Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's analyst conference call on its first half-year 2025 results. The telephone lines will be in a listen-only mode during the company's presentation. The lines will then be open for a question and answer session. Before handing this conference over to Mr. David Knibbe, Chief Executive Officer of NN Group, let me first give the following statement on behalf of the company. Today's comments are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those projected in any forward-looking statements. Such forward-looking statements may include future developments in NN Group's business, expectations for the future financial performance, and any other statements not involving a historical fact.
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 or an offer to buy any securities. Reference is made to the legal information on the last page of the presentation. Good morning, Mr. Knibbe. Over to you.
Yes, thank you, Sharon, and good morning, everyone. Thank you for joining our conference call to discuss NN Group's performance for the first half-year of 2025. I'm excited to be here today, and with me are Annemiek van Melick, our Chief Financial Officer, and Wilbert Ouburg, our Chief Risk Officer. I'll begin with an overview of the key messages and then dive into the excellent commercial momentum we have witnessed in our growth segments. Next, Annemiek will give a detailed analysis of the strong progression of our capital position and our record financial performance over the first half of 2025. After my concluding remarks, we will move over to Q&A. I see the strong set of results we present today as a great start towards delivering the growth targets we set at the CMD, which once more underpin our attractive investor proposition with compounding returns for shareholders.
Annemiek will further elaborate on our capital position and the strong set of OCG results, but I will give you the headlines. Our Pro-forma Group Solvency II ratio progressed strongly from 195% per the end of April to 205% per the end of June, or 208% on a reported basis, and this is now above our comfort range of 150% to 200%. Netherlands Life Solvency II ratio shows a similar trajectory and came in at 200%. For operating capital generation, for the very first time, we report more than EUR 1 billion over a semi-annual period. As you remember, at our recent Capital Markets Day, we set ambitious growth targets, supported mainly by Europe, Netherlands Non-life, and Japan . I'm particularly pleased about the commercial success these growth segments have shown in the first half of 2025.
The value of new business in Europe and Japan increased with 11% and 25%, respectively. In the Netherlands, Non-life, gross written premium grew by 6%. Let's dive into the underlying drivers of our financials. As you know, we have a multi-stakeholder approach. Our objective is to achieve customer satisfaction scores significantly above the market average and secure a position among the top three for broker satisfaction in 2028. Customer satisfaction has shown consistent improvements, especially in Europe, where every single unit is above market average in terms of customer satisfaction. This is the first time we earned this great achievement, which will support our growth both from a retention and new business perspective. Additionally, our Dutch broker satisfaction score indicates that we are overall ranked number one.
Our goal is to maintain an employee engagement of above benchmark levels while we aim for over 40% women in senior management by 2028. We aim to cut greenhouse gas emissions by 45% by 2030, invest over EUR 13 billion in climate solutions, and support 2.5 million people's well-being by 2028. As you can see, progress on all these targets is well on track. Our investor proposition remains attractive, and we're well positioned to continue delivering value to our shareholders. I already gave the headlines on capital and financial performance. I do want to highlight the Future Ready programme that we introduced during our recent Capital Markets Day. This strategic programme focuses on standardization, automation, and the implementation of AI to enhance customer experience, to promote growth, and deliver around EUR 200 million in annual benefits by 2027.
As such, the programme is an important cornerstone in our investment case, and we are demonstrating significant progress. Let me give two examples. We are making significant progress towards our goal of generating 50% of APE from digital leads by 2028, having reached 40% in H1 2025, up from 36% in 2024. This growth is driven by our digital marketing initiatives, including the successful launch of the Agent Digital Office in Poland, which helps agents build an online presence and use digital tools. This initiative will be expanded to all units with tied agent networks. Secondly, we're also focusing on collaboration and standardization to create scalable, reusable AI solutions. Currently, 191 AI use cases are in production, up from 148 year-end 2024, with all business units reporting strong progress. One example is our secure internal platform for generative AI, which allows our teams to build AI-powered chatbots using internal knowledge.
This platform is already in use across multiple Dutch and international units. Another important cornerstone in our investment case is our capital return promise, with an attractive progressive dividend per share, complemented by annual share buybacks. Today, we announced an 8% increase of our interim dividend. With a Group Solvency II ratio now above the 150% - 200% comfort range, we are well positioned to look for upside to our capital return promise at the full year 2025 stage, with a focus on small incremental steps. Our delivery on capital returns since the IPO is impressive, with over EUR 10 billion of capital return to shareholders. We remain committed to continue this roadmap, with total capital return to shareholders foreseen to grow to EUR 15 billion by 2028. As a first step, today we announce EUR 1.38 per share interim dividend in line with our dividend policy.
Before I highlight the commercial success we have seen during the first half year, I'd like to remind you of the ambitious targets we set at our Capital Markets Day back in May. OCG is expected to reach EUR 2.2 billion in 2028, while free cash flow should exceed EUR 1.8 billion. Most of the growth versus our 2025 targets is coming from Insurance Europe, Netherlands Non-life, and Japan . I am very pleased that the three units are delivering very strong commercial results. Allow me to elaborate. Insurance Europe, bolstered by our leading positions, is our largest growth segment, with a target of EUR 600 million in 2028. We are active in eight countries where we have organically built our business since the 1980s and 1990s, becoming a top player or number one in markets like Greece, Romania, and Hungary for life insurance, and for example, Poland and Romania for pensions.
Our strategy focuses on high-margin capital-led protection products, and we are well positioned to capitalize on the underpenetrated high-growth margin in the region. However, the underpenetration does not matter if you do not have the distribution to tap into this need. Our multi-distribution network is what sets us apart from the competition. In the first half, we saw strong VNB growth of 11%, driven by both better sales and margins, and this will translate into OCG growth over time. OCG grew by 10% in the first half of 2025, outpacing the 7% CAGR implied in our target versus 2024. OCG came in at EUR 251 million, not that dissimilar to our achievement in 2020, with the important difference that we now deliver this in six months. Netherlands Non-life is our second largest growth segment, with an OCG target of EUR 475 million in 2028.
Also here, we witnessed solid commercial momentum supported by strong customer and broker satisfaction. Gross written premiums are up 6% year-on-year to EUR 2.6 billion, driven both by indexation and volume growth. Growth primarily came from the SME, direct, and bank channels, with fire and sickness insurance showing the highest increases. OCG came in at EUR 175 million in the first half of 2025, up 14% versus last year. Netherlands Non-life's strong performance is also highlighted by its combined ratio of 91.2% over the first half of 2025, at the lower end of the 91 to 93 target range. This marks a 1 percentage point improvement compared to the first half of 2024, mainly driven by lower expenses. The Future Ready programme in Non-life is paying off in efficiency improvements. Japan is the third growth segment, with an OCG target for 2028 of EUR 160 million.
In Japan, we see strong signs of sales recovery, with a 25% increase in value of new business in the first half of 2025. This was mainly driven by our long-term savings product and higher rates, driving better margins for cash value insurance sales. Our new long-term savings product has already taken a 17% share of VNB over the first half of 2025, and we expect this to further increase over time. The new long-term savings product was only launched in March. If we focus on the comparable VNB solely for the second quarter, VNB growth would be more spectacular at 56%. Japan is making strong progress on regaining a top-three market position now that we have been able to improve our level playing field with the introduction of a first new product in the attractive long-term savings market. There is more to come.
Now, I will hand over to Annemiek , who will further provide details on our financial performance for the first half-year of 2025.
Thank you, David. On my behalf, a warm welcome to everyone. Let's start with the key financials on slide 12. Our OCG is up 6% and exceeded the EUR 1 billion for the first time for a biannual period. It's a strong print and confirmation we're on the right track to deliver our 2028 target. Free cash flow is down 4% versus last year, mainly driven by a positive one-off last year versus Future Ready investments this year. It's a metric you really have to look at on an annual basis, and we're very confident to achieve a free cash flow target of EUR 1.6 billion for 2025 and remain on track to meet the 2028 target of exceeding EUR 1.8 billion. Pro-forma Solvency r atio came in at 205%, which is above our 150%- 200% comfort zone.
Our cash capital position shows an increase from EUR 1.3 billion - EUR 1.6 billion, driven by the untendered RTO1 capital and some net cash built during the period. Now, let me give you some insights into our strong capital progression. Looking at the capital bridge for the first half of 2025, operating capital generation of EUR 1 billion added 12 percentage points to the solvency ratio, which is 4% higher than the capital flows to shareholders. Market variance added 5 percentage points, largely driven by the positive impact of interest rate movements and the decreasing spreads on government bonds and mortgages, partly offset by negative equity variance. Mortgage spreads at the end of June are some 10 basis points tighter than our through-the-cycle expectation. If this were to normalize, it would cost circa 2 percentage points at group level.
The bucket other added 3 percentage points to the ratio, where the positive effects from the implementation of Basel IV and the new longevity deal were partially offset by model and assumption changes. The solvency ratio of Netherlands Life increased as well, up from 187% at full year 2024, to 200% at H1-25. As indicated at our Capital Markets Day, the natural moment for us to consider stepping up our capital return policy is at the full year results. Given our position now, the outlook is promising. As you know, we prefer small incremental steps in our structural capital return promise over lumpy buybacks.
We continue to have a conservative asset portfolio, and given that most of you are on holiday or trying to pack your bags, I will not dwell on it this time, but you can find all the usual information on our very safe Dutch mortgage book, etc., in the appendix of the analyst presentation. I would like to separately mention, though, that our key Solvency II ratio sensitivities on equity, real estate, and mortgage spread shocks all decreased compared to the end of 2024, as we benefited from increased eligibility of own funds, driven by lower net deferred tax assets. Now, let's move to OCG. A strong print on OCG, up 6% on a not-so-easy comparable base last year. This growth reflects continued strong underlying business performance and growth in Insurance Europe and Netherlands Non-life, flattered by positive experience in Netherlands Life.
In the Netherlands Life segment, we witnessed a significant OCG increase due to favorable experience; last year was negative, now it was positive, and higher investment returns. Also, new business is seasonally elevated in the first quarter and still benefits from DB sales, which will taper off as the pension reform further effectuates. Netherlands Non-life came in at EUR 175 million, up 15% versus H1 last year, despite a refinement in business recognition, shifting some OCG towards the second half of the year. Similar to last year, Non-life OCG benefited from benign weather, whereas this year we did not see the elevated fire claims that we saw last year. On the back of this benign weather, we would expect Non-life to deliver an OCG of more than EUR 400 million this year.
Europe's increase by 10% OCG is driven by business growth, as David already alluded to, improved persistency, and increased investment results. For Japan Life, the underlying APE and VNB trends are very promising, as David just explained. OCG is down 10% versus last year, however, mainly due to normalizing technical results and a higher new business strain due to the strong sales recovery. In banking, further NIM compression in H1 2025, although partially offset by expense reductions, negatively impacted OCG. We expect NIM pressure to extend to the second half of the year. The first half of 2025 furthermore included a one-off release of required capital related to a change in collateral recognition. Lastly, the segment Other showed some normalization compared to the first half of 2024, and we still benefited from positive experience.
Now, with the strong H1 2025 OCG results, we do see upside to our previous full-year guidance of flattish OCG versus full year 2024. However, we would expect OCG for the second half of 2025 to be slightly lower than the first half, as positive one-offs in Netherlands Life and continued NIM pressure on NN Bank are expected to be mostly, but not entirely, offset by higher OCG from Netherlands Non-life due to the seasonality of new business. Before we go to free cash flow, let me say a few words on our IFRS results. As you know, we steer on OCG, where at the Capital Markets Day, we've again outlined ambitious growth targets. Under IFRS, the most important driver for future growth is the organic CSM, as this feeds the future profit margin.
Therefore, I'm happy to see organic CSM growth of 2% over the first half of 2025, where Japan became a neutral contributor instead of a drag reflecting its sales recovery. Now, similar to OCG, our IFRS operating result increased as well, largely due to a higher investment result at Netherlands Life. This was mainly driven by higher returns from private debt investments and a more technical accounting asymmetry relating to a portion of our derivatives falling outside of hedge accounting. NN Group's net result decreased due to bond sales, revaluations on derivatives used for hedging purposes, and the final accounting results from the sale of Turkey, which in itself had a negligible capital impact. Lastly, let's move to our capital position. Free cash flow came in at EUR 863 million in the first half of 2025, 4% lower than the comparable period last year.
This is mainly due to the segment Other, where last year benefited from a tax-related one-off, whereas the current period includes Future Ready investments. Remittances were actually up 2% year-on-year, where lower contributions from Netherlands Non-life and NN Re were more than offset by higher contributions from Insurance Europe and the bank. At the full year results, we already indicated that the bank's remittance capacity strengthened significantly due to the implementation of Basel IV per the 1st of January in 2025, which we are using to complement remittances this year and the first half of next year. In addition to the Dutch units, we still expect remittances from Insurance Europe and NN Re in the second half of the year. As such, we're very confident to achieve the EUR 1.6 billion free cash flow target for 2025.
The change in our debt and loans reflects the impact of the untendered grandfathered RTO1 notes with a call date in January 2026, and our capital flows include the payment of the final dividend over 2024 and a part of the EUR 300 million buyback that has been executed as per the end of June. That concludes the financial explanations, and with this, I would like to hand it back over to David for concluding remarks.
Yeah, thanks, Annemiek. To wrap up our presentation, the Group Solvency II ratio improved from 195% at the end of April to 205% at the end of June, surpassing the 150% - 200% comfort zone. Netherlands Life also increased to 200%. Operating capital generation exceeded EUR 1 billion for the first time over a semi-annual period. Our growth segments in Europe, Japan, and Non-life showed strong commercial success, with the value of new business increasing 11% in Europe and 25% in Japan, and the Non-life premiums in the Netherlands growing by 6%. Bottom line, we presented another set of strong results today, and this marks a strong start toward delivering the growth targets we set at the CMD, which once more underpin our attractive investor proposition with compounding returns for shareholders. With these remarks, I would like to open up the call for Q&A. Operator?
Thank you. Ladies and gentlemen, we will now start the question and answer session. To register for the Q&A, please press star one and one on your telephone. As a reminder, in the interest of time, we kindly ask you to limit the number of questions to two. Your questions will be answered in the order that they are received. Please press star one and one for your questions or remarks. Go ahead, please. Thank you. We will now go to the first question. One moment, please. Your first question today comes from the line of Andrew Baker from Goldman Sachs. Please go ahead.
Great. Thank you for taking my questions. The first one, just on Netherlands Life OCG, you mentioned some assumption changes. What specifically did you change there? What was the impact in the first half? Were these assumption changes considered as part of your 2028 target? Secondly, just on the longevity transaction, I believe this was for EUR 4 billion of liabilities, but correct me if I'm wrong there. I'm just curious how you arrived at this number and how much capital generation you gave up as a result of the transaction. Thank you.
Yeah, thank you, Andrew. Annemiek?
Sorry. To start with your question on the longevity transaction, we did a transaction of EUR 4 billion of liabilities. It continues to be a very attractive market. I think the OCG impact will be less than EUR 10 million of that. That also means, given that we indicated last year that we roughly would build up EUR 10 billion of liabilities in a period of three years, we would still expect to have roughly EUR 6 billion available in a build-up of two to three years. Your first question was related to the assumption changes in Life or Non-life?
Life.
In life, we made some changes. They were indeed part of the target that we have actually given, and it basically is upping both on real estate and on equity, the assumptions with 50 bps. In terms of public equity, we had an old pre-tax figure of 5.7%, and the new return would be 6.2% pre-tax, which is roughly similar as post-tax, given that we have quite some tax-exempt stakes there. On real estate, we were at 4.9% old pre-tax. That would go to 5.4% pre-tax.
Great, thank you.
Thank you. Your next question comes from the line of David Barma from Bank of America. Please go ahead. David, your line is open.
Good morning. Thanks for taking my question. Can you hear me?
Yeah, we can hear you well.
Can you hear me?
Yes, David, we can hear you. I'm not sure you can hear us.
Great. On visibility, please. The combined ratio keeps being quite a bit volatile and was a bit higher than I thought in 1H. Can you explain whether this is just the accounting noise on the IFRS 17 that you've talked about before or if there's a worsening frequency here in 1H? Maybe if you can talk about the sort of premium increases you're doing in visibility at the moment as well. Secondly, on Japan, what would have been the OCG in Japan, assuming you were under the new solvency regime, please?
Yeah, thank you, David. Annemiek, on Japan?
On Japan, the OCG under the new regime, that's hard to assess. I think what we've set at the full year results, you know, it will depend on what the sales levels will actually be in 2026 when we transition to the new regime, and we would expect it to be a couple of tens of millions there then.
Yes, David, on visibility. I think overall the.
Sorry, can I just add to that.
Go ahead.
Yeah, go ahead, David.
Go ahead.
David?
Sorry for the delay here. Just adding to that Japan point, maybe to put it another way, what's the translation between VNB growth and OCG? As in, how long does it take to be fully recognized? Thank you.
At this point in time, it takes roughly seven to eight years to be recognized. If we transition to the new ICS, then 85% of it will be recognized immediately, and the remaining 50% will go over roughly seven years or something.
David, let me take the question on this. I think we're all very curious now where you are, given the long delay. You must be in a really nice location. On the disability of the combined ratio, I think overall, yes, there is some accounting noise in there. If we just look at underlying at the book, the majority of the book is sickness benefits. That is actually doing very well. We did do some premium increases, but overall, we're quite positive on this book. This is also what we flagged at the Capital Markets Day, that within DNA, we expect growth in the DNA, but then in the sickness part, that also happened. It's about EUR 500 million out of the close to EUR 800 million that is in group income. The other part, the EUR 300 million, is in the disability book. This is more the long tail.
There, there's more concerns given the overall trend that we see in society and also some of the backlogs that are with the government. We've been doing significant premium increases there, and we expect also that that will continue to be needed to keep that book healthy. Overall, I think the DNA book is on a positive trend that we expect also going forward, and therefore, we continue to say that 91% - 93% for the overall combined ratio for the total non-life businesses is the right way to look at this in terms of guidance.
Thank you. We will now go to our next question. Your next question comes from the line of Nasib Ahmed from UBS. Please go ahead.
Thank you. First question on solvency reform and the update on where that's going to land for you guys, given the update on the level two tax. The second question on, David, you kind of mentioned that there's more to come in Japan. First, you've got the improvement order lifted, and I think the expectation is it takes a couple of years for you guys to start getting product approvals and distribution. Can you give us a sense of what is that more to come? You've got the long-term savings product, but what else can we expect from Japan? Thank you.
Yeah, thank you, Nasib. Wilbert, on the Solvency II reform?
Thank you, Nasib. On Solvency II, the Solvency II 2020 review is not coming in before January 2027. We expect a broadly neutral outcome in relation to this review, where we will be less dependent on management actions in order to achieve this outcome compared to before.
Thanks, Wilbert. On Japan, maybe a little bit of background on Japan. If we look at the overall Corporate Life market, it was actually relatively flat, or in fact, it was 1% down. What we see is that the shorter-term market or the cash value products was actually down 5%, and the long-term market was up 12%. We launched a product, obviously, in March in this long-term market, and this has also been a driver of our growth. Because of all the engagement that we have with the distribution channels on this product, we've also seen an upward trend in the protection space and also in the cash value product line. The growth is not just coming from the long-term business, but from all three product lines. You're right.
We said earlier it will take quite some time to get back to previous levels or to value of new business (VNB) levels of 2022 at some point we guided to. To be fair, I think so far it's going probably a bit faster than we thought. If you just look at the quarter, we've seen indeed a 56% uplift, and it's possible that already this year that maybe roughly half of what we lost, we would be in terms of new business that we would recover. Of course, we need to see how the rest of the year will play out. It's clearly on a positive trend, and I think it shows the strength of our distribution that we have in this market that is an improvement order, but also because of the opening of the long-term calling market.
Thank you. This is very helpful.
Thank you. Your next question comes from the line of Thomas Bateman from Mediobanca. Please go ahead.
Hi, morning there. I was just hoping you could give an update on the Future Ready program, just in terms of the money that you spent so far and the potential cost savings. Is this going faster or slower than expectations? I'm feeling it's going quite well. The second question, just on pension buyouts, just an update on your thoughts on that market. I guess I'm interested in you're still doing Longevity transactions on the backbook, but seem a little bit reluctant to on new buyouts. I'm just wondering what the constraint is at the moment for participating in that market.
Thank you, Thomas. On the Future Ready program, this is very much going in line with the guidance that we've given also in terms of the free cash flow impact over the first half of 2025 and also the expectation for 2026. Financially, it's going on track. We also see, we said, you know, we expect EUR 200 million benefits by 2027, EUR 180 million in expenses, EUR 20 million in growth of value of new business development. That's also going nicely on track. Underlying, we see that the scaling of use cases is progressing. I mentioned earlier, we had at the beginning of the year 149 AI use cases. It's now at 191. I think good to mention, for example, is the scaling of SonarGPT, which is an agentic chatbot.
What we see is now, and we haven't rolled it out in all units, but we see that the long tail, so the more complex questions, this chatbot does 60% better than the, let's say, the annoying one that we had before that. Also, 33% less referrals to meaning that a human needs to get on the phone to deal with the rest of the question. This was launched at the pension business. It's now also with the bank, with the mortgages, and these are examples of AI applications that we scale across the company. Overall, I think it's going well, and we're for sure on track to deliver the EUR 200 million benefits that we expect to come out of this program. On buyouts, there was around EUR 4.1 billion closed this year. None of these deals actually met our return criteria.
We've been very clear that we want at least an IRR that is above 10%. These deals didn't meet our return criteria. Keep in mind also that we don't need these buyouts to sustain our remittance pattern. As we explained also at the CMD, without doing buyouts, we can sustain that remittance pattern from NN Life up to 2040. Ultimately, I think capital allocation is probably one of the most important things that we do. When you have, we see that applying, deploying capital in Europe, obviously in Japan, but also in the Immediate Annuity market in the Netherlands, all give a lot more attractive IRRs than the buyout business. Buying back shares also would be more attractive than doing these buyouts. We'll continue to monitor it and to see whether the pricing becomes more attractive, and if it does, we'll certainly participate.
I think it's also good to note, let's not overdo this. I think there was EUR 4 billion done. There's probably a bit more coming this year, but even if we would do half of that EUR 4 billion, that would be roughly EUR 20 million OCG for the life company. The life company, you know, typically does more than EUR 1 billion of OCG in a year. Overall, we haven't done it because the pricing wasn't attractive enough. If that changes over time, then we'll certainly be more active again in this market.
Very clear. Thank you. Good to see so many opportunities to deploy capital. Thank you.
Thank you. Your next question comes from the line of Iain Pearce from Exane. Please go ahead.
Hi, morning everyone. Thanks for taking my questions. The first one is just on the increased NN Life OCG. Historically, you've sort of paid out or remitted 100% of OCG from the life company. With that higher OCG, do you expect to see a step up in the NN Life remittance over time? Following on from Andrew's question, was that embedded, if so, in the plan that you gave at the investor day? The second one was just on the CSM growth. The normalized CSM growth of 2%, I think that's the best half you've had since we've had IFRS 17. Is that sort of a normal level of growth that you'd expect going forward, or is that benefiting from strong new business that you've shown in your numbers? Thank you.
Thank you, Iain. Annemiek?
Yeah, and on life and OCG expectations and remittances, we really want to have a stable remittance pattern coming out of life that we can sustain for a very long time. That's why we gave this stable remittance guidance towards 2040. The outlook for life is a bit better for this year versus the flattish guidance that we gave at the beginning of the year. We also realized that part of it is really structural because it's higher investment returns. That was already all in the target that we gave for life for 2028 of EUR 1.1 billion. In the first half year, there were also some one-offs, the positive experience variances, and there was a bit of a skew on new business towards the first half of the year. Life will have a good, probably good year in 2025.
We're on track to meet the target for 2028, and we stick to the stable remittances and the guidance we gave there before. If we look at the CSM, agreed, 2% is probably the highest that we've reported. There is a bit of seasonality there because in the non-life business, on the group income side, these contracts come into IFRS in the first half of the year, OCG in the second half, but IFRS first half of the year, and they tend to really be skewed also to the first half of the year. I wouldn't expect that to necessarily repeat for the second half. The outlook on CSM, we're obviously very happy that Japan is now a neutral contributor after having seen a sales pickup in Q2. What the long-term outlook for CSM growth will be also depends a bit on how developments in Japan will be going.
That's great, thank you.
Thank you. Your next question comes from the line of Farquhar Murray from Autonomous. Please go ahead.
Morning all. Just two questions, if I may. Firstly, just a follow-up on Thomas's question on the Future Ready programme. Would you have a number on where you stand versus the EUR 180 million cost-saving target, or is that going to be updated annually? Secondly, turning to coming back to Japan, might you have a sense of how much of the recovery you're seeing there splits between the kind of product launch versus the kind of improvement order being lifted? In particular, I just wondered whether you're seeing brokers become active again. Thanks.
Thanks, Farquhar. Yeah, in terms of the EUR 180 million cost-saving target, no, I think that's too early to talk about that. We'll obviously, over time, continue to update you on the progress of the Future Ready program. Full year would probably be a first moment to give some indication on it. As I was saying, what we continue to see is that the IT simplification and standardization on the one part and the application of AI, and this is not only on chatbots, but this is, for example, on the automation of claim handling. We gave this demo on how you can have, in a couple of minutes, a claim payout.
If we expand that to, for example, windows of cars, but also windows of buildings and other types of damages, it's clear for us that with the enormous speed that GenAI is already generating, this is a huge opportunity for our industry and certainly for us. From that point of view, I think we're all positive on that we will achieve those targets, both the EUR 180 million and the EUR 200 million. I think on Japan, it's very tough to split that out. Why exactly are people buying a product? What is clear to us is that brokers were already, pre the lifting of the Business Improvement Order, starting to do business with us again. That was clearly a positive. We didn't have to wait until the closing of the Business Improvement Order. 65% of our brokers are independent, and there's another 25% that is banks, and then 10% is Sumitomo.
We've seen different speeds in which brokers, but also bank and Sumitomo, have been active, but it's clear that all channels are now, have been already starting to be very active again in the last few months. It was already happening pre-Business Improvement Order. Obviously, the Business Improvement Order was very good news and further supported that. Like I said, if the Q2 number was 56% up, that clearly was already pre-Business Improvement Order sales was going up. All in all, I think, as I was saying earlier, the business is well on track to recover from this and go back to a position where we're probably number five or number six right now. We do believe that, depending a bit on how the market will evolve, there will be three or four big players, and we're convinced that we're going to be one of them.
Thanks.
Thank you. Your next question comes from the line of Farooq Hanif from JPMorgan . Please go ahead.
Hi, thank you. Just a couple of numbers questions, actually. On OCG, I just want to clarify exactly what you said, Annemiek. I think you said, look, there are some positive experience services, capital release, just some positive, maybe non-recurring items in 1H. In the second half, because of the way you're now accounting for the OCG, the loss of those one-offs will be offset. Did you imply completely by non-life or is one bigger than the other? That's question one. Question two on IFRS operating result. I just want to go back over what you said about the investment results again, just to understand it. You've increased your investment margin or your investment income smooth assumption. Presumably that uplift in investment margin, for example, in Netherlands Life, is kind of repeatable. Thank you.
Hi Farooq, thanks for your questions. Yeah, in terms of full year guidance, if you look at OCG, obviously previously we guided for a flattish trajectory versus 2024, where we landed at [EUR 1.014 billion], where we said we would be flattish there. If you would look at the second half for OCG, we would expect it to be slightly lower than the first half. We would expect a bit lower OCG from Netherlands Life because we did see some positive one-offs there in H1 2025 that we don't think will be recurrable. We also know that there is a bit of seasonal nature in these DB renewals. Plus, the bank, we're expected to see continued NIM pressure there. In H1, the bank also benefited from some capital relief.
We do expect that the majority of that will be offset by higher OCG coming out of Netherlands Non-life, and that really has to do with the seasonality of Non-life, which is mainly related to when the P&C business is recognized. Last year, that seasonality was roughly EUR 50 million. We would expect that to be a bit more. You would probably be having some numbers to build your model on. In terms of the IFRS investment result at Life, indeed, roughly half of it was related to higher investment result, mainly private debt related, and that is something that you can expect to be sustainable, yes.
I'm just coming back on OCG. Obviously, some of this is weather related. Can you tell us in euro amounts, because you have in the past, what you think the weather-related benefits have been so far in 1H in Non-life?
If you compare it to last year, obviously, it was the same. We had benign weather as well. I think typically, if we would have a very, you know, storm, typical storm budget would roughly be EUR 50 million. We haven't seen that.
That's really kind. Thank you.
Thank you. We will now go to our next question. The next question comes from the line of Jason Kalamboussis from ING. Please go ahead.
Yes, hi, good morning. A couple of follow-up questions. On the longevity, you did the deal on the EUR 4 billion. I'm interested to know if you had waited to do on $10 billion, if you would get a better pricing. You say that conditions are favorable. I mean, do you find that over the last two years, the pricing has become much better for insurers? The second part is on Japan. If you could elaborate on, and maybe I missed something, on products, on new products, do you plan to have new products to go for approval for new products in 2025? What is the next stage where you will go for product approvals? Where would these products be? How much time would it take roughly to get the approval so that we have an idea of, you know, what new you plan in there? Thank you.
Yeah, thanks, Jason. Let me start with Japan and then Annemiek can cover the longevity conditions. Like I said, there's three groups of products that we offer here, which is the protection, pure protection. Then there is the cash value. It's typically five years or at least what we call a shorter-term product. Then there's a longer-term unit-linked longer-term product. We have introduced a longer-term product in March. The intention is to introduce another one, another long-term product. The intention is to do that in the second half, but as you might remember, all products need to be pre-approved by the regulator, by the FSA, and this takes time. It actually, to be honest, at times helps us because companies have only limited windows. If you also have a retail business or other businesses, then you have to really make a choice.
We're only in Corporate Life, so we can use the one or two windows that we have for Corporate Life. Our intention is to introduce another long-term product in that space, hopefully in the fall, and otherwise, depending on when the approval comes, it would be in 2026. In any case, we feel already that in the long-term market, it's currently another very crowded space. Sony is there. There's some activity from AXA. There might be one or two more coming, but it's still a market that is growing. It's supported by the regulator. It's supported by the government that wants the markets and the SME owners to do more long-term savings. We're well positioned there, even with one product. Ideally, we'll launch another one in the second half, but that will depend on regulatory approval. Annemiek?
Yeah, in terms of Longevity transactions, your question on whether the conditions have improved over the past two years, I think they've continued to be good over the past two years. We also did a transaction a year in 2023 of EUR 13 billion, roughly similar metrics as the current one. There's still a lot of demand for longevity risk. We currently did EUR 4 billion because we typically do these transactions to a large part on the pension liabilities that are in benefit. It takes some time for those liabilities to become in benefit and that part of the portfolio to build up. The EUR 4 billion is what we did now. Over the next two to three years, we would expect another EUR 6 billion of liabilities to become in benefit where we could do another transaction if conditions continue to be favorable.
Thank you very much for Japan. Annemiek, if I may follow up just on my question, I understand that you need more in pensions so that you have, you know, another $6 billion to come. My question was more like, is it better to wait and, you know, the $4 billion to become $10 billion because then you have more leverage on the pricing or at the end of the day, it doesn't matter too much and therefore, you know, doing it by steps or in one go at the end of the day doesn't make a huge difference on the pricing of the deal?
It doesn't make a difference. There's so much demand now that we can just, you know, look at it opportunistically, and if it's attractive, we can just go.
Okay, fantastic. Can I just add a quick one? Is it fair to say that, you know, from both of what you said and David, that at the end of the day, you are just stepping, you know, you can, you are looking this year at the buyouts and saying, look, at the end of the day, it's probably better to go towards the direction of share buybacks because you have also a Solvency II that now it's comfortably above 200 or at 200 at an end life. That, you know, you could be looking at the buybacks next year or the year after, only if the pricing becomes better or it's something that, you know, this year it's more privileging the share buyback and next year you will see which direction you go.
It looks like it's not only pricing, but it's also how you manage the one versus the other one.
Thanks, Jason. No, it is really pricing. Like I said, we apply very strict return criteria, and we do think that doing buyouts at a 10% or lower, we don't think it screens attractive versus all the other capital deployments that we have. Even if next year, you know, the capital situation would be even higher than today, we still wouldn't start doing buyouts below 10%. I think I mentioned earlier, if you look at the immediate annuity market, for example, people in the Netherlands have to buy an annuity once they retire. We see that the longer people are in DC, obviously per ticket size that increases. Last year we did EUR 600 million of that. This year, I would expect that we certainly will do more.
For example, the IRRs of that immediate annuity business, which you could see as a collection of small buyouts, I guess, IRRs are much more attractive. As long as that's the situation, we'll do those, but we will not do the individual large buyouts. This is all about capital allocation and where we feel that we can make a good return or not. Indeed, on the buybacks, we'll have to visit that at the full year result to see what we will do. The outlook is positive, but as you know from us, we're not looking for lumpy buybacks. If we're going to do something, it has to be an incremental and a recurring step. That's something to look forward to in the February discussion.
Fantastic, very clear. Thank you both very much.
Thank you. There are no more questions. I will now give the call back to Mr. David Knibbe for closing remarks.
Thank you very much, Sharon, and thanks everybody for the interest and the interesting questions that you have asked us. Obviously, as I was saying, we remain committed to our capital return policy, which includes a progressive dividend and a recurring share buyback of at least EUR 300 million. We look forward to further engage with all of you in the upcoming roadshows and conferences that we have planned. I know it's been a very busy week for all of you, so I hope that from now on you will have maybe a couple of nice days off, and I hope you have a very nice holiday. I look forward to seeing you after that in the rest of the year. Have a good day.
Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.