This is
the operator speaking. Welcome to the NN Group's Analyst Conference Call for its Q4 2015 Results. The telephone lines will be in a listen only mode during Before handing this conference over to Mr. Lars Vriesen, Chief Executive Officer of NN 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 the future developments in NN Group's business, expectations for its future financial performance and any statements not involving historical facts.
Actual results may differ materially from those projected in any forward looking statements. Any forward looking statements speak only for 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 comment constitutes an offer to sell or sell a station or an offer to buy any securities. Mr. Friesen, go ahead, please.
Yes. Good morning, everyone, and welcome to this conference call to discuss NN Group's results for the Q4 of 2015. I will start off today's presentation by going through the highlights of the Q4 results and of the year 2015 as a whole, including the progress we have made to deliver on our financial targets. But I will also look forward to our priorities for the coming year. Delfin Rueda, our Chief Financial Officer, will then talk you through the financial details of the results at group level and for the individual operating segments as well as our capital position.
I will conclude the presentation with a wrap up, after which we will open the call for Q and A. And we also have our Chief Risk Officer, Doug Coldwell here to answer your questions. So let's go to Slide 3, the financial highlights of the 4th quarter. NN Group's operating result for the Q4 of 2015 was €250,000,000 which was down in the same quarter of 2014. Let me start with the positive developments in the quarter.
We continue to reduce administrative expenses in the Netherlands and the results of Insurance Europe and Japan Life were up compared with the same quarter in 2014. On the other hand, the results of our Non Life business were impacted by less favorable claims experience in the Property and Casualty segment. And the lower operating result at Asset Management reflects restructuring provision, which has been taken as part of its strategy enhancement program, which I will talk about later. If we look at the year as a whole, the full year 2015 operating result of the ongoing business was €1,435,000,000 which is up more than 32% compared with 2014 with almost all segments reporting improved results. As you know, the Dutch Central Bank approved our Solvency II partial internal model in December 2015.
Delfinrovera will talk in some detail about our capital position in this part of the presentation. So I will simply say that our Solvency II ratio under the partial internal model was 239% at the end of 2015, and our cash capital at the holding company increased to almost €2,000,000,000 In view of our strong capital position and the earnings development, we are proposing a final dividend for 2015 of EUR 1.05 5 per ordinary share. Together with the interim dividend that we paid in September, the full year 2015 dividend comes to €1.51 per ordinary share and represents a payout ratio of 41% of the 20 15 full year net operating result of the ongoing business, in line with our stated dividend policy of 40% to 50% of the net operating profit. Let's now turn to the next slide and look how the individual businesses developed in 2015. In our largest segment, Netherlands Life, we remain focused on achieving further cost efficiencies while managing the runoff of the individual life closed block.
We continue to selectively pursue growth in the pensions market and in December 2015, saw the launch of our general pension fund or APF ahead of the new pension regulations that became effective in January of this year. Our aim is to improve the combined ratio of our Non Life business to 97% or better by 2018. This ratio stood at 101.5 percent for 2015, and so we have still more work to do. Progress within the Disability and Excellence segment has been encouraging with a combined ratio of 97.6% for 2015. However, the Property and Casualty segment was hit by large power and weather related claims in 2015, resulting in a combined ratio of 104.8% for the year.
At the businesses in Insurance Europe, our focus is on profitable growth, which means that we put the value of the business before volume. This is reflected in the higher value new business numbers for 2015. It should help us achieve our earnings growth target even in this low interest rate environment. Our COLI business in Japan is performing well as it builds on its ability to offer innovative products through an expanding distribution channel. Our bancassurance sales grew by approximately 20% in 2015.
The market environment in 2015 was very challenging for the asset management industry as a whole and NN Investment Partners, our asset manager was no exception in struggling to attract new mandates during the year. To address this, we have embarked upon a program to focus, simplify and optimize our Asset Management business by rationalizing and creating scale in its product range and building on its specific areas of expertise. As I already mentioned, we have taken a €13,000,000 restructuring provision in the Q4 in connection with this program, which is reflected in the operating results. In addition to delivering cost savings, these measures should enable our asset management business to achieve its growth ambitions in the coming years. Finally, Enen Bank is steadily and successfully growing its franchise in the Netherlands as it expands its mortgage portfolio and customer savings activities.
Let's move on to the next slide. And let's look at our progress and the financial targets that we have set for Enang Group as a whole. Firstly, we aim to realize an annual growth rate of the operating result before tax of the ongoing business of 5% to 7% on average in the medium term. The operating result before tax of the ongoing business in 2015 of over €1,400,000,000 represents a 32% increase compared with 2014. This growth rate obviously reflects the particularly high results in 2015, which were supported by some large favorable items.
We've always stressed that this is a medium term target and that we intend to measure our average growth rate over a longer period. At our Capital Markets Day in November, we announced our new target to reduce the administrative expense base in the Netherlands to €700,000,000 by the end of 2018. We achieved €15,000,000 of cost savings in the Q4 of 2015. Thirdly, we aim to increase the net operating return on equity of the ongoing business in the medium term. The net operating return on equity of the ongoing business for 2015 was 10.8%, so higher than the 8.6% for 2014.
Aligned with these three targets, we expect over time to generate free cash available to shareholders in a range around the net operating result of the ongoing business. In 2014, the free cash flow adjusted for the IPO related items was €450,000,000 compared with a net operating result of €806,000,000 The free cash flow of the holding company in 2015 was almost €1,400,000,000 which included a total of about €1,500,000,000 of dividends upstreamed by our subsidiaries. This compares with a net operating result of the ongoing business for 2015 of almost €1,200,000,000 Please bear in mind that this is an overtime target, and there can be volatility in both the operating results and the dividend flow. Delfin Rueda, our Chief Financial Officer, will go into details of our free cash flow later in the presentation. Turning now to Slide 6.
We aim to always maintain a robust balance sheet while at the same time using the balance sheet efficiently. Being well capitalized allows us to fully focus on improving the returns on that capital. Thanks to strong capital generation, NN Group Solvency I IGD ratio increased to 3 20% at the end of 2015, even after distributing EUR 849,000,000 to shareholders during the year. The holding company cash position was almost €2,000,000,000 at the end of the year, mainly driven by the dividends upstream by all business segments in 2015. And please bear in mind that this number reflects the position before the payment of the announced final 2015 dividend and the share buyback completed in January 2016.
In terms of financial leverage, our fixed cost coverage ratio went up to 13.1 times. The leverage ratio decreased to 21.7 percent, while the gross financial leverage position remained stable at €3,700,000,000 From now on, we will report our capital position based on our Solvency II partial internal model as approved by the Dutch regulator last December. The NN Group Solvency II ratio was 2 39 percent at the end of the Q4 of 2015, down from 2 47% at the end of the third quarter of 2015. But please note that both the Solvency II ratio and the IGD ratio already reflects the proposed final 20 15 dividend of €341,000,000 The share buyback of €250,000,000 in January 2016 will be reflected in the Solvency II ratio at the end of the Q1 of 2016. So let's move to Slide 7.
We've always been very clear about our commitment to execute on the equity story set out of the IPO with a focus on creating shareholder value. Our priority is to improve earnings and generate cash with a base case of returning that cash to shareholders unless it can be used for other value creating opportunities. Since the IPO, we have returned a total amount of €1440,000,000 to shareholders. This includes the final 2015 dividend that will be proposed to the Annual General Meeting in June 2016. And it also includes our participation in ING sell down of a further stake in NN Group in January 2016 when we bought back another €250,000,000 of NN Group shares.
As a result of that sell down and the conversion of the final tranche of subordinated notes to the anchor investors, ING stake in NN Group has been reduced to 14.1%. So finally, on Slide number 8, I would like to spend a minute on our priorities for 2016. Our primary focus is on improving performance across all of our businesses. That means continuing to achieve efficiencies and cost savings, while at the same time investing in our products and services to customers in the various regions. 2 areas are being given particular focus and that is Non Life and Asset Management.
I've already mentioned the program we have launched at our Asset Manager to sharpen its strategic focus. And as our Non Life business, we continue to take measures to further improve the results, such as adjusting premium rates and improving underwriting performance. We will continue to deploy capital in the best way in the most profitable businesses in order to generate value for our shareholders. And we're looking at future growth opportunities, be it organic or inorganic. We will always apply strict financial criteria and compare it with the alternative deployment of that cash by returning it to shareholders.
At all times, we will maintain our capital discipline. We have today disclosed our target range for the cash capital position in the holding company at €500,000,000 to €1,500,000,000 And Delphine will talk more about this later in the presentation. Our solid capital position will allow us to cope with the remaining regulatory uncertainties and market volatility and continue to deliver on our dividend policy. And with that, I would like to hand over to you, Delfin.
Thank you, Ralf. Good morning, everyone. I will start with the consolidated full year results. NN Group reported an operating result of the ongoing business of €1,400,000,000 for the full year 2015. This is up 32% compared with 2014.
The operating result excludes the result of the closed block variable annuity business in Japan. The 2015 operating result was supported by some favorable items, including large private equity dividends of €221,000,000 cost reductions in the Netherlands of EUR 75,000,000 and non recurrent benefits of EUR 52,000,000 in the technical margin. It also reflects higher results at Insurance Europe and Japan Life as well as lower funding costs. These positive developments were partly offset by a lower result at asset management and an unfavorable claims experience in our non life property and casualty business. In the right hand chart, you can see that the full year net result increased significantly compared with 2014 to almost €1,600,000,000 Special items in 2015 comprised rebranding expenses.
In addition to that, special items include 13 €1,000,000 of restructuring expenses taken in the Q4 related to our new cost reduction target in the Netherlands. To achieve this target, we expect to spend €30,000,000 to €35,000,000 before tax per year over the next 3 years. We will report these expenses as special items. Before going through individual operating segments, please turn to Slide 11, which gives more details on the cost savings in the Netherlands. As we announced at our Capital Markets Day in November, we have set ourselves a new target cost base in the Netherlands.
We aim to reduce the administrative expenses of Netherlands Life, Netherlands Non Life and the holding entities to €700,000,000 by the end of 2018. This is a reduction of almost 15% compared with the annualized cost base at the end of the Q3 of 2015. We have got off to a good start with total expense savings of €15,000,000 achieved across all the Dutch units in the Q4 of 2015, bringing the cost base in the Netherlands down to €803,000,000 in an annualized basis. As Lard already said, improving efficiency remains a priority for us going forward. We are implementing a range of initiatives to achieve these savings from operational efficiency improvements in individual departments to more cost effective IT platforms.
Let's now look at the 4th quarter performance of each individual segment, starting as usual with Netherlands Life on Slide 12. The operating result of Netherlands Life remained broadly stable at €155,000,000 in the Q4 of 2015. There are both positive and negative developments influencing this result. Firstly, the technical margin was higher as the current quarter including 20 €5,000,000 benefits following updates to certain technical provisions, partly offset by lower mortality results. Please also note that the Q4 of 2014 included a €19,000,000 addition to the unit linked guaranteed provision due to a decrease in interest rates.
Secondly, fees and premium based revenues remain under pressure due to the Individual Life closed block runoff. The investment margin decreased in the Q4 of 2015, following a nonrecurring negative adjustment of €13,000,000 related to mortgage amortization, while the Q4 of 2014 included a €23,000,000 private equity dividend. The large private equity dividends received in earlier quarters in 2015 led to an increase in the investment spread to 136 basis points. We continue our strategy to gradually shifting the asset mix to higher yielding assets. Finally, as already seen in the previous slide, administrative expenses decreased compared with the Q4 of 2014, supported by lower staff cost.
I will now turn to Slide 13 for the results of Netherlands Non Life. The operating result for Netherlands Non Life was €28,000,000 compared with €35,000,000 for the Q4 of 2014. This was due to an increase in the claims ratio in Property and Casualty. The combined ratio for the Q4 increased to 100 0.7%. Let's look at the 2 business lines within Non Life separately.
The Q4 2015 operating result in disability and accident remained stable at €21,000,000 The results of D and A have improved over the last few years following the various management actions we have taken. As you can see in the right hand chart, the combined ratio has decreased accordingly and now stands at 97.6% for the full year 2015. The 4th quarter operating result in Property and Casualty, however, decreased to €6,000,000 from €13,000,000 in the Q4 of 2014. This was due to lower results in the motor portfolio as well as in the miscellaneous portfolio, which primarily comprises liability and legal aid cover. On the other hand, the current quarter saw fewer large fire and weather related claims, leading to a higher result in the fire portfolio.
On balance, however, I think it is fair to say that we still have more work to do to bring the property and casualty combined ratio down, which stood at 104.8% for the full year 2015. Please turn to Slide 14 and the results of Insurance Europe. Insurance Europe reported a higher operating result of €48,000,000 for the Q4 of 2015. This is compared with €40,000,000 for the same quarter the year before. This was supported by higher fees and premium based revenues related to traditional life, unit linked and universal life insurance products.
Also, administrative expenses were lower compared with the Q4 of 2014, resulting in an improved costincome ratio. Moving to Japan Life. The operating result of Japan Life was €27,000,000 up significantly from the Q4 of 2014. Fees and premium based revenues increased almost 5% on a constant currency basis, driven by larger in force volumes. And the technical margin improved, reflecting a higher mortality result.
This was partly offset by a decrease of the investment margin due to lower interest rates on reinvested assets. The costincome ratio improved as a result of the higher income and flat administrative expenses. Moving now to asset management. Total assets under management decreased to €187,000,000,000 at the end of the Q4 of 20 15. The decrease reflects net outflows of 3rd party assets of €4,100,000,000 partly offset by positive market performance of €1,600,000,000 The operating result decreased to €21,000,000 for the 4th quarter.
Fees were down on lower average assets under management in the quarter, and expenses were higher due to the €13,000,000 restructuring provision already mentioned by Lard. This one off expense was partly offset by lower staff related cost. The lower income and higher expenses are, of course, reflected in the higher cost income ratio for both the Q4 and the full year. Our focus remains on bringing this ratio down by increasing fees on assets under management and reducing expenses. The segment Other, which comprises the holding company, the reinsurance business and NN Bank is set out on Slide 17.
The total operating result of the segment Other decreased from a loss of €24,000,000 in the Q4 of 2014 to a loss of €29,000,000 in the Q4 of 2015. These results mainly comprises the 3 elements shown in the graphs on this slide. Let me go through this individually. 1st, starting with the first graph. The improved holding result was mainly driven by cost reductions.
The result of NN Bank increased to €11,000,000 in the 4th quarter. The bank continued to grow in both mortgages and customer savings, which led to a higher interest margin. On the other hand, administrative expenses were also up as investments are being made to support this growth. Finally, at the reinsurance business, the operating result was down due to lower underwriting results. Also, the Q4 of 2014 included favorable mortality and lapse assumption updates.
I will now move on to Slide 18 to cover our last segment, Japan Closed Block VA. Japan Closed Block BA reported a result before tax of €24,000,000 up from a €24,000,000 loss in the Q4 of 2014, mainly driven by positive hedge results. As we have mentioned before, these hedge results can be volatile from quarter to quarter and tend to have a negative bias in volatile markets. As you can see in the right hand chart, the portfolio continues to run off. The number of policies decreased by more than 31% in 2015, and the account value of this closed book now stands at €10,000,000,000 That completes the results of our operating segments.
On the following slides, I would like to take you through the value of new business, free cash flow and capital generation. Starting with the value of new business. As Lars mentioned in the presentation, we were much focused on profitable growth in Europe and Japan, where we are shifting our business mix towards higher margin products. The success of this strategy can be seen in the value of new business for the full year 2015, which went up at both Insurance Europe and Japan Life. On the other hand, the value of new business at Netherlands Life decreased due to an overall decline in interest rates.
I will now move on to Slide 20 to cover our free cash flow. As we have done in previous quarters, let's start with the movement in the holding company cash capital during the Q4 of 2015, which increased from €1,600,000,000 at the end of the 3rd quarter to almost €2,000,000,000 at the end of 2015. The free cash flow during the quarter was €335,000,000 which is the sum of the 4 elements within the box in the chart. As you can see, the free cash flow was mainly driven by dividends of €376,000,000 received from our subsidiaries. This included a total of €250,000,000 of dividends received from NN Life.
The free cash flow for the year 2015 as a whole is on Slide 21. The cash capital position at the holding company increased during 2015 from €1,400,000,000 at the beginning of the year to almost €2,000,000,000 at the end of the year. This increase reflects total free cash flow during the year of 1,000,000,000 €336,000,000 driven by dividends received from all business segments. This was partly offset by €792,000,000 of net capital flows to shareholders, which mainly consist of ordinary dividend payments of €349,000,000 and the 3 share buybacks completed during the year for a total amount of €500,000,000 The appendix to this presentation on Slide 32 shows a breakdown of the dividend received in 20 142015 from our segments and subsidiaries. As you can see on that slide, they are broadly spread across the various businesses.
Let's now turn to capital generation on Slide 22. This slide shows the capital generation of our subsidiaries and for NN Life separately for the second half of twenty fifteen based on Solvency I. The total capital generated by the subsidiaries during the second half of the year was €951,000,000 This was predominantly generated by NLIFE for an amount of €804,000,000 and reflects decrease in interest rates and the tightening of credit spreads in combination with positive operating performance, partially offset by the investment in new business. Now that Solvency II has become effective, this will be the last quarter that we report this Solvency I numbers. On the following slides, I would like to take you through some additional disclosures on Solvency II.
In the table of this slide, we provide you with the Solvency II ratios for NN Group and insurance entities in the Netherlands based on the partial internal model. As you can see, they have different levels of solvency, but are all strongly capitalized under Solvency II. Let me now update you on the sensitivities of our Solvency II ratio based on the partial internal model on Slide 24. On this slide, as you can see that in time of stress, the solvency II ratio based on the partial internal model moves in a similar direction as the standard formula ratio, which we disclosed at the Capital Markets Day last November. NN Group solvency ratio is exposed to raising and falling rates, but is relatively well matched to interest rate movements as Own Funds and the SCR both move in the same direction under parallel interest rate shifts.
The Own Funds are most exposed to widening spreads on AAA Sovereigns and reducing corporate spreads. On the other hand, the fact that own funds benefit from widening corporate spreads provides a good offset to equity risk, especially in times of stress. This is mainly the result of the difference between our own investment portfolio and the Vola reference portfolio and the fact that we have substantially more AAA government bonds and fewer corporate bonds. If we apply these sensitivities to market developments since the beginning of the year and we exclude the impact of the €200,000,000 share buyback we did in January, the impact from market movements on our solvency to ratio was not material. I will finish off by looking at our cash capital target and dividend on Slide 25.
We told you at the time of the IPO that we would look to have free cash available to shareholders in the range of the net operating profit of the ongoing business. While this varies year on year due to financial markets and other items, this guidance remains in place as we transition to Solvency II. Today, we also give you some more clarity on the cash capital position at the holding company, which we see as requiring a target range of €500,000,000 to €1,500,000,000 As I have previously communicated, the amount of capital we need in the holding depends on the risk in our units relative to their financial position. As they take on more risk or have lower solvency ratios, then we will need more in the holding and vice versa. For this reason, we give you a guidance range, which we think will cover most scenarios.
The combination of these two statements should allow you to have a better sense of our deployable capital in the holding, both in terms of what you can normally expect to be generated and also what you can normally expect us to hold. Looking at our position today and if we take into account the €200,000,000 share buyback that we completed in January and the proposed final 2015 dividend that, if approved by shareholders, will be paid in June, our pro form a cash capital position stand at almost €1,400,000,000 so within our target range. The proposed final dividend taken together with the 2015 interim dividend that was paid in September represents a payout ratio of 41%, in line with our stated dividend policy. And now I will pass you back to Lard for the wrap up.
Yes, everybody. So I'd like to round off this presentation by saying that we are pleased with the strong results for 2015 and the progress that we have made during the year to achieve our financial targets and generate value. We reached an important milestone in December when our Solvency II partial internal model was approved by the Dutch regulator. We believe that our strong capital position will allow us to deal with any remaining uncertainties or market volatility, But it also allows us to keep delivering on our promise to return capital to shareholders by proposing a final 2015 dividend of €1.05 per ordinary share. We still have a lot of work to do in 2016 to further improve performance, and this goes hand in hand with delivering an excellent customer experience by offering transparent products and services that serve our customers' lifetime needs and being a company that truly matters in the lives of our stakeholders.
And with that, I would like now to open the call for your questions. Delfin Roeda and Doug Caldwell, our Chief Risk Officer and myself are here to help you with that. So please, operator, over to you. Thank you, sir.
The first question comes from Ashik Musialdi from JPMorgan.
Just a couple of questions. First of all, on your dividend. So how should we think about your dividend? So is it strictly based on payout ratio, I. E, if your earnings move up or down based on, say, private equity dividend coming in or not?
Or do you have some sense like, okay, you aim to have at least maintain the absolute cost of dividend? Or any sort of thoughts on that? Secondly, in your partial internal model, is it more or less final? Or are you still in discussion with DND or other regulators to get a bit more clarity on stuff like LACBT or anything else that is still pending? Or do you think this is more or less the final number?
And then whatever happens will be like proper industry wide, not just Netherlands, but for all of Europe? And thirdly is, can you give us a bit more color on cash flows for 2016? Because you extracted a lot of cash out of Netherlands last year, how should we think about it? Is it like you're extracting cash ahead in from Netherlands? Or from like from your 2016, you have already got a lot of cash in 2015?
Or that was just done and now it's all about 2016 and you continue to expect recurring strong cash flows from that?
Yes. Thanks, Ashik. Delfin, I think you would be so kind to take those questions.
Three questions. Good morning, Assik. So the first one, how to think about dividend. We have established the guidance on the dividends in the range of 40% to 50% of the operating result of the ongoing business after tax. And we have also highlighted and we do so again that we are aiming for a sustainable dividend over time.
So that means that fluctuations that might happen on the operating results should not be translated to 1 on 1 towards the amount of dividend to be paid. That's why, as you know, we have a range between €40,000,000 €50,000,000 on which, under normal circumstances, we like to drive the ordinary dividend. Obviously, as it's been commented already in the past, any surplus capital that we have will be distributed at the appropriate time on top of the ordinary dividend as we have done already over the past quarters. In terms of the partial internal model, we did receive approval by the our regulator mid December, And we have already disclosed what is the amount of the solvency ratio under the Partial Internal Model. We have indicated that as it was the case for Solvency 1 that the solvency ratios are not final until they are filed with the regulators.
And it is true that under Solvency II, there are more areas for potential interpretation with the new regulation that it was the case with Solvency 1. But otherwise, we do consider that our partial internal model is stable, has been approved and subject to the uncertainties that we have mentioned in the press release and in further disclosures. There is nothing else or special to comment upon. Looking at the cash flows for 16, I can refer you back, as it's to our general statement that we do expect these cash flows to be over time in the range of the operating result after tax. And I think that you highlighted yourself, indeed, 2015 has been very strong.
And there are certain elements there, particularly the dividends from private equity that although we do expect to keep receiving dividends from private equity, not to the same extent that happens in 2015.
But there is no such thing that you have accelerated cash outflow cash flows from Netherlands Life, I. E. We may see a bit of drop in Netherlands Life cash flow this year. It's not like that. I mean, you still expect recurring cash flows from Netherlands Life in the range of your operating profits?
Netherlands Life had a very good dividend for the parent company, but they are not out of line with the guidance that we have provided in terms of the cash flows coming from Netherlands Life to be over time at or above the operating result. But as we have always flagged, there is volatility on how this comes quarter per quarter or year per year. But nothing special that happened in 2015 that under normal circumstances could not be repeated going forward.
That's very clear. Thanks, Sophie, and
thanks a lot. The next question comes from William Harkings from KBW. Please go ahead, sir.
Thank you very much. First of all, on Solvency II, now that you have had the PIM signed off, could you just try and be clearer to us about what you think is an acceptable Solvency II ratio of the group and then Dutch Life and Non Life subsidiaries? And then sort of Part B of that, forgive me if you've disclosed it and I've missed it, but can you just remind us what's the LACTT contribution to available capital and the tiering between Tiers 1, 2 and 3, again, some of that might have changed since the Investor Day? And then secondly, could you just give us a brief strategic update on what's changed in the Asset Management division since the IPO? I'm maybe not following this as closely as I should have done, but it does sound like the performance hasn't been kind of coming up to scratch and you've got this further restructuring investment today.
So can you tell us sort of what's been going wrong and more precisely what you're changing that means the performance is going to be better in the future?
Yes. Thanks, William. I'm going to take the Asset Management discussion first, and then I will ask Delfin to comment on the other two questions that you had. First on the Asset Management business. We want our Asset Management to grow its 3rd party flows.
That's our objective. And we want also our Asset Manager to improve its earnings over time. And we've given a target for that at the time of the IPO. What we're seeing, and this is against the back active management industry, but also our asset manager is not immune to that, is that we've seen outflows. So we obviously would like to change that profile moving forward and make sure that we get the growth that we want to achieve there.
And why? Because we've invested, for instance, in a platform to rewire the asset manager, ensure that we can take on more assets. And secondly, because we believe that there is a lot of good strategies that we have that can attract new flows. So what we've done to sharpen that focus and to make sure that we achieve our objectives moving forward, we have done a couple of things. We've designed a new program, which goes by the name of Focus, Simplify and Optimize, and that pertains to a number of things.
First of all, we will focus on selected areas, meaning that we will focus on some flagship strategies in the income space, multi asset space, the liability driven investments, sustainable impact emerging markets, real assets and private debt, where we think that we have a great expertise and we combine our expertise with higher fees charged in these strategies. Secondly, in terms of simple rationalizing, we think that we can rationalize our product range and our product offering. We currently have over 300 funds in 7 fund domiciles, and we expect to rationalize that in the coming 3 years. More focus is what we want and also in our distribution and in our client in our target client segmenting sorry, targeting client segments. So we want more focus on what client segments and build out distribution in those areas.
And we want to simplify our structure within the asset managers within the asset manager and simplify the processes following the implementation of the platform that I just mentioned earlier. Now in order to support all this, we've taken a restructuring provision of $13,000,000 in the 4th quarter operating result line of the asset manager. And this has to do with some investments that we need to make, plus also some personnel costs that are included in that. And that's what we've done to ensure that we achieve our objective moving forward, which is to improve the net flows and grow the asset manager. With that, I'd like to hand over to you, Delfin, to take William's other questions that he had.
Of course. William, so in terms of your first question about targets on Solvency II Ratios. I think that maybe on this, we are slightly having a slightly different approach than others. But we are not at this time ready to elaborate on specific targets for the subsidiaries or for the group. And the reason being is because we believe that these ratios, how they are interpreted remains fluid and still remain some uncertainties over the final numbers as we move over the next quarters.
We will see how the environment pans out over the coming year. And for this reason, our capital guidance at this point of time remains focused on capital generation and in the holding cash capital levels. And I think that, that guidance should provide you a good metric in order to grasp not only what subject to some volatility, we will be able to generate of cash flow available to shareholders. And then how as this accumulates in the cash capital at holding, how that will be distributed to shareholders over time within the range guidance of €500,000,000 to €1,500,000,000 Your second question was about deferred taxes. You've got in the press release in the Capital Management section in Page 22, you've got the contribution to own funds to eligible own funds of the different elements.
So that also can allow you to do the tiring, the tiering of capital. So then you can see there that the deferred tax access is basically all of Tier 3 of €735,000,000 representing around 6% of the total.
Next question comes from Cor Klaj from Rapple Please go ahead, sir.
Good morning. Cor Kluis from Rabobank.
I've got a few questions. First of all, on the Solvency II ratio in the NL Live business, which declined only by 5 percentage points from 2.25% to 2.20% despite the big upstreams that you have done this quarter. Could you tell what happened during the quarter? What's the roll forward for that for the rest obviously development over the quarter? And second question is about energy exposure and China exposure.
That's probably very small for you, but at least could you give some indication or sizes or figures on that one? That's my questions.
Yes. So let's start thanks, Gaurav. So let's start with the exposures in China and the Energy sector. So Doug, can you take that? And then I'm asking Telfin to take the solvency ratio and in life.
Sure. The China is, yes, I think you used the word non existent. I think it's very we would not have any material exposure to China directly. In terms of the energy sector, we have in the appendix, we show 3% under utilities and natural resources, about $1,200,000,000 of that is exposed to oil. There could be, of course, again, indirect exposure, but that would be more difficult to quantify.
So in total, you're talking about 1% of the general account investments exposed to oil and essentially no exposure directly to China.
And the metals business?
Metals? Yes.
I think that would be in our Utilities and Natural Resources. The total exposure we would have is 3% of our assets.
So the evolution of the Solvency II rate unit in Life, basically, you have to take here into account, first, the market impact has not been this quarter that significant. So the variance from the previous quarter are mainly driven by the dividend payment of €125,000,000 that is being deducted from the solvency. As and I think that is and obviously, the operating result that has contributed positively over the quarter.
The next question comes from Rafiki Mukenre from Autonomous.
It's Farke from Autonomous here. Just two questions, if I may. Just starting on the holding cash target, could you just explain the reasoning or framework behind the €500,000,000 to €1,500,000,000 target there? And also, could you just explain whether there's been any incremental upstream from the subsidiaries to the group in the Q1 to date? And then just on the kind of well, just a little bit of extension on the question from Ashik on the dividend.
I mean, obviously, net operating profit in 2015 was kind of boosted by high private equity dividend. My question therefore to a certain extent is when you think about the dividend trajectory, did you kind of look through those perhaps with an intention of at least maintaining a stable nominal? I think the answer is very much yes, but I just want to confirm that. Thanks.
Thanks, Farquhar. I'll hand over to Delfin for these questions.
Okay. So Farquhar, the first question about the way of looking at the targets of the whole company cash levels. Maybe if I refer back, as you know, at the time of the IPO, we did explain that the free cash available to shareholders will be in the range of the net operating profit of the ongoing business. We have repeated that several times. And now basically what we have given you now is more clarity on the cash capital position at the holding, on which we think that the range of €500,000,000 to €1,500,000,000 is our target.
The cash capital, you have to think of it as the amount we believe that we require to cover stress events and to fund holding cost. So this amount depends, therefore, on the risk in our units relative to their financial position. So as I said during the presentation, as we take more risk, then we need to have more cash capital at holding. And also, it depends what is the level of solvency in the system at the subsidiaries. So this is, if you like, a dynamic situation on which also levels of interest rates and other valuations of financial assets impact your solvency over time.
So the combination of these two statements, how much we are expecting to generate of cash flow and how to move from there should provide you a good guidance. And obviously, you should not expect that this target is a complete fix. So that means that there will be times on which we are outside of the range. And obviously, as any target, we will aim taking the right actions in order to move towards the range again.
Okay. And dividends in the Q1 in terms of Upstream?
In terms of dividends for the Q1, you have to basically, just as a reminder, the dividends for Europe tends to come into the 2nd quarter. And I think that one element maybe to highlight is that in the case of Belgium, because the portfolio is part of the portfolio is running off, we are expecting to release during the period 2016 2018 a bit more dividends than in the past. For Netherlands Life and for the other operating units, the capital above the commercial target is upstream to the holding company as it comes through. And we expect this remittance of Netherlands Life to be larger than the net operating result, as I have said. So I don't think there is anything in particular to flag for the existing quarter.
And then finally, I think, Delfin, that Farfir also had a final question around the dividend policy, in general, the 40% to 50% range and how you think about how we think about that. So maybe you want to take that as well.
Yes. I think the dividend policy, we on the ordinary dividend, I stated already that we're looking for a stable evolution on that respect. And obviously, the private equity contribution, as others, can be volatile, But we should still I think that the right definition is to look at sustainable, hopefully, growing dividend over time.
Next question comes from Farooq Hanif from Citi.
I want to return to the HoldCo cash target because you're clearly going back into the target range now having been above it. So I just want to understand what this means because you are I mean, we are in a time of stress with lots of potential risk. And but at the same time, you've got very good capital in your subsidiaries. So should we interpret you being below that €1,500,000,000 range as look, if you're within the range, buybacks, we should assume in this climate don't happen until you get above the range. What happens when you get to 0.5?
I mean, what is the range of different actions you take within that range?
If you could just explain a
little bit more. And my second question is, you've given the €1,800,000,000 of Solvency I capital generation. Was the Solvency II capital generation in 2015 greater than this or less than this? And can you make a general comment on Solvency II capital generation versus the Solvency I generation that we've seen before?
So Farooqah, thanks for your question. Let's start with Delfin on the range and how to think about that.
So when considering how we return excess capital, I think we have to take into account different factors, our own risk and solvency assessment, current and future capital generation, market volatility, regulatory uncertainties, litigation risk as a unit link. So many factors needs to be taken into account when we take a decision to return excess capital. For this reason, we have given our guidance that cover most scenarios within that range. But as I said, you should not look at the 1.5% or 0.5% as our target. We will, over time come back to the range.
And that does not mean that if we are below €1,500,000,000 that we don't have capacity to do share buybacks or distribute further dividends on top of the ordinary dividend. That's why there is a range. And again, within that range, then what we will look is into considering all these factors, the solvency of the subsidiaries, the situation of the risk profile at that point of time. We will decide on the share buybacks. But the range, I would say, if anything, give us financial flexibility in order to aim for the sustainable return to shareholders.
And Doug, can you take the second piece of the question, Farooq?
Yes. I think maybe just to focus on the differences between the Solvency I and Solvency II regime and primarily in the Netherlands, It was I think when you look at it in life where you have the change in the assets is very similar between the 2. On the liabilities, there is a credit risk adjustment and a volatility adjuster that you have to take into account that was not there in Solvency I because it was on the swap curve. During 2015, that was a net positive. So that would have been a little bit lower capital generation for the fixed income and the liabilities.
Then the other main difference is the risk margins. The risk margins are generally a little bit higher under Solvency II than under Solvency I. So that would generate a little bit higher capital. But those are the types of points that I think are the
key differences. And I think Delfin can give a bit more on the capital generation.
Yes. I think maybe the best reference for you to look at Farooq is in again in the Capital Management section when you can see the evolution of the solvency capital ratio in the quarter. You can see that in terms of the solvency capital requirement has been very flat, around €5,600,000,000 capital requirement. And there's been, however, a reduction of €5,000,000,000 in the eligible on forms. But when you look into that, you can see that there are 2 elements impacting that.
Basic on forms decreased not much by around €200,000,000 And it's been the increase in the non eligible on funds as well as the non eligible on funds the non available on funds, sorry, and the non eligible on funds. So the main driver for the reduction of the basic of funds is, of course, the proposed final dividend of €341,000,000 And so you have to take into account that the solvency requirements and the basic on funds already reflects the €340,000,000 dividend and assets. So the implication of
what you're saying is a kind of normalized run rate is essentially similar to the dividend final dividend payment in the quarter?
Sorry, Farooq, can you ask the question again?
Yes. Sorry, I was just trying to do some math in my head. But so what you're saying is that the SCR was flat, but the owned funds was down mainly due to the dividend. So if we take the final dividend payment, that gives you an idea of the operational full duty generation in that quarter?
Yes. Actually, I think that if you were to exclude the impact of the dividend, instead of 239,000,000 it will be 245%. So excluding the dividend, it is a decrease of 2 percentage points from 2.47% to 2.45% per percent. And the majority of that is explained by basically the non available own funds and the non eligible own funds that has increased somehow. The markets have not had much impact during the quarter for both and in Life for the group.
Next question comes from Ms. Nadine van der Meulen from Morgan Stanley.
Firstly, I suppose on Netherlands Life. The value of new business was a little low. You mentioned declining interest rates. What are your expectations here going forward? So what's in your mind sort of a more normalized level going forward?
And in that light, perhaps you can comment also on the development of new products like APS, etcetera. The second question is, previously, you mentioned there are regions where you see the potential to reduce solvency positions. Can you remind us which regions and how much capital you expect to be reduced from lowering this in the coming years? Thirdly, on the P and C performance, clearly, the last 3 years above 100%. Apart from further expenses, what actions are you taking to improve this?
And lastly, yes, can you, as far as you can say, given the indication of your appetite for acquisitions, given that you still have quite low leverage, strong capital and low growth?
Yes. Thanks, Nadine. So let me start with taking a couple of these, and then I'll make sure that I think the solvency ratio is definitely something for you, and then the remainder, I will take to a large extent. So first, on the appetite for M and A. Our focus and priorities on the existing businesses and activities and making them stronger in the markets where we operate.
And obviously, we monitor the developments in the various markets where we operate closely. But nothing has changed in that sense in the IPO. So if we have excess cash, we our base case is to repatriate that back to shareholders unless there's a corporate opportunity that presents itself and casualty business and the combined ratio of the Property and Casualty business and the combined ratio of the Non Life company. As you know, let me start by repeating the target that we have for It's 97% or better by the end of 2018. In spite of the fact that the full year, the combined ratio has gone up, we're going to continue to get after that target and work towards it.
So but you need in order to go deeper into this, we need to dive a bit deeper into the various segments of the non life company. Disability and accident, which is a large piece like 45% of the premiums of the Non Life business is actually in a decent place. It's down at 97.6%. And don't forget, that is a healthy level for our D and A business where we also have reserves on the balance sheet. You also make money on the investments there.
When it comes to property and casualty, we have there's a number of dimensions here. Over the full year, we have seen an increase of the combined ratio there, which was mainly driven by the 1st 3 quarters in which we saw large fires in our fire book and quite some weather related claims. You may recall the hailstorms, even the summer storms that we had this summer. So we saw that coming through. We've looked extensively at whether these large prior claims would constitute a pattern.
We've looked ourselves. We've made sure that we had proper diligence done on Nothing came out that there were any that was signaling towards a trend in that area. And also Q4 actually confirmed that because in Q4, we didn't have these large fires and the combined ratio for fire, for instance, in Q4 was back to 88%. So that gives you a dynamic, which has been important for understanding the driver of our combined ratio evolution in the Non Life business. The Motor book is something that we focused on, and I mentioned that in earlier quarters.
There, we have improved actually over the year from 111% combined ratio to 109%. Now obviously, that's not where it should be, so we continue down that path to bring the combined ratio in a better place for the motor book. And what we have done so far is the following things. We have taken individual approach to frequent claimers. We terminated large car fleets.
We introduced usage based car insurance. And we had some differentiated premium rate increases, 6% roughly round numbers in 2015. For small car fleets, round numbers 10% to 20%, depending on the experience that we have in the particular client with the particular client. And for the next steps, we will take ongoing measures on loss making pools, mandated broker portfolios and additional car fleets pruning. So we will continue to do this and also adjust premiums based on risk reviews.
We will do that in a sophisticated manner to ensure that we improve the overall risk profile of that book. So bottom line is, risk profile of that book. So bottom line is combined with the expense reductions, we aim for the target of 97% combined. Now that's for the Non Life business. For Life, VNB was low.
I want to start by saying that the actually, the sales growth in the Life business in the Netherlands is obviously very, very small since it's mostly constitutes of the pension business where we have a lumpy evolution of renegotiating existing pension contracts. In the individual life insurance space, we basically sell term life. And for the remainder, the long term savings needs are catered by the savings products that we offer through the NN Bank business that we have, which is growing quite nicely. And then we focus especially on the DC and the PPIs, etcetera, so which is a low no guarantee or a very low guarantee and therefore less capital intense new business in the defined contribution space. So that's where we do think that there's growth opportunity.
And we have launched new products there and also launched the APF as a new vehicle to capture DC arrangements. With that, I'd like to hand over to Delfin for the question about potentially reducing Solvency II ratios in the in various markets.
Nadine. So we are well capitalized across the different subsidiaries, so that will give a good position. Maybe the best reference I can give you, Nadine, is what we described already in the Capital Markets Day. When we expressed that for Netherlands Life, for some entities within Insurance Europe and certainly for the Japan Closed Block VA is where the reduction from the level of surplus capital will be also a contributor to the cash generation coming from these segments. Within Europe, I have already mentioned Belgium as being the entity with the largest potential for releasing capital due to the runoff of part of their business there.
The next question comes from Gordon Aitken from RBC. Please go ahead, sir.
Firstly, one of your competitors, yes, you were saying it's not currently profitable, which is right to find benefit and showed a negative new business margin. I'm just wondering, is it profitable currently for you? I noticed the IRR has declined. As you said, you've renewed a few large group contracts. And I mean, is it possible in this market to take schemes from other providers?
Would you look at doing that? And if that's not possible, can you simply just up your prices that you're charging the schemes? That's the first question. The second one is on Solvency II. And I mean, UFRIC, you've given some sensitivity for 100 basis points move south.
And what's your view as to the likelihood of this happening?
Yes. Thanks, Gordon. Let me start with the pension business in the Netherlands. We have always maintained a view that when it comes to writing pension business, you need to be disciplined. And we have our own pricing discipline.
And as a result, you did not see us participating as much as some of the others did in the buyout space, for instance. So we maintain that discipline also when renewing new pension contracts, where we do observe, given the low rates and the quotes that we would give in the renegotiations to our clients, that there is obviously, it's become quite expensive. And as a result, you see a move to defined contribution or at least to renewals on a different basis where you have more of a hybrid system that employers offer to their employees or really defined contribution business. So we there we will continue to maintain our pricing discipline. And as a result, that's how we migrate and help our clients towards, let's say, less capital intense and affordable pension plans.
When it comes to the margins of the DC business, they are lower indeed. Having said that, the capital that is associated with this business is also quite low. So as a result, the return on capital, of course, looks also different in this area. We believe that over time and it will take time because the existing stock on the balance sheet of our company is there, and that represents the past accruals and past rights of our pensioners that over time that will we clearly see a move towards the defined contribution. So over time that will happen.
It is accelerating at this point in time, especially for new business, but it will take time before our total balance sheet has migrated into that direction. So when it comes to the Solvency II sensitivities, I'll hand over to Doug for this.
Yes. Thank you. I think the question we showed is UFR sensitivity. I think the question is do we what's the likelihood of that? Of course, we don't really assign a likelihood.
We that's something that will go through the process of AOPA. They will review this. It's one part of Solvency II as well. So it's not necessarily likely that only one part will be reviewed, but we will see how it plays out over during 2016 and see what the nature is. I think one point that's not mentioned on the slide, it's important though to remember is if it were to be adjusted, while that would have the impact on the solvency ratio that we show, that would also increase capital generation going forward.
So this is one where there is a trade off between the 2.
Next question is from William Haldekian from Goldman Sachs. Please go ahead, sir. Thank you. Good morning, everyone.
Most of my questions have been asked and answered. But I just wondered, can you give us any how we should be thinking about this very, very strong solvency you're showing in the Dutch Life business? I know you've made comments around the holding company and previous comments around capital generation. But is there anything more you can add in terms of where your major uncertainties are? Or how and when some of that excess capital may return to the holding company?
Yes, van Delfin, please.
Yes. Thank you, William. No, I don't think that there is anything special or uncertain there. Obviously, the impact of the loss absorbing capacity of deferred taxes and actually of any of the sensitivities that we have shown in the presentation, very much impact NLife as being the largest and the most important entity. So but nothing special to indicate in terms of how the capital will be generated or will flow into dividends to the holding company.
As we explained in the Capital Markets Day, we do expect that to have positive evolution on their own funds, But also in the solvency capital requirement, we expect to have a decrease in capital requirements due to the individual Life portfolio. And then for the pension business, depends of how things play out in relationship to ensure defined contribution. But keep in mind that as the business shift to toward defined contribution, that is very capital light and more management fee based. And then we have already said that Netherlands Life has a strong solvency ratio, so reduction from the current level of solvency ratio might also be a contributor to cash flow generation towards the holding.
Next question comes from Matthijs de Vitz from
KBG. Just to come back on the question of the dividends paid to the holding companies since the start of the year, still not entirely clear whether or not you remit you did remit any cash, especially related to the Netherlands, where in last year in Q4, you announced that you paid the dividend in February. So just wonder whether you did do that again. Could you link to that also remind me when the international Dutch operations typically pay their annual dividends to the holding company? I thought it was Q2 for international and Q1 for the main dividends from the Netherlands.
And then secondly on Solvency II, I understood you were working on some optimization initiatives or looking at them, including longevity swaps, the refinancing of the non eligible hybrids and a number of other actions. So could you update us in this respect? Thank you.
Yes, Matias, so Delfin, would you take those questions, please? Yes. Maybe just
Okay. The microphone is now on. So maybe the Matias, on the dividends paid from Netherlands Life, I think there is no particular quarter on which that's going to be done. Actually, when you look at how 2015 has developed, we paid €350,000,000 in the 1st quarter. We paid €150,000,000 in the 3rd quarter and €250,000,000 in the second in the 4th quarter.
So that's a total of €750,000,000 which actually you should add to that the approximately €10,000,000 per quarter that we do receive as part of the coupon or the interest on the hybrids that has been lent from the holding to Netherlands Life. So and that the same happens with other business units like Investment Partners or NNRE that don't have so much of a bias toward the Q2, and this is more distributed across the year.
Okay. So for
Insurance Europe and Japan, it's
more in the second part? Japan as well, it tends to be in the second quarter or maybe the Q3.
Okay. And then on the dividends received since start of the year, because normally you announce it when you pay you remit cash from the Netherlands, you announce it that it's what was paid after the quarter ended, but you didn't do this year. Is there any different timing or
No, yes. I think I mean, one thing one has to be it can be a little bit misleading, and one is to read carefully because every time we announce a dividend, it's already reflected in the solvency ratio of that entity. However, if you were to look at the graphs or the numbers in relation to the cash flow to the holding, Obviously, cash flow is only accounted when the actual cash transfer from the subsidiary to the holding. But basically, what we have already paid has been €125,000,000 in the month of October from Netherlands Life, another €125,000,000 in the month of December. And we have not announced anything yet from Netherlands Life so far.
Otherwise, would have been highlighted and also included in the solvency ratio as of 31st December.
Okay. That's clear. And on Solvency II optimization?
In terms of Solvency II Optimization, I think there are a few things that we are looking at. I mean, one clear one is the longevity on which we are looking into the what is the possibility of doing a transaction. I think this is something that we have to be very careful with in the sense that it has different elements. And one has to be sure that when we do the transfer of longevity risk, it's done based on the right basis. Another potential action is reducing expenses faster than our expense assumptions, and that will have a positive impact.
And then but it is more marginal if we were to apply some transitionals on the countries for the technical provisions in the countries in Europe under the standard formula. But that will have a very marginal impact on the overall solvency.
That's clear. Thanks a lot.
The next question comes from Jan Willem Knoel from IB and
Yes. Good morning. Thanks for taking my questions. A couple of brief questions. On nonlife, do you think the combined ratio in D and A can improve much below the current 97.6 percent?
Or will the improvement in the group P and C ratio fully have to come from the P and C business? And then on disability specifically, do you think that on the back of the economic recovery in the Netherlands, you will see some positive impact on the claims ratio in the disability business? And actually, both in P&C and D and A, how much room do you have to reprice the business? Or is that quite difficult given the competitive environment? I guess, on the longevity swaps, I guess, that's partly a choice between capital now and capital generation in the future.
And given your strong capital ratios, I mean, why would you sort of consider doing all the effort in executing long term debt swaps? And then briefly also, sorry for that coming back on the capital capital target of holding. I mean, you made very clear that the target depends on, amongst other things, the risks in underlying businesses. But you could argue that looking at the risks and developments in the underlying business, that the risks are rising. Are you rerisking the general accounts still?
It seems that risks in the financial markets are rising, at least in my view. Not all your litigation risks have been resolved. So given these risks and developments, is it fair to assume that you will aim to keep the cash capital in the upper half of the guidance range? Maybe lastly, on your asset quality, you talked about your exposure to energy and mining. So we used the utility and natural resources exposure as a proxy.
What percentage of these portfolios is below investment grade? And what sort of credit migration have you seen in the Q1? And do you expect in the of the year? And basically, similar on your exposure to financial institutions, how much exposure do you have to AT1, if any?
Well, good morning. That's quite a number of questions. We'll try to answer them in an orderly fashion there for you. So let's take them 1 by 1. First, the Non Life comments or questions that you had.
The disability and accident business runs at 97.6% combined. I already mentioned earlier that on the breakeven, you could on a breakeven level, you can even you also run this business in 100% combined. So 97.6% combined is a very healthy effect healthy level of this business. The but we will obviously, we do think that most of the improvement we need to get to the 97% or better by the end of 2018 needs to come from the property casualty side of the house. Having said that, we will also aim to improve the combined ratio on the D and A side by especially lowering expenses, etcetera.
But most of the improvement we expect to have to be come from the Property and Casualty business. When it comes to the economic developments in the Netherlands, will it have a positive impact on D and It's not a 1 on 1 relationship, but it is true that if the economies are better, usually you see a better risk profile emerging in the D and A portfolio. That is true, but let's not but I'm not going to be more concrete on that moving forward. So the bottom line is most of the improvement will need to come from P and C. And D
and A is in a healthy position right now, but we aim
to improve it further through expense reductions. Improvements of the underwriting performance. Then we go to the longevity swaps, which is the second question you had. And I asked Doug to comment on that.
Yes. I think we have a few considerations when we look at the longevity swaps. It's one is it's simply a risk concentration for our company. So it's one of our biggest single concentrations and we need to consider if we want to adjust that over time. And then of course, how to do that because these contracts can be very long dated.
And so you have to be very careful that you're entering into something that you're comfortable with. Of course, we also want to look at the capital efficiency of it and whether that improves our return on capital. And that's some these are probably the 2 biggest things that we will look at and consider as we continue to work through that.
Okay. And then the questions on the HoldCo cash capital levels and then subsequently the energy exposure question. So let's move to Delfin. So
I think it's we have given a range for a reason in order to cover most scenarios. So I think it should not be that appropriate just to speculate if we are going to be on the very top of the range or come down below that element. The only thing I would highlight is that once more that the subsidiaries are strongly capitalized and that the level of the cash capital at holding is strong. And as a consequence, unless there is extraordinary circumstances, markets moving very badly, the sustainable return to shareholders should be maintained over the next quarters. Keep in mind that so far, as Lard emphasized during his presentation, we have given back €1,400,000,000 to our shareholders since the time of the IPO.
And that has been done at a time where, obviously, we have benefited from positive impacts of the market because while doing so, we have increased at the same time the level of solvency and the level of cash capital at the holding. So there is some flexibility there, I would say. In terms of the exposure to energy and investment grade and the COCO or AT1. First, our overall exposure to financials is very low. We basically don't have any exposure to COCO.
You can also see in the appendix the breakdown of the fixed income securities by category. And you can see that as part other that will include non rated or non investment grade is very limited with a total of 2%. And I said, again, this includes also non rated securities. And in terms of the exposure of energy, it is also very limited, and I think it was 2% of the total, of which oil related is 1%.
Okay. Yes.
And in terms
of credit quality of the specific
oil and mining expouences, what percent of that is below investment grade?
I think we have to get back to you on that specific question. But again, I think it's good to note that it's very limited, the exposure that we have. But on that particular question, we'll get back to you, Yves.
Yes. Thanks.
Next question is from Farquhar Murray from Autonomous. Please go ahead, sir.
Hi, gentlemen. Thanks for letting me come back. Actually, I've just got 2 quick questions if I may. Several of your peers have given Solvency II targets for subsidiaries and for group level already. So could you just explain which uncertainties are driving your decision not to give these?
And are these specific to NN? And then more broadly, you have stated before that there is excess capital within NN Life. And certainly, 220% looks extremely strong versus peers. But at the same time, you seem to be now saying that the €500,000,000 to €1,500,000,000 holding cash target built in the position of the subsidiaries. Does that mean that if you upstreamed from NN Life and lowered the capital in that subsidiary, that there would be an offsetting increase in the cash target of the holding?
And would that be an offset be 1 to 1? Or is that far too extreme a kind of interpretation of what you're
saying? Thanks, Falkor. Delfin?
Yes. Starting with your first question about any specific uncertainties driving our approach to provide guidance on capital management? The answer is no. I don't think there is anything specific. Obviously, each company has its own characteristics and risk profile.
Maybe it's also a question of style and approach that we have taken from the various start at the time of the IPO. And I think that we've been clear on which uncertainties do exist at this point of time. We just think that maybe at this point of time, providing specific targets for the subsidiaries might, in certain scenarios going forward, prove not to be that helpful. So we better provide guidance that gives you, as I said already, indication of how cash flow might be generated and how can be distributed to shareholders going forward. And your second question, if indeed NLife continues having a healthy and strong dividend flow to the holding, there is not a 1 by 1 need to increase it at the holding company.
Obviously, the levels of €500,000,000 to €1,500,000,000 is designed for covering most scenarios over time. So that means that there is flexibility within that range and it's not mathematical 1 by 1.
Could I just extend that question? I mean, if you took the position in NN Life below, say, 200, does it become 1 to 1 at that stage? I can't imagine it does. But I just think the way you spoke to that comment, you just opened up a point of uncertainty.
Obviously, if you treat the cash capital at holding differently if your largest subsidiary is 2 20% solvency or that is at 120% solvency for the sake of argument. That's obviously the case. But one has to consider the flexibility that currently assist in the solvency rate of Netherlands Life in order to cover any uncertainty or risk that they can be facing. And 2 20%, as you have said, it is a very strong solvency ratio and certainly compared with other peers.
There are no further questions. Please continue.
Well, then I would like to thank all of you for your questions and for your participation in this call this morning. So I'd like to round off by saying that we are pleased with the strong results for 2015 and the progress we have made during the year to achieve our financial targets and to generate value. We reached an important milestone in December when our Solvency II partial internal model was approved by the Dutch regulator. And we believe that our strong capital position will allow us to deal with any remaining uncertainties and market volatility. But it also allows us to keep delivering on our promise to return capital to shareholders by proposing a final dividend for 2015 of €1.05 per ordinary share.
We still have a lot of work to do in 2016 to further improve performance, and this goes hand in hand with delivering an excellent customer experience by offering transparent products and services that serve our customers' lifetime needs and being a company that truly matters in the lives of our stakeholders. I wish you all a very good day.