NN Group Aktie

Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's Analyst Conference Call on its Full Year Results. [Operator Instructions]

Before handing this conference call 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 and -- 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, operator, and good morning, everyone. Thank you for joining our conference call to discuss NN Group's performance for the full year 2025. I'm excited to be here with you 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 dive into the excellent commercial momentum we have witnessed in our growth segments as well as our tangible progress on our future-ready program. Next, Annemiek will give a detailed analysis of the strong progression of our capital position and financial performance over 2025. After my concluding remarks, we will move over to the Q&A.

I'm excited to share that we have not only exceeded our 2025 targets, but also delivered a very strong Solvency II ratio of 220%, giving us an even stronger foundation to deliver on our future-ready growth targets. I am also pleased to see our growth segments deliver significant increases in new business values for international and a growth written premium growth of 6% in Non-life, which is now surpassing the EUR 4 billion mark for the first time.

Next to this, we saw increased DC inflows of EUR 2.6 billion at Netherlands Life. These results demonstrate a continuing shift towards high-quality fee and underwriting income. And we are making meaningful progress on our Future Ready Program, where I will share some compelling AI use cases later. And finally, on the back of our solid business performance and outlook, robust cash generation and healthy capital levels, we are further enhancing our promise to shareholders by stepping up our capital return commitments by EUR 100 million with a EUR 50 million step up in our annual share buyback and a EUR 50 million increase in our dividend, above the regular progressive increase.

As I mentioned, we have exceeded our key financial targets for 2025 with an OCG of EUR 2.1 billion, coming in well ahead of the targeted EUR 1.9 billion and our free cash flow slightly above the target of EUR 1.6 billion, a growth rate of 7% per annum for both metrics. These impressive numbers are further evidence of our ability to deliver on our business plans and a further testimony that we can drive profitable growth, which is good for all stakeholders.

Our capital position has significantly improved as has the underlying quality of capital with several tail risks being addressed as pointed out on the slide. Annemiek will provide the details on our financials later. This strong business performance as well as comfortable cash and capital levels have allowed us to increase capital return by EUR 100 million above our typical progressive dividend, splitting this evenly between a step-up of the dividend and a higher annual share buyback.

Consequently, we have increased the dividend per share with 13% to EUR 3.88 per share, increasing the base level for our continued progressive dividend policy. And we are stepping up our annual share buyback program by EUR 50 million to EUR 350 million. Today's increase marked a continuation of our outstanding track record of capital return to shareholders, having now returned over EUR 11 billion to shareholders since our IPO in 2014. We remain very committed to our capital return promise and to extend this strong track record, which is based on our current market capitalization, still implies an attractive future DPS growth of approximately 7% per annum.

We continue to deliver value to our customers, employees and society at large. And with the Capital Markets Day, we have set new targets for 2028. Let me highlight a few. We aim for the customer satisfaction scores significantly above the market average and secure a position among the top 3 for broker satisfaction by 2028. Customer satisfaction has shown consistent improvement, especially in Europe where all units are above market average. Additionally, we, once again, affirmed our #1 position on satisfaction with the Dutch brokers who play a dominant role in the distribution of our products.

We also aim to be an employer of choice where people enjoy to work with a diversified population. Furthermore, we aim to cut greenhouse gas emissions by 45% by 2030, invest over EUR 13 billion in climate solution and support 2.5 million people's well-being by 2028. As you can see, progress on all these targets is well on track.

With the Capital Markets Day, we took a deep dive into our Future Ready program, our plan to position us for greater competitiveness and adaptability in a rapid evolving landscape. We focus on standardization, automation and reuse of AI with a clear focus to improve customer experience and growth. I'm proud to say we are making significant progress and happy to share that we are firmly on track with the new KPIs that we set at the Capital Markets Day. We now have 236 AI use cases in place and already 42% of our sales come from digital leads. From the EUR 200 million annual target benefits by 2027, we have 40% realized in our run rate for the end of 2025.

Let me just highlight a few of these use cases behind these achievements. First, a breakthrough in claim processing. We can now process third-party car liability claims fully straight through. This enables us to deliver faster service with processing time decreasing from 1 to 3 days to a few minutes as well as reduce manual effort and improve customer satisfaction. And it builds on our existing AI modules and system integrations, it is scalable for other use cases as well.

Second, we are now using AI-powered avatars to train and coach our tied agents, enabling them to practice complex customer scenarios. Data shows that following standardized scripts significantly boost conversion rates, and we are now scaling this across the more than 9,000 agents. The result is a higher sales conversion, improved agent retention through better support and increased customer satisfaction.

Third, our new generative AI tool, AIReply. It drives high-quality e-mail responses using historic interactions and templates. This frees up time for customer service agents to focus on what matters most, delivering value to our customers. We are rolling it out across all Dutch business units with international outgrow to follow. And these are just a few highlights because there is much more to come.

We show excellent commercial performance in our growth business, Insurance Europe, Japan and Netherlands Non-life. Our largest growth segment, Insurance Europe continues to show significant VNB growth with an increase of 16% versus 2024, with both higher sales volumes and increased margins play a part in this success. With the growth from 2025 included, new business in Europe has grown with an average of 12% annually over the last decade, clearly not incidental and showing that our strategy is reaping real benefits.

Japan, our other international growth segment, continues its sales recovery with a significant 25% increase in new business value in 2025 versus '24. When comparing VNB year-on-year from Q2 onwards, the period since the launch of our new long-term savings product, we even see a 34% increase. Our market share has already been improving on the back of this performance. Going forward, we expect gradual sales recovery to continue, also driven by further product introductions. This will help VNB to recover to 2022 levels by '28, as outlined during our Capital Markets Day last year.

Netherlands Non-Life witnessed solid commercial momentum with gross written premium up 6% on year, surpassing the landmark of EUR 4 billion for the first time. This was driven by both indexation and volume growth. While the overall combined ratio remained within the 91% to 93% target range at 92.9%, the combined ratio of P&C was excellent at 90.3%.

And now I'd like to take a moment to highlight some of the business specifics for Europe and Netherlands Life. Our European business continued its impressive growth trajectory, and I'd quickly like to reemphasize our strategy. The focus is on a simple capital-light offering, favoring technical and fee income with a limited reliance on spread income. Our protection products have small ticket sizes, which makes these products accessible for a large pool of people who are increasingly aware of the usefulness of these products.

With these small tickets, high-volume products, the key is getting in front of customers, and this is an area in which we excel. We have a multichannel distribution network, well balanced with tied agents, bancassurance, brokers and direct. The tied agents channel, in particular, is undergoing a digital transformation and is one of the key beneficiaries of the Future Ready program, as can be seen by the success of our digital reach generation.

We took the decision to focus on protection more than a decade ago, and I am pleased to see how well that decision is paying off. With our presence in the highly underpenetrated markets, I have faith this trend can prove to be sustainable. Protection is the key pillar of our growth in Europe. But our pension offering is also a strong contributor. We're one of the leading providers of Pillar 2 and Pillar 3 pensions across Central and Eastern Europe, providing a source of AUM-based fee income, a business model with attractive operational leverage. And in 2025, this business model showed strong growth, also helped by financial markets in those regions.

Moving on to a promising growth opportunity in our home market. We have a leading position in the Dutch immediate annuity market. Even in the new pension framework, it is mandatory that people convert their accrued pension investments into an annuity. This is an attractive market segment because margins are healthy, and we expect the reform to improve our growth prospects.

In 2025, our gross inflow into immediate annuities was around EUR 0.8, up from EUR 0.5 billion in 2020, representing a CAGR of 10%. We expect these inflows to continue to grow, mainly fueled by the increasingly large DC pension funds. We expect to see a CAGR for immediate annuities of 10% to 15% going forward, leading to a potential gross inflow of EUR 1.4 billion in 2030.

This growth was not immediately visible in the growth of AUM. I won't bore you with the details, but this line item also includes a legacy retail portfolio that runs off at about 10% per annum. This runoff will be largely completed by 2030, where we expect the immediate annuity portfolio to have reached EUR 10 billion in AUM.

Together with the strong customer satisfaction, targeted pricing and our market-leading position in the overall DC market, we are confident in continuing this upward trajectory towards more than EUR 65 billion of AUM with an anticipated 15 to 20 basis points OCG margin by 2028.

In conclusion, our investor proposition rests firmly on 3 core pillars. First, our business mix will continue to diversify over time where growth segments will become more dominant in our mix. Netherlands Life will also become a more capital-light business as the mix changes towards DC pensions.

Second, with our Future Ready program, we continue to standardize and automate operations, improving efficiency and scalability across the group and at the same time, improving customer experience.

Third, we remain fully committed to delivering on our capital return commitments. And with safe announcements, we have taken another significant step in strengthening those commitments.

And with that, I will hand over to Annemiek.

Thank you, David, and good morning from my side to everyone listening in on the webcast. I'll begin with our excellent financial delivery of 2025. As you can see on Slide 14, our OCG is up 9% versus 2024, coming in at EUR 2.1 billion. It's a strong trend and testament to underlying business performance, whilst also benefiting from some nonstructural tailwinds. Free cash flow was up 7% versus last year with improved diversification as Netherlands Non-life, Europe and the bank increased contributions. The delivery on both metrics reinforces our confidence in the '28 OCG target of EUR 2.2 billion and our free cash flow target of above EUR 1.8 billion.

Our solvency ratio is strong at 220%. And as David highlighted, it's a significantly better quality since we removed the unit-linked overhang and are less sensitive to market movements and longevity risk. Cash capital increased to EUR 1.8 billion, although this has since reduced somewhat to EUR 1.6 billion following the repayment of the remaining RT1 debt that was called during January. These elements combined have put us in a position to reward shareholders beyond our normal capital return promise. We further enhanced our structural capital return with EUR 100 million, equally divided between dividends and share buyback. As such, we present the year-on-year dividend per share increase of 13% and a EUR 50 million increase in the annual share buyback to EUR 350 million.

Now let me give you some more insights into our capital progression. Looking at the capital bridge for the second half of 2025, strong operating capital generation of EUR 1.1 billion had a 13 percentage points to the solvency ratio, which is rounded 5 percentage points higher than the capital flows to shareholders in the form of dividend. Market variance increased the ratio by 7 percentage points, largely driven by the positive impact of interest rate movements, and decreasing spreads on government bonds and mortgages, partly offset by negative equity variance.

Mortgage spreads at the end of December were around 75 bps. We've previously communicated a normalized through-the-cycle level of 100 bps. However, we currently see tight spreads across basically all asset classes and clearly, mortgages are no exception. The bucket other added 2 percentage points to the ratio. This is mainly due to an update in the way we calculate non-available own funds for Insurance Europe entities, which add up 4 to 5 percentage points. We brought our approach more in line with the market after noting a more conservative approach versus peers. This was partially offset by a number of our model and assumption changes. The solvency ratio of Life showed a strong increase from 200% to 233% as well.

Our 3-pillar capital framework with a focus on: one, a Solvency II ratio comfort zone of 150% to 200%; two, EUR 0.5 billion to EUR 1.5 billion cash at the holding company; and three, a single A financial strength rating has not changed. With the current strong Solvency II ratio, it's fair to say that we're currently sustainably above 200% and that our binding constraint for capital return has now moved from solvency to cash at the holding company. Of course, this could change under adverse scenarios.

Now let me give you some details on our high-quality private debt portfolio before moving into OCG. We're comfortable with our private debt portfolio, which is well diversified by industry and geographically focused on Western Europe with an exposure to the U.S. below 10%. Over half of the book is either collateralized or government guaranteed, around 60% is above investment grade, and there is no exposure to leveraged products. We put a lot of emphasis on manager selection. Our goal is to gradually build the right exposure, giving managers time to put the funds to work. Our enhanced oversight capabilities allow us to properly challenge the fund managers. One example of this is the sample testing that we perform on the credit ratings assigned to individual loans. So while the market has seen some isolated incidents on private credit exposure, we're confident that our credit exposure has a more conservative risk profile.

And let's move to OCG. As already mentioned, our OCG came in at EUR 2.1 billion, up 9% versus last year. This reflects ongoing commercial and business success, driven by our growth segments, Europe, Japan and Netherlands Non-life. The strong underlying trend was further enhanced by some nonstructural elements.

Netherlands Life's OCG grew by 13%, helped by an infliction in experience. Last year was negative, now it's positive and higher investment returns. The main moving part for Life into '26 is the likely absence of positive experience variances, so we would expect a modest decrease in OCG for '26.

For Netherlands Non-life, which grew by 9% on a reported basis, we confirm an underlying rate of EUR 400 million for '25, from which we expect to grow with GDP plus going forward. Benign weather and the positive impact from reinsurance renewals were key reasons for Non-life to overachieve in '25.

Europe's OCG grew by 13%. As David explained, increased sales and higher margins drove it, and we're very pleased with the overall performance. Due to favorable markets, our pension fund service also benefited from performance fees during '25.

Sales recovery in Japan was strong and as such, has put some pressure on OCG as the current framework doesn't allow for deferred acquisition costs, as you know. However, Japan's OCG still grew by 8%, and this was more than offset by the benefits of a reinsurance transaction and favorable claims environment. For '26, we expect Japan to grow OCG benefiting from the move to ICS and continued new business growth. Lower OCG at the bank has a large [indiscernible] effect of NIM compression, which was only partly offset by one-offs. For '26, we expect a roughly stable OCG versus '25.

With the above comments in mind, looking forward to '26, we expect the nonstructural positive contributions in '25 to be offset by underlying continued business growth, leading to a flat reported OCG. As such, we're well on the way to deliver on our '28 OCG target of EUR 2.2 billion in '28.

Now a few words on operating results on Slide 18. Since we steer the business based on solvency metrics, I'll only concentrate on drivers that are different from the OCG analysis. Operating results were up 17%, largely driven by a sharp increase in Netherlands Life. Investment income benefited from the result on derivatives that fall outside of hedge accounting and higher dividends from private investments, especially the first item is rather technical and has no economic substance.

Japan's operating result was down due to a decline in the in-force book. This dynamic should be temporary as new business is rebuilding after the new long-term savings products that we launched in March. Future profits on the IFRS are largely determined by the CSM level. Our organic CSM grew 2% in '25 with high single-digit growth from both Netherlands Non-life and Europe. Japan is now also contributing to CSM growth following its sales recovery.

NN Group's net result decreased due to revaluations on derivatives outside hedge accounting used for hedging purposes. Bond sales and the final accounting results from the sales of Turkey.

Now let's move to our cash capital position. Free cash flow slightly exceeded our '25 target and came in above EUR 1.6 billion in '25, up 7% versus last year. Although free cash flow is lumpy by nature, we expect it to grow year-on-year to our target of over EUR 1.8 billion in '28.

Remittances from business segments were also up 7% and benefited from increased diversification as Insurance Europe, Netherlands Non-life and the bank all showed increased contributions. The bank benefited from additional remittance capacity due to the capital release from Basel IV.

Other includes the impact of increased debt costs and approximately EUR 50 million of Future Ready investments. Capital flows of more than EUR 1.2 billion includes the payment of the final dividend over '24, the interim dividend over '25, and the EUR 300 million share back that has been executed over '25. The change in our debt and loans reflects the impact of the untendered grandfathered RT1 notes, which have been redeemed in January 2026. As such, a pro forma cash capital position per year end '25 was closer to EUR 1.6 billion.

Now that we achieved our 2025 targets, our eyes are set on 2028 and our improved investor proposition. We've increased confidence to deliver on our 2028 targets, which will not only grow but also further improve and diversify our business. We're on track to grow our Dutch Non-life and International segments, and the strong business and financial results of Netherlands Life underscore our commitment of stable and predictable remittances until 2040.

We're on track in creating a highly digitalized Future Ready platform and organization. We have a strong balance sheet to support these key pillars of our investment case. Based on this confidence, we enhanced our capital return proposition today with an additional EUR 100 million on top of our regular progressive dividend policy and annual share buyback.

Going forward, we will continue to return additional excess capital to shareholders, unless it can be used for value-creating opportunities with a continued preference for small incremental steps rather than one-off lumpy returns.

At our Capital Markets Day, we indicated EUR 1.5 billion of excess cash bill potential over the 4 years from 2025 to '28. With today's enhanced capital return announcement of EUR 100 million, we allocate more than EUR 400 million of this excess cash bill to shareholders.

In order to improve future financial flexibility and manage debt costs, we intend not to refinance the EUR 600 million senior debt that was originally raised for the Delta Lloyd acquisition and is set to mature in 2027. Consequently, we expect the residual excess cash bill to be around EUR 500 million over 2025 to 2028, which can be used for value-accretive opportunities for further enhanced shareholder returns.

Thank you all. And with this, I'd like to hand it back to David for the wrap-up.

Yes. Thanks, Annemiek. I'm going to keep it short and punchy. We exceeded our 2025 targets. Capital is strong, our growth segments show excellent and continued commercial momentum, and we further enhanced capital return towards shareholders, and we are ready to continue this impressive track record.

And with these remarks, I would like to open up the call for Q&A. Operator?

[Operator Instructions] and our first question today comes from the line of David Barma from Bank of America.

Thank you for the 2026 capital generation guidance. I wanted to ask you about how disability fits into this. So could you please explain the deterioration in the second half of '25? How much of that was experienced compared to reserve adjustments maybe? And perhaps can you give some color on the measures you're taking in '26 to improve the combined ratio, and so how that is included in your flat OCG guidance for this year?

Then secondly, on Japan. So your new business data really starting showing the relaunch from the second quarter. And you had mentioned NBV growth of 50% year-on-year in that quarter. The second half was strong but has slowed a little bit. Would you be able to talk about the sales trend there, please? And how that's tracking compared with your expectations?

Yes. Thank you, David. Let me just say a couple of things on the combined ratio of the Non-life business, including D&A, and then Annemiek can fill in also the -- on the OCG guidance, and then we'll go to Japan.

Yes, on overall, the combined ratio of Non-life, I think overall, it was in the range of 91% to 93%. It was 92.9%, a little bit better than [indiscernible]. Obviously, P&C was very strong, but disability stood out. And then good to know within the disability book, we are really talking about the disability part of the sickness here, which is the first 2 years of coverage that the book is actually doing well.

What we have seen in this D&A book is that we've seen elevated inflows. I think partially, this is a long COVID. Partially, this is also a societal impact as an increase of mental health concerns.

Unfortunately, we were -- the reporting of the government agency on this claim was relatively late. So that meant that also, we needed to take strong measures in '25 to catch up, and that's what we did. So we've been actively repricing. First of all, we've also increased the segmentation between sectors because we saw quite some differences also in sector performance. And probably most important, even though these are 3-year contracts, the vast majority now of contracts will have the ability to reprice every year. So once a year instead of every 3 years.

Now this was combined with the strengthening of reserve. So all in all, we feel that these are strong measures that we have taken. Also, the solvency was not impacted there. So the remittance pattern will not be affected by this, by the development in the disability book. And we continue to guide 91% to 93%, as the right guidance of the combined ratio and clearly, we're on track to deliver on the EUR 475 million OCG target that we set for 2028.

Yes. On your question on how it impacts the '26 OCG forecast for Non-life, it doesn't, because the disability reserve strengthening doesn't flow through the OCG.

Yes. Then on Japan. Well, developments are very positive. I mean the -- clearly, the VNB was up 25%. I think, I mean, if you correct for currency, it's more in the range of 30%. These are very good numbers. So what has basically been happening in the market is that the overall corporate life market was flat, the short-term market or more the -- tax-driven markets actually went down with 4%. And then the long-term market where we mostly operate grew with 10%. So clearly, we're doing well in this market.

We also expect in this half year to introduce a new long-term product. So we have a unit-linked version out there, and we expect to launch also a more traditional product as well. So that means that next to the good protection product, a unit-linked product, we will also have a traditional life product in there. So that means that overall, yes, we're positive on the development. Japan is clearly on track to get to the targets that we have set. We initially said that we want to get back in '28 at the levels of VNB of 2022 which at that point was JPY 20 billion. And the business is clearly on track to deliver that, which is obviously a positive.

We will now take the next question, and the question comes from the line of Andrew Baker from Goldman Sachs.

The first one, just on the solvency ratio. Are you able to give a bit more detail on the change in non-available own funds methodology? And specifically, what changes you made to bring your methodology closer to peers? And then also what drove some of the offsetting model change impacts?

And then secondly, in Netherlands Life, are you able to give us a sense of the impact of a steeper yield curve on OCG now versus maybe your expectations at the CMD? And also, if you are able to give us any type of sensitivity to yield curve steepening on OCG, that would be really appreciated.

Yes. Thank you, Andrew. Annemiek?

On the non-available own funds. In our European business, we obviously have available own funds. We have solvency ratios that we actually statutory report in those businesses, but we cannot contribute all those available funds to the group, and that has to do with fungibility. We did some peer review also because the European business, obviously, is growing, and we don't like that buildup of nonavailable own funds from a group perspective. And we found out that we had a rather conservative approach there.

Technically, if you would actually sell one of those businesses within 9 months, you would get part of those nonfunds obviously reimbursed, they typically relate to future expected profit. We've now brought that more in line with what our peers do, and that means that we had a solvency build -- additional solvency build of roughly 4 to 5 percentage points out of this nonavailable own funds change. It doesn't change the local solvency ratios because they already included that. It also doesn't change the remittance capacity, but it does prevent group solvency leakage.

In terms of NN Life with the steeper yield curve, obviously, it was helpful for OCG of NN Life to have that -- steepen our yield curve. If you look at it going forward for the target, yes, it's a positive for '26, we would expect Life to be modestly below the '25 result that we had, and that mainly has to do with the absence of positive experience variances. We do recognize that the steeper curve, obviously, has a positive impact, but that's all market driven. So we're not going to change our target there for Life, but there could be some upside to it.

We will now take the next question, and the question comes from the line of Farooq Hanif from JPMorgan.

When you talked about incremental step-up in capital return, you were referring in the path to the buyback, but you've also added to the dividend. Can you just comment on whether the dividend is now part of the toolkit for incremental step-up, given the amount of surplus cash that you've just indicated to us?

And my second question is on the VNB. So the VNB, from what I can see, I mean you had a really big jump in margin in Netherlands Life and Insurance Europe, which I'm guessing is mix -- business mix improving. Can you talk about how that can continue to improve going forward? And also in Japan, as you're launching these new products, whether you also expect a VNB margin uplift as well as just the sales uplift?

Yes. Thank you, Farooq. Yes, on the capital, the capital return increased thinking. So obviously, we have continued strong business performance. As Annemiek explained, the cash levels are good and capital levels are strong, also our confidence in the business outlook is positive, and that's why we decided to enhance our capital return. And we indeed decided to do that by splitting this evenly between dividends and an annual share buyback.

We think that the EUR 50 million extra dividend and the anticipated buyback step-up is a good balance also between shareholder remuneration and deleveraging. Typically, we see that a higher dividend, obviously, it compounds over time and the market sees it as the most structural form of dividend.

I think your question is also -- so that was in our thinking. I think your question is also going forward. So our capital framework hasn't changed. We have always indicated that solvency being above 200%. If that happens, then the binding constraint moves to cash, which is where we are today. And we also said our cash, on the cash side, we expect a buildup of EUR 300 million to EUR 400 million per year. So from that point of view, we do expect that we can further enhance capital return in the medium term, but it will continue to have a focus on small incremental steps.

Just quickly, if I may, with respect. I think my question was more about the sort of level of the incremental step-up. I think we sort of had a feeling that it will be EUR 50 million a year, but it was EUR 100 million this year, if you know what I mean. And that's kind of what my question was more about.

Sorry, your question was more about EUR 100 million versus EUR 50 million?

Yes.

Yes. Well, to be honest, I don't have much to add to it. I think the -- we always said we like incremental, we like that if we do something that we can do it recurring, we want to avoid lumpy buybacks. And like I said, given the strong business performance, our belief in -- that we can continue this given where cash and capital levels are, we felt that EUR 100 million is also the right step, given our focus on that it should not only be incremental but also recurring.

Yes, on VNB. Well, I mean, there's a lot of parts moving, obviously, always in VNB. We've seen actually the VNB of Life coming down a bit, but this is normal because we have less defined benefit renewals, in fact -- ahead. So with the shift to DC over time, you will see that these defined benefit renewals will completely disappear, and the shift will be really to the DC space where we measure it in net inflow. So I think that is one dynamic. If you look within and in Life, actually, the margins in terms of the riders and the disability parts that are still part of and continue to be in VNB is there, the margin is positive.

We also -- I already mentioned that the immediate annuity market continues to be an attractive market for us. We look at capital deployment, and this is an attractive market for us to deploy capital in. We did around EUR 800 million. We expect that market to grow 10% to 15%. It's already growing around 10%. But with the effect of the pension reform, we actually expect a bit more of a step-up. So we do expect that we can continue to make attractive margins there.

In Europe, it's really a combination of the APE that is going up, but also our focus on protection. Protection continues to have very attractive margins. And we do expect also going forward that we can maintain those -- that we can maintain those attractive margins because of our strong distribution and as I was saying earlier, the ability, it's not just around the product, but it's also the ability to have the right distribution channels to actually get customers to talk about this. So for Europe, yes, we continue to believe that we can grow the VNB on the back of both volume and while keeping a healthy margin.

Japan, again, also attractive margins. There, we also see that the volume is up, and we've moved from what we call the short-term COLI to the unit linked, which is more the long-term market, which also has a higher margin. The traditional products typically tend to have a little bit lower margin, but also is still attractive.

So going forward, I think also for Japan, it will apply that there is still an underserved market. There's still a lot of SME owners out there. It's a big market that are under protected. So we continue to see the opportunity to grow both in volume and in margin also for Japan and a new product launch next to the repricing that we did of the protection product and the unit-linked product that we launched before summer. The combination of that should give a good platform for the growth of Japan, and we still aim to be in the top 3, top 4 back again in that market in the coming years.

Your next question comes from the line of Iain Pearce from BNP Paribas.

The first one is just on the capital structure. So with the paydown of the RT1 and then the further EUR 600 million deleveraging and then assumes capital build, CSM build, the leverage looks like it's going to come down quite a lot. Just wondering why you want to sort of adjust the leverage picture and sort of if you view that as a more normal capital structure going forward?

The second one was just on Japan. You said you've done a reinsurance deal in Japan. I'm just wondering if you could give some more detail on what that reinsurance deal is, if there's any sort of benefit to remittance on that or capital strain, just trying to think, and is there an optionality to do more of that on the reinsurance side in Japan?

And if I could just ask a very quick third one. Just on the cash and capital now being finally constrained, cash capital at holding. In terms of where that target sits, I think in the past, you've sort of spoken debt holding costs, dividend cost buyback cost plus 1 in 20 shops. I mean with NN Life solvency being so strong, what sort of number should we be thinking about that? Is it the sort of EUR 1.6 billion, EUR 1.7 billion, the right number to be thinking about?

Well, thank you, Iain. Unfortunately for me, these are all for Annemiek.

On your first question on leverage, listen, the EUR 600 million senior note that we intend not to refinance this senior one, that was really -- that was tied to the Delta Lloyd acquisition. It was done at historically low rates and not refinancing it in '27 just saves us probably EUR 15 million or something. It doesn't materially lower our leverage ratio. And it's currently around 17% -- slightly over 17%, and will go to around 16%, if you already deduct the RT1 notes. So it doesn't materially impact that.

And if you look at the -- if you remember, at the Capital Markets Day and what I also said in the presentation, our cash build is roughly EUR 1.5 billion in the next 4 years until '28. And with today's announcement, we said we do the EUR 100 million additional capital return, EUR 400 million in total, then we have the EUR 600 million deleveraging and that then leaves another EUR 500 million in excess cash build. So it's not that we were unhappy with the leverage structure. It's just we don't need the cash, and it was tied to the Delta Lloyd acquisition on a historical rate.

On NN Re, it was a small reinsurance transaction we did -- sorry, on Japan, it was a small reinsurance transaction on the in-force book and the short-term COLI that we did. In general, we've been doing reinsurance transactions on Japan frequently over the last couple of years, and we'll continue to look at it. It doesn't change the remittance forecast that we have on Japan.

Cash capital, we've indeed always said that we hold cash capital to cover our holding costs, to cover debt cost, and we need to sustain a 1 in 20 shock for all the business units that we have. Typically, that number varies between EUR 0.5 billion and EUR 1.5 billion, and that's still the case for the guidance that we have on cash capital.

We will now go to the next question, and your next question today comes from the line of Michael Huttner from Berenberg.

Fantastic. And congratulations. I have one on Life and the other one, I'm kind of hesitating. I guess I'll ask it on AI because it's kind of topical. So on Life, I would say, you're not shrinking, you're growing. And your comments today seem -- this is NN Life, it seem to indicate that with the new figures you've given us on the immediate annuities. Can you kind of flesh that out a little bit? I mean, if I give you the way I'm looking at it, you might say, well, actually you're wrong or this is right. So if I add the DC assets to the Life reserves, this is in your financial supplement, year-end '24, we had EUR 148 billion, year-end '25, we're at EUR 146 billion, EUR 147 billion. So that's a shrinkage of maybe 1% or something.

And I think in the past, you've said shrinkage of 2%, but it feels like we're no longer really shrinking and you kind of alluded to the benefit of the Dutch pension reform coming through, even though you haven't kind of focused so much as some of your peers on pension buyouts. So I just wondered why don't you raise your targets in Life because the business is clearly doing fantastic. I mean, just a solvency of 223% is amazing. So that's -- sorry for the long question.

And the other one is really kind of almost stupid, but because it's so topical. So you gave us these lovely use cases in AI. Could you just say which one is a single biggest thing? My feeling from the way you've been kind of approaching the topic on protection is, it is coming from the fact that your agents are so much more productive once they've been trained with avatars or AI or whatever. If you could give us a feel, that would be magic because clearly, if you can accelerate protection growth, that's a big plus.

Yes. Thank you, Michael. Yes, on Life or NN Life, there is obviously competing things. So the closed book still runs off and earlier, we said it still runs off at around 2%. And that is on the back of basically retail but especially defined benefit books slowly running off.

At the same time, you're right that we do see good growth in DC. Of course, the dynamics are very different from big spread business and capital heavy runoff to growth of lighter. We set a target of EUR 55 billion AUM for the DC business, EUR 10 billion in annuities, and annuity is attractive. We haven't assumed any buyouts in that. So we do think that DC assets indeed will grow, immediate annuities 10% to 15%, we can make 10 to 15 basis points over this AUM. So that's clearly a plus, and then some of it is one-off.

I think for Life for us, it's always been important that stable remittance is very key for us. And also at the CMD, we indicated that we can maintain a stable remittance pattern out of NN Life. So even if OCG goes up a bit, which it has, or it comes down a bit, we will continue to focus on keeping stable remittances out of NN Life and offsetting the let's say, the slow runoff of DB with growth in DC. So from that point of view, yes, happy to see that NN Life is doing well, but there's not a change in the approach or in the guidance here.

Yes. On AI, I think even though we talk a lot about what we say, use cases. So we mean a use case, obviously, is where we have something AI that is really deployed usually in our operations. But the real game, of course, is scaling. So what is very cool, I think about the tied agents is that we see things that are developed in Poland or in Madrid. And then we have the ability to scale that to other markets. And this is a clear advantage of having a multi-country, multiunit platform that if you develop it once, it is with AI and certainly now on the language, it's really easy to scale this across other markets.

So probably a very big one right now is the tied agents, you're right, the 42% of growth, and it's not just the lead generation, it's the AI avatar that we have to coach our agents. It's the connecting AI using connecting the agent to the right customers. So there's a lot of individual AI use cases there and the fact that it's scalable across our 7 tied agent markets is very helpful.

But I also mentioned the claim handling part for Non-life, you can imagine that once you have an agentic AI claim handling module life, you can also scale that to European markets where we do a lot of protection business. And protection, of course, also has a claim handling, same for underwriting. So we now are focusing on trying to get to a 50% automated full underwriting in the retail space in the Netherlands. Again, we do lots of underwriting in the European markets and vice versa.

So my real expectation is that we should only develop AI use cases that are scalable, right? Because we trained everybody, a lot of initiatives come out of the company. And actually, we've been, in a way, almost slowing down the company because we don't want these -- all these small individual cases, we really want scalable cases that we can at least scale and we say scale means at least in 3 markets. So at least in 3 countries or 3 units, it should be deployable, and then we develop it. And so today, it's probably tied agents. Over time, claim handling, underwriting, customer service. I see in all these areas, some real scaling opportunities.

We will now take the next question, and the next question comes from the line of Michele Ballatore from KBW.

Yes. So I have two questions. So the first question is about the Non-life, in particular about property and casualty. In terms of the pricing environment, what are your observations going into 2026? Any sign of softening? I mean anything you can add to this?

And the second question is about the capital. So with EUR 500 million of available, let's say, capital cash beyond the distribution, if we think about, let's say, inorganic growth, I mean if we think about the businesses that you have where your organic -- the pace of the organic growth is satisfying and businesses where you say, well, I mean, some M&A there, some inorganic growth, some action could be beneficial. So can you talk a little bit about your preference there?

Yes. Thank you, Michele. I think on pricing Non-life, well, we've done a lot. And within P&C, you see very different trends. Motor, I would say, trouble always starts in motor and especially in retail. So we've done a significant premium increases in the past year. Our expectation is that we will probably see a mid-single digit depending a bit on the book, high single-digit premium increase. And this is simply also keeping up with inflation of claim cost and other liability costs. But we do think that the bigger premium increases are behind us, but we will continue to have to increase premiums to keep up with claim inflation.

In terms of dynamics, retail motor, always competitive. We might lose some market share. Motor is 25% of our book. It's -- generally, we're underweighted anyway in motor, and we don't mind. We continue to prioritize margin over volume even though, again, I don't think we will be expecting major increases in motor.

I think fire, but also the other books around travel liabilities, a different dynamic, combined ratios are very low. It's a very attractive business. So there also, we are doing less premium increases simply because the portfolio is holding up well. We also want to maintain our competitiveness, and this is the core of our P&C book.

So overall, I expect a relatively good environment for P&C as we have seen in the last year, even though, again, we have to state that we didn't see any fires or -- well, we saw fires, but not very large fires. We didn't have very large storms. So the P&C results also on the fire side were a bit helped by favorable weather.

Overall, I still think it's a good environment that we -- even if we would lose some market share, we continue to prioritize margin over volume. But we don't think it's needed. The business grew 6% and 2% was also volume growth here.

Yes, I think on available cash, obviously, we still need to build all these -- and when we talked about the EUR 1.5 billion, we still need to build the EUR 500 million in cash. But you're right, we do have financial flexibility. But if you look at inorganic, it has been a challenging market. And we continue to see that there's more buyers and sellers, there haven't been that many transactions, certainly not cross-border.

We are very happy with our organic growth path. We said 7% to 8% or 7% CAGR, we think is very attractive. Our businesses are growing well. If we see an opportunity for M&A, we have a very strict financial and strategic criteria. We are actually proud of our track record in M&A. But that also means that we need to be very careful in embarking on M&A unless we have a high conviction on both the financials and the strategic merit. If these opportunities will come, we will certainly take a look at it, but we're also happy to continue on the organic growth path that we have been doing.

If I may, my question was about more like the preference in terms of, if you have to do something, what businesses you will target?

Well, I'm not sure we have to do anything. I mean, what we have to do is deliver on our targets that we set for '28. And we said that we've set our free cash flow and OCG target. We also said that the 7% to 8% CAGR per share is what we've been aiming for. So that is what we focused on. Anything, any opportunities that would come on top of that in terms of inorganic would also mean that, that would have to add to the targets that we have already set.

So from that point of view, it is more opportunistic. If something very attractive comes along, that would be interesting. But our first priority is just to deliver on our targets and deliver on the capital return commitments that we have given at our Capital Markets Day in 2025.

We will now go to the next question, and the question comes from the line of Nasib Ahmed from UBS.

I'm not sure if Nasib can hear us. I will move on to the next question. One moment, please.

And your next question comes from the line of Thomas Bateman from Mediobanca.

[indiscernible] great results. It's great to hear the conversation so much about growth as well. Could you just comment a little bit on the strategy in Greece? I don't want to say too much, but I guess I've observed some movements in the banks there. So any comment you can give on your strategy there would be interesting.

And then the second question is just on government bond volatility in Japan. It seems a little bit immaterial now, so you've got solvency at 220%. But has there been any impact in solvency from Japan year-to-date? And is that tied at all to the realized losses on bonds that you've done in the year? And if not, maybe can you just give a little bit of color on those realized losses?

Yes. Thank you, Thomas. Yes, on Greece. So obviously, there have been developments with Piraeus acquiring Ethniki. When we set our targets, we already took this into account. So we obviously expect to deliver our 2028 target for Europe, irrespective of these potential changes in Greece.

Having said that specifically for Greece, I mean bancassurance is an important channel. So that would have an impact on our business. Today, we see a very strong performance still from Piraeus in '26, and potentially, we also expect that in '27. It is important to point out that this is not our only distribution channel in Greece. We have a very strong and growing tied agent network. That network was also further strengthened with the acquisition of MetLife.

We see today that the digital -- the [indiscernible] Michael already asked on the use cases around tied agents, but that's still relatively low in Greece. And we see opportunities for further digital leads, the avatar training and some of the other things that we can still roll out in Greece. There's a potential development of the broker market and some of the direct business. So we do see opportunities also to further scale. Tied agents grew also with 30% already last year in VNB. And so that will also be important going forward that we continue to strengthen also other channels. But the key message is that when we set these targets, we took already this change into account. Annemiek?

Your question on government bond volatility in Japan, they are less relevant for solvency, but higher yields, obviously helped VNB and OCG in Japan. Obviously, higher interest rates could have some volatility on the solvency, but the solvency in Japan under the current regime is very strong also versus peers, and we would expect it to be the same under the new regime there.

So the realized losses that you see in the nonoperating items of the IFRS result that we called out there, they are not related to any bond [ resales ] or losses in -- of sales in Japan. They were more related to some government bond sales that the Dutch Life company did, actually some sales of U.S. bonds given that under the Solvency 2020 regime, for us, it's just more attractive to hold long-term euro-denominated bonds. And as far as those realized losses, they are concerned, they obviously were already included in the shareholders' equity via OCI, but now we just have to take them in a nonoperating item.

We will now go to our next question, and the question comes from Nasib Ahmed from UBS.

I've got a clarification first off. Annemiek, you said there's a reduction in the leakage from the own funds eligibility change. I remember you had a 1 point leakage every year on the solvency. Does that go away now with that change?

And I guess my 2 questions are, I think you've got a German business as well. How is that going? Is there capacity to increase exposure there? And then finally, on Japan, what does high yields mean for new business lapses? I think you mentioned kind of solvency, but investment returns is higher yields actually negative for lapses, people switching out of these savings products into other products. So just trying to get a sense of that as well.

Yes. Thank you, Nasib. I'm glad you made it. Yes. So let me just start with the German business, and then Annemiek can take the questions on the other ones. Yes. So we entered into Germany, mostly on what we call mandated agent business. It's still relatively small, but it is attractive. So today, the business is performing well. At the same time, growing in Non-life or especially in P&C, always you need to be careful. But it is, so far, it is screening as an attractive opportunity. And it is -- the business is on a growth path today, and that's also in our plans. Annemiek?

Yes, your question on the leakage from the non-available own funds change that indeed will go largely away. And your question on the higher yields for the Japanese business, it is indeed helpful given that the embedded fixed guarantee rate of -- in the COLI products.

Yes. Well, with that, we will now close the call. Well, thank you very much, and thank you very much for everybody on the call for the interest you've shown and all the interesting questions that you asked. And obviously, we look forward to continue to engage with you on the upcoming roadshows and conferences, and have a nice day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.

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. [Operator Instructions] 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 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 a 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 semiannual 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 3 for broker satisfaction in 2028. Customer satisfaction has shown consistent improvement, 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 retention and new business perspective. Additionally, our Dutch broker satisfaction score indicate that we are overall ranked #1. Our goal is to maintain an employee engagement 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 program that we introduced during our recent Capital Markets Day. This strategic program 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 program is an important cornerstone in our investment case, and we are demonstrating significant progress. Let me give 2 examples.

We are making significant progress towards our goal of generating 50% of APE from digital leads by 2028, having reached 40% in H1 '25, 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. And 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 '24, 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. And with a group Solvency II ratio now above the 150% to 200% comfort range, we are well positioned to look for upside to our capital return promise at the full year '25 stage with a focus on small incremental steps.

Our delivery on capital return since the IPO is impressive with over EUR 10 billion of capital return to shareholders. And we remain committed to continue this road map with total capital return to shareholders foreseen to grow to EUR 15 billion by 2028. As a first step, today, we announced 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 target is coming from Insurance Europe, Netherlands non-life and Japan. As such, I'm very pleased that the 3 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 8 countries where we have organically built our business since the 80s and 90s, becoming a top player or #1 in markets like Greece, Romania and Hungary for life insurance and for example, Poland and Romania for pensions.

Our strategy focused on high-margin, capital-light 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. And 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 '24. 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 6 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 strong performance is also highlighted by its combined ratio of 91.2% over the first half of '25, at the lower end of the 91% to 93% target range. This marks a 1 percent point improvement compared to the first half of '24, mainly driven by lower expenses. The Future Ready program in Non-life is paying off in efficiency improvements.

Japan is the third growth segment with an OCG target of 2028 of EUR 160 million. In Japan, we see strong signs of sales recovery with a 25% increase in new business value in the first half of '25. This was mainly driven by our long-term savings product and higher rates, driving better margin for cash value insurance sales. Our new long-term savings product has already taken a 17% share of VNB over the first half of '25, 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%. So Japan is making strong progress on regaining a top 3 market position now that we have been able to improve our level playing field with the introduction of our first new product in the attractive long-term savings market, and there's 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 our 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.

Our pro forma solvency ratio came in at 205%, which is above our 150% to 200% comfort zone. Our cash capital position shows an increase from EUR 1.3 billion to EUR 1.6 billion, driven by the untendered R Tier 1 capital and some net cash build 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 '25, 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 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 '24 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 crack 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, et cetera, 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 '24 as we benefited from increased eligibility of own funds, driven by lower net deferred tax assets.

Now let's move to OCG. Asset, a strong print in 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 '25, 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 '25 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 '24, but NN Re still benefited from positive experience. Now with the strong H1 '25 OCG results, we do see upside to our previous full year guidance of flattish OCG versus full year '24. However, we would expect OCG for the second half of '25 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 to future profit margin. Therefore, I'm happy to see organic CSM growth of 2% over the first half of '25, where Japan became a neutral contributor instead of a drag, reflecting a 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 investment 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 '25, 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 for the 1st of January in '25, 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 '25. The change in our debt and loans reflects the impact of the untendered grandfathered RT1 notes with a call date in January '26. And our capital flows include the payment of the final dividend over '24 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.

Yes. 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% to 200% comfort zone. Netherlands Life also increased to 200%. Operating capital generation exceeded EUR 1 billion for the first time over a semiannual 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 towards delivering the growth targets we set at the CMD, which once more underpin our attractive investor proposition with compounding returns for shareholders.

And with these remarks, I would like to open up the call for Q&A. Operator?

[Operator Instructions]

And your first question today comes from the line of Andrew Baker from Goldman Sachs.

The first one, just on Netherlands Life OCG, you mentioned some assumption changes. What specifically did you change there? And I guess, what was the impact in the first half? And then were these assumption changes considered as part of your 2028 target? And then secondly, just on the longevity transaction, I believe this was for EUR 4 billion of liabilities, but correct me if I'm wrong there. Just curious how you arrived at this number and then also how much capital generation you gave up as a result of the transaction?

Yes. Thank you, Andrew. Annemiek?

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. And that also means given that we indicated last year that we roughly would build up EUR 10 billion of liabilities in a period of 3 years, we would still expect to have roughly EUR 6 billion available and a buildup of 2 to 3 years. And your first question was related to the assumption changes in life or non-life?

Life.

And life. Yes, 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. So in terms of public equity, we had an old pretax figure of 5.7% and the new return would be 6.2% pretax, 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 pretax, that would go to 5.4% pretax.

Your next question comes from the line of David Barma from Bank of America.

Can you hear me?

Yes, we can hear you well.

Can you hear me?

Yes, David, we can hear you. I'm not sure you can hear us.

Okay. Great. So yes, just with a delay, sorry. So firstly, on Disability, 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 under IFRS 17 that you've talked about before or if there's a worsening frequency here in 1H? And maybe if you can talk about the sort of premium increases you're doing in Disability at the moment as well.

And then secondly, on Japan, what would have been the OCG in Japan, assuming you were under the new solvency regime, please?

Yes. Thank you, David. Annemiek, on Japan?

On Japan, the OCG under the new regime, that's hard to assess. I think what we've said at the full year results, it will depend on what the sales levels will actually be in '26 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 Disability. Well, I think overall...

Sorry, can I just add to...

Go ahead.

Go ahead, David. David?

Yes. Sorry for the delay here. Yes, just adding to that Japan point. Maybe to put it another way, what's the translation between VNB growth and OCG? And then how long does it take to be fully recognized?

Well, at this point in time, it takes roughly 7 to 8 years to be recognized. But if we transition to the new ICS, then 85% of it will be recognized immediately and the remaining 50% will go over roughly 7 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. So you must be in a really nice location. But 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 D&A, we expect growth in the D&A, 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.

So 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 D&A book is on a positive trend that we expect also going forward. And therefore, we continue to say that 91% to 93% for the overall combined ratio for the total non-life business is the right way to look at this in terms of guidance.

And your next question comes from the line of Nasib Ahmed from UBS.

So first question on solvency reform. Any update on where that's going to land for you guys given the update on the Level 2 text? And then the second question on -- David, you kind of mentioned that there's more to come in Japan. Of course, you've got the improvement order lifted. And I think expectation is it takes a couple of years for you guys to start getting product approvals and distribution. But can you give us a sense of, yes, what is that more to come? You've got the long-term savings product, but what else can we expect from Japan?

Yes. Thank you, Nasib. Wilbert Ouburg, on the Solvency II reform?

Yes. Thank you, Nasib. So on Solvency II, Solvency II 2020 review is not coming in before January '27. We expect a broadly neutral outcome in relation to this review, where we are will be less dependent on management actions in order to achieve this outcome compared to before.

Thanks, Wilbert. Then on Japan. Yes. Maybe a little bit of background on Japan. So 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%. So we launched a product, obviously, in March in this long-term market, and this has also been a driver of our growth. But 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. So actually, the growth is not just coming from the long-term business, but from all 3 product lines.

Yes, you're right. We said earlier, it will take quite some time to get back to previous levels or to 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. I mean, 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. Yes, but it's clearly on a positive trend. And I think it shows the strength of our distribution that we have in this market that -- yes, that is a resilient business that is really on a positive trend now after the lifting of the business improvement order, but also because of the opening of the long-term coding market.

Your next question comes from the line of Thomas Bateman from Mediobanca.

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 think it's going quite well. And then 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 back book, 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.

Yes. Thank you, Thomas. Yes, on the Future Ready program, well, overall, 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 '25 and also the expectation for '26. So financially, it's going on track. We also see -- we said we expect EUR 200 million benefits by '27, EUR 180 million in expenses, EUR 20 million in growth of value 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 [ Sana GPT ] 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 or the more complex questions, this chatbot does 60% better than the, let's say, the annoying one that we had before that, but 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. So yes, 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. Yes, on buyouts, yes, I mean, there was around EUR 4.1 billion was 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, we -- without doing buyouts, we can sustain that remittance pattern from NN Life up to 2040. Yes, ultimately, I think capital allocation is probably one of the most important things that we do.

And 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. But 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, I mean, 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 on -- while the life company typically does more than EUR 1 billion of OCG in a year. So 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. Good to see so many opportunities to deploy capital.

Your next question comes from the line of Ian Pearce from Exane.

The first one is just on the increased NN Life OCG. I mean, 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? And again, sort of following on from Andrew's question, was that embedded if so, in the plan that you gave at the Investor Day? And 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, Ian. Annemiek?

Yes. 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 the 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 realize 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 '28 of EUR 1.1 billion. In the first half year, there were also some one-offs, the positive experience variances. And there is a bit of a skew on new business towards the first half of the year. So Life will have a good -- probably good year in '25.

We're on track to meet the target for '28, 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. So I wouldn't expect that to necessarily repeat for the second half. And 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.

Your next question comes from the line of Farquhar Murray from Autonomous.

Just 2 questions, if I may. Firstly, just a follow-up on Thomas' question on the Future Ready program. 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? And then secondly, turning back to Japan, might you have a sense of how much of the recovery you're seeing the split between the kind of product launch versus the kind of improvement order being lifted? In particular, I just wondered where you're seeing brokers become active again.

Thanks, Farquhar. Yes, in terms of the EUR 180 million cost saving target, no, I think that's too early to talk about that. But we'll obviously, over time, continue to update you on the progress of the Future Ready program. So full year would probably be a first moment to give some indication on it. But as I was saying, the -- 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 Gen AI is already generating that this is a huge opportunity for our industry and certainly for us.

So 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. So 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 were already starting to do business with us again. So that was clearly a positive. We didn't have to wait until the closing of the business improvement order. So 65% of our brokers are independent, and there's another 25% 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.

So it was already happening pre-business improvement order. Obviously, the business improvement order was very good news and further supported that. But like I said, if the Q2 number was 56% up, that clearly was already pre-business improvement order sales was going up. So 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 #5 or #6 right now. And we do believe that depending a bit on how the market will evolve, there will be 3 or 4 big players, and we're convinced that we're going to be one of them.

Your next question comes from the line of Farooq Hanif from JPMorgan.

Just a couple of numbers questions actually. So on OCG, I just want to clarify exactly what you said, Annemiek. So you -- I think you said, look, there are some positive experience variances, capital release, just some positive maybe nonrecurring items in 1H. But 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? So that's question one. And then question two, on IFRS operating results, I just want to go back over what you said about the investment results again, just to understand it. So you've increased your investment margin or your investment income smooth assumption. So presumably, that uplift in investment margin, for example, in Netherlands Life is kind of repeatable?

Farooq, thanks for your questions. Yes, in terms of full year guidance, if you look at OCG, obviously, previously, we guided for a flattish trajectory versus the '24, where we landed at EUR 1.4 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 '25 that we don't think will be recurrable. And we also know that there is a bit of seasonal nature in the DB renewals plus the bank, we're expected to see continued NIM pressure there. And 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. Now last year, that seasonality was roughly EUR 50 million. We would expect that to be a bit more. So then 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.

And just coming back on sorry, on OCG. So 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 benefit has been so far in 1H in Non-life?

Well, 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 storm, typical storm budget would roughly be EUR 50 million. We haven't seen that.

We will now go to our next question. And the next question comes from the line of Jason Kalamboussis from ING.

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 EUR 10 billion if you would get a better pricing. And probably a question that can or may not be related. You say that conditions are favorable. I mean, do you find that over the last 2 years, the pricing has become much better for insurers? And the second part is on Japan. If you could elaborate on -- and maybe I missed something on products or new products. Do you plan to have new product to go for approval for new products in '25? And what is the next stage where you will go for product approvals? Where would these products be? And how much time would it take roughly to get the approval so that we have an idea of what new you plan in there?

Yes. Thanks, Jason. Let me start with Japan and then Annemiek can cover the longevity conditions. Yes. Well, -- so like I said, there's 3 groups of products that we offer, which is the protection -- pure protection. Then there is the cash value. It's typically 5 years or at least what we call a short-term product, and then there's a longer-term unit-linked longer-term product. So 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, the all products need to be preapproved 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. So 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 1 or 2 windows that we have for corporate life. Our intention is to another -- introduce another long-term product in that space, hopefully, in the fall. And otherwise, depending on when the approval come, it would be in '26. 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 1 or 2 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 market then the SME owners to do more long-term savings. So we're well positioned there even with one product. But ideally, we'll launch another one in the second half, but that will depend on regulatory approval. Annemiek?

Yes. In terms of longevity transactions, your question on whether the conditions have improved over the past 2 years, I think they've continued to be good over the past 2 years. We also did a transaction at year-end '23 of EUR 13 billion, roughly similar metrics as the current one. So 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. And it takes some time for those liabilities to become in benefit and that part of the portfolio to build up. So the EUR 4 billion is what we did now. And then over the next 2 to 3 years, we would expect another EUR 6 billion of liabilities to become in benefit where we could do another transaction on if conditions continue to be favorable.

If I may follow up just on -- my question was more -- I understand that you need more impatient, so that you have another EUR 6 billion to come. My question was more like, is it better to wait and the EUR 4 billion to become EUR 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, doing it by steps or in one go at the end of the day is -- doesn't make a huge difference on the pricing of the deal?

It doesn't make a difference. There is so much demand now that we can just -- we can 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 from both of what you said and David, that at the end of the day, you are just stepping -- 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 NN Life and that you could be looking at the buybacks next year or the year after only if the pricing becomes better? Or it's something that this year, it's more privileging the share buyback and next year, you will see which direction you go? It looks like you -- 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 a 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. So even if next year, 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, so people in the Netherlands have to buy an annuity once they retire. We see that the longer people are in D.C., 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.

So as long as that's the situation, we'll do those, but we will not do the individual large buyouts. So yes, this is all about capital allocation and where we feel that we can make a good return or not. And 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. We're looking -- if we're going to do something, it has to be an incremental and a recurring step. But that's something to look forward to in the February discussion.

There are no more questions. I will now give the call back to Mr. David Knibbe for closing remarks.

Yes. 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. Obviously, we look forward to further engage with all of you in the upcoming roadshows and conferences that we have planned. And 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, and I look forward to seeing you after that in the rest of the year. And have a good day.

Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.