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Edited Transcript of NN.AS earnings conference call or presentation 15-Aug-19 8:30am GMT

Q2 2019 NN Group NV Earnings Call

Aug 23, 2019 (Thomson StreetEvents) -- Edited Transcript of NN Group NV earnings conference call or presentation Thursday, August 15, 2019 at 8:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Delfin Rueda Arroyo

NN Group N.V. - Vice Chairman of Executive Board & CFO

* Jan-Hendrik Erasmus

NN Group N.V. - Chief Risk Officer & Member of Management Board

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Conference Call Participants

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* Albert Ploegh

ING Groep N.V., Research Division - Research Analyst

* Andrew Baker

Citigroup Inc, Research Division - Analyst

* Ashik Musaddi

JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research

* Bart Jooris

Banque Degroof Petercam S.A., Research Division - Analyst

* Benoit Petrarque

Kepler Cheuvreux, Research Division - Head of Benelux Equity Research

* Ebrahim Saeed

Deutsche Bank AG, Research Division - Financials Credit Trading Analyst

* Farooq Hanif

Crédit Suisse AG, Research Division - Head of Insurance Research in Europe

* Fulin Liang

Morgan Stanley, Research Division - Former Research Associate

* Jason Kalamboussis

KBC Securities NV, Research Division - Executive Director Research

* Johnny Vo

Goldman Sachs Group Inc., Research Division - MD

* Matthias De Wit

Kempen & Co. N.V., Research Division - Analyst

* Robin van den Broek

Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst

* William Hawkins

Keefe, Bruyette & Woods Limited, Research Division - MD, Head of European Insurance Research and Senior Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's Analyst Conference Call on its Second Quarter 2019 Results. (Operator Instructions)

Before handing this conference call over to Mr. Delfin Rueda, Chief Financial Officer of NN Group, let me first give the following statement on behalf of the company. Today's comments may include forward-looking statements, such as statements regarding future developments in NN Group's business, expectations for its future financial performance and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. Any forward-looking statements speak only as of the date they are made and NN Group assumes no obligation to publicly update or revise any forward-looking statements whether as a result of new information or for any other reason. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any securities.

Good morning, Mr. Rueda, over to you.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [2]

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Thank you very much, operator. Good morning, everyone, and welcome to our conference call to discuss NN Group's results for the second quarter of 2019.

Following Monday's announcement that Lard Friese has stepped down as CEO of the company, I will take you through today's presentation covering the highlights, business developments and financial performance in the past quarter. As usual, our Chief Risk Officer, Jan-Hendrik Erasmus, is also with us today to answer your questions.

Let me start on Slide 2. We have today reported an operating result for the second quarter of 2019 of EUR 445 million. The measures we are taking at our Non-life business are visible in the improved results of that segment this quarter. The Insurance Europe and Japan Life businesses also posted higher results compared with a year ago despite some regulatory headwinds in those regions. At the same time, the results in Netherlands Life were lower versus last year, largely due to lumpy private equity dividends of EUR 55 million in the second quarter last year. And the insurance business showed some higher claims. I will go into the details of the financial results of each segment later in this presentation.

Total expense savings to date under our cost reduction program amount to EUR 306 million. I will talk about this on the next slide.

In terms of capital, our Solvency II ratio stand at 210%, down slightly on last quarter, reflecting the deduction of the 2019 interim dividend of EUR 0.26 per share that we have announced today. The holding company cash capital position is currently at EUR 2.2 billion with EUR 558 million of dividends received from subsidiaries in the second quarter.

The quality of our new sales translates into a higher value of new business. Value of new business increased to EUR 236 million in the first 6 months of 2019 from EUR 205 million in the same period last year. Successfully integrating Delta Lloyd and improving efficiency across the organization remain key priorities. We continued to migrate Delta Lloyd products to the targeted platforms and decommission systems when this is completed.

On Slide 3, you can see that total cost reductions achieved to date at the units in the scope of the integration amount to EUR 306 million compared with 2016 full year administrative expense base. This represents a small increase of the cost base this quarter. We are committed to reducing the cost base by EUR 400 million by the end of 2020. However, as we have guided in past quarters, expense reductions will not be linear and some units will see expense increases to support their growth plans and make necessary investments.

Slide 4 shows the value of new business and new sales volume in the first half of the year. Our business continue to develop innovative products and services that meet the needs of our customers. In the first 6 months of 2019, our commercial performance was strong with an increase in both new sales and in value of new business compared with the same period last year. The revision of the regulations of the tax deductibility of certain COLI products, which was announced by the Japanese National Tax Agency early this year, led to high sales in the first quarter, but low sales in the second quarter after we suspended sales of these products. Our Japanese unit is adjusting its product portfolio to meet the requirements of the new tax rules and was the first player to launch new COLI products in July. In addition, the continued focus of Japan Life on the sale of protection products resulted in a 30% growth in protection VNB during the first 6 months of 2019.

Let me now move to the financial performance. Starting with NN Group's operating result, which you can see in the chart on the left-hand side of Slide 5. The operating result amounted to EUR 445 million from the second quarter of 2019. This compares with EUR 508 million in the same quarter of last year, which benefited from EUR 69 million of private equity dividends and nonrecurrent items versus EUR 4 million this quarter. The right-hand chart shows the net result for the second quarter of EUR 606 million versus EUR 463 million in the same quarter of 2018. The increase was largely driven by higher nonoperating items, which reflect a mix of items, including positive revaluations on derivatives, real estate and private equity as well as gains on the sale of government bonds. Special items relating to restructuring expenses and other project-related expenses were lower than a year ago. The amortization charge on the intangible assets that we acquired on the Delta Lloyd transaction is also running down in line with the amortization schedule.

On the next 2 slides, I will take you through the second quarter performance of the individual segments. Starting with our largest unit, Netherlands Life, in the left-hand chart. The operating result was down on a year ago, reflecting a lower investment margin as the second quarter of 2018 benefited from total private equity dividends of EUR 55 million versus EUR 4 million in the current quarter. In addition, the technical margin was lower due to unfavorable mortality results this quarter, while fees and premium-based revenues continue to trend down given the runoff of the closed book and lower margins on the pension business.

As I already mentioned, we are seeing continued improvement in the performance of the Non-life business. The combined ratio improved to 95.8% from 97.9% in the second quarter last year. The higher operating result in Property & Casualty reflects an improved claims experience, partly offset by higher weather-related claims.

In the Disability & Accident book, we saw favorable claims development in the group income portfolio, while unfavorable claims experienced in the individual disability portfolio was covered by internal reinsurance with NN Re.

The third chart shows the operating result of Insurance Europe, which was up on a year ago, partly driven by nonrecurring items. We also saw higher performance fees in Slovakia and a small positive contribution from the acquired Czech and Slovak businesses. This was partly offset by lower pension fees in Romania following the pension reforms in that country.

Finally, on this slide, the operating result at Japan Life was up over 15% from the second quarter of 2018, if you exclude currency effects. The higher technical margin reflects better mortality and surrender results this quarter, while DAC amortization and trail commissions were down driven by lower premiums and lower surrenders.

On the other hand, fees and premium-based revenues were lower, reflecting the sales suspension of certain COLI products that we mentioned earlier.

The other segments are shown on Slide 7. Starting on the left, the operating result of Asset Management was broadly stable at EUR 40 million, reflecting lower fees, partly compensated by a decrease of administrative expenses. Total assets under management increased to EUR 268 billion at the end of the second quarter of 2019 from EUR 260 billion at the end of the first quarter, mainly reflecting positive market performance, partly offset by net outflows. The banking business saw a drop in its operating result mainly due to higher additions to the loan loss provision, although this remain at a low level in absolute terms. Operating expenses were higher, which is supporting an increase in mortgage origination.

And finally, the segment Other, which includes the results of the holding company and the reinsurance business. The holding result remained stable compared with a year ago and the lower results of the reinsurance business reflect claims related to Non-life's disability portfolio as well as a large claim from a legacy portfolio.

I will now move on to the free cash flow on Slide 8. The cash capital position at the holding company was EUR 2.2 billion at the end of the second quarter of 2019, up from EUR 2 billion at the end of the first quarter of 2019. The free cash flow during the second quarter was EUR 546 million, driven by EUR 558 million of dividends received from subsidiaries in all segments. This was partly offset by capital flows to shareholders of EUR 373 million, representing the cash part of the 2018 final dividend and shares repurchased in the second quarter under the share buyback programs.

On the next slide, I will take you through the developments in NN Group's Solvency position. NN Group's Solvency II ratio was 213% at the end of the second quarter of 2019 before the deduction in full of the 2019 interim dividend of EUR 0.76 per share. After the deduction of the interim dividend, the ratio was 210% versus 213% at the end of the previous quarter. As you can see in the chart, the operating capital generation for the second quarter added 5 percentage points to the ratio.

Let me also remind you that as from the first quarter this year, we deduct the accruals of qualifying debt from the operating capital generation, which amount to approximately EUR 160 million per annum.

Lastly, market variance lowered the ratio by 5 percentage points this quarter, reflecting movements in credit spreads, lower interest rates, higher mortgage spreads and positive returns from equity.

To wrap up, NN Group has today reported a good set of results for the second quarter of 2019. Commercial momentum is strong as evidenced by higher sales and higher value of new business in the first 6 months of the year. Our capital position remains strong with a cash capital position of EUR 2.2 billion. The Solvency II ratio stand at 210% after deduction of the interim dividend announced today of EUR 0.76 per share to be paid in September.

In the second quarter of this year, we took steps to expand our position in the Dutch Non-life market with the acquisition of HCS as well as the announcement to acquire VIVAT Non-life. We are currently working to finalize the requirements to be able to close the VIVAT transaction early next year.

Finally, I would like to take this opportunity to mention that we recently celebrated our fifth anniversary as a listed stand-alone company. In the past 5 years, we have strengthened our leading position in the markets where we operate with a focus on being a company that truly matters in the lives of our stakeholders. And this is thanks to the efforts and dedication of all our employees. Together, we have ensured that NN is well positioned for the future and fully committed to helping our customers secure their financial futures.

And with this, I will pass the call to the operator to start the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) And the first question is from Mr. Ashik Musaddi, JPMorgan.

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Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [2]

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Can you hear me?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [3]

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Yes, we can hear you, Ashik.

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Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [4]

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Just a couple of questions. So one is with respect to the interest rate. I mean, interest rates have gone down straight line. So how should we think about your cash flows basically? Can you just remind us how well you're hedged on the cash flows? Has anything changed over the past 1 year in terms of whether you are still hedging the cash flows or you are focusing on hedging the Solvency ratio? Should your cash flows be impacted in the near future at least, say, 3, 5-year view because of the falling interest rates? So that's number one.

Secondly, I mean, given that interest rates have gone down straight line again, I mean, how do you think about your group pension and individual life business? In the past, I remember that you flagged that you want to maintain a flattish group pension business. But with this interest rate environment, do you think you will be able to maintain a flat or should we be expecting runoff in group pension as well, which will generate more cash flows at least in the near term?

And thirdly, with respect to Europe and cash dividends, it looked a bit lower at EUR 125 million. I mean I thought that the range is about EUR 200 million. So what's happened there?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [5]

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Thank you very much, [Ashik]. I will leave Jan-Hendrik the opportunity to answer the first question, and I will cover the other 2. Jan-Hendrik, please.

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [6]

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Ashik, thanks for the question. Yes, rates have come down quite a bit. And also this quarter, we saw our Own Funds increase and our SCR increase as you would expect. We are still hedging on our best estimate cash flow basis, so we -- where the curve is steep and liquid, we try to match assets and best estimate liability cash flows. Of course, we don't hedge where there aren't any good assets to hedge, although we accept bigger mismatches. So that's at the very long end of the curve. And the way we think about it is that we try to, of course, limit our sensitivity to rates to the less than 10% that we've disclosed tolerance for, plus or minus 50 basis points. So we see that, and we're not hedging the ratio specifically more than that except as keeping it within our tolerances.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [7]

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Then Ashik, on the impact of interest rates on the prospects of our individual and pension business going forward, I think it's clear that our individual life portfolio is in runoff, is closed, so the changes in interest rate does not affect that.

In terms of the pension business, and I think that's what you were referring to, individual and group pension business, the need of people to build up for their pension is there. And therefore, the prospect for that business going forward is clear there. We actually show a very strong level of renewals in the first quarter of the year. And in July, we also announced our pension buyout, which was important and significant in terms of its size, which shows our commitment to the pension business and also that volumes even with low interest rates could develop in a nice manner.

Obviously, on the individual front, the low interest rates only put further pressure on employers for making the defined benefit that pensions is very expensive. And as a consequence, their move to defined contribution is expected to continue, for which we believe we are well positioned.

In terms of the dividends for Europe, when you compare the dividends of the second quarter of this year with last year, you see that particularly in Europe, as you highlighted, we have less dividends coming from Belgium. And also last year -- in the second quarter of last year, we had some additional release of excess capital coming from Spain. Nevertheless, as you can see, due to diversification of our dividend sources, you've seen some increase in the dividends coming this quarter from Japan, but also the bank has done a significant dividend contribution of EUR 56 million this quarter.

I hope this answered your 3 questions.

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Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [8]

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Yes. Can you hear me?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [9]

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We can hear you now, yes.

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Ashik Musaddi, JP Morgan Chase & Co, Research Division - Executive Director and Co-Head of European Insurance Equity Research [10]

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Sorry. Just a follow-up question to Jan-Hendrik. I mean, how should we think about the cash remittances from the Dutch Life business for -- in the near future, I mean, unless there is any specific asset allocation shift in that sector. I mean, should we expect stable cash remittances? Or do you think that this falling interest rate might impact the cash remittance from the Dutch Life business?

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [11]

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Thanks, Ashik. No. I mean, in our business and capital plans, we see stability, so nothing significant to report on there. It is true that lower rates, of course, puts pressure on our operating capital generation through the UFR drag, but there are also offsetting effects like the risk margin and the shift to higher-yielding assets you mentioned yourself.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [12]

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Yes. Just to add what Jan-Hendrik has said, I mean keep in mind that our Dutch business -- Netherlands Life business and Life is currently at Solvency ratio of 212%, and we have maintained very stable evolution of remittances coming from Netherlands Life and we expect that to continue in the future.

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Operator [13]

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Your next question is from Mr. Benoit Petrarque, Kepler Cheuvreux.

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Benoit Petrarque, Kepler Cheuvreux, Research Division - Head of Benelux Equity Research [14]

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First one will be on Japan. Now that you have a bit more details on the impact of the new tax deductibility on the COLI, so -- could you provide a bit of a guidance on the sales and earnings going forward in Japan? Also tell us what you have seen so far in the month of July with your new product, if you're able to recuperate some of the lost sales going forward? So a bit of granularity around that. And also we've seen -- obviously, it was expected that Japan Life is paying dividend. What is the outlook in terms of dividend-paying capacity of this business? So that's the first question.

Second one was on the market impact in the second quarter, so a bit lower than expected. Could you provide us a bit -- kind of the moving parts in terms of impact, volatility-adjusted mortgage spreads and rates? And also what you see in the third quarter on the Solvency II? And what is the volatility-adjusted benefit at the end of Q2? I guess, it's much lower than we have seen in the past, but also an update there will be useful.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [15]

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Thank you, Benoit. I will cover the first question, and Jan-Hendrik will elaborate on the second one. The new tax rules in Japan were implemented as of July. And as we all know, that has a very significant impact on the sales in the first quarter. And then we stopped the sales of the COLI products with high surrender values. We've been the first one to launch -- to relaunch 3 products in Japan. And covering part of your question is -- this has been, as you know, recently done, therefore, is very early to know what the impact of this will be. In any event, it is fair to say that sales will be lower going forward until the market adapt to the new situation. The focus over the last year has been an increase in sales in protection products, on which we've seen very good growth over the last quarters both in terms of the percentage that represent over the total as well as the contribution to the value of new business. The sales will be down. We also have to keep in mind that surrenders are expected to be lower that is going to protect somehow the profitability of this segment. And the one positive aspect of having less pressure on capital in Japan due to the lower sales means that the dividend capacity from Japan increase. Nevertheless, we have the policy in order to basically have more of a gradual evolution of dividends as it come forward.

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Benoit Petrarque, Kepler Cheuvreux, Research Division - Head of Benelux Equity Research [16]

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The sales, you said down. I mean, how much you have in mind, actually.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [17]

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It's difficult to say, but it will be significantly down because the volumes that we reached in 2018 and certainly in the first quarter of 2019, were very elevated even when you compare it with the previous periods. So we saw a period of very high growth of sales. And a significant part of the business, like approximately 70%, 75% were related to products more dependent on a high surrender. So these are the areas that have been adjusted. And therefore, sales will be relatively down.

Of course, the surrenders will be lower and that will have a positive impact also in the deferred acquisition cost, but also on the technical result. So the impact on the profitability won't be as accentuated as the reduction in terms of sales. In any event, in terms of value of new business, the protection products are contributing significantly more than the so-called financial solutions products. And we have seen that already in this quarter, and we expect that to actually continue and increase going forward.

With that, maybe I leave it to Jan-Hendrik to answer the second question.

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [18]

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Benoit, yes, so markets lowered the ratio by 5 percentage points this quarter, which reflected movements in credit spreads, lower rates, higher mortgage spreads, slightly lower inflation and positive returns from equity and real estate. So credit spreads was negative, of course, mainly due to the decrease in the VOLA, which went from 14 basis points to 9 basis points in the quarter, so minus 5. And we also saw some widening of the mortgage spreads by close to almost 20 basis points, which negatively impacted our ratio.

Now rates, as we have said, also decreased quite a bit in the quarter. That increased Own Funds and SCR as you would expect, but the impact on the ratio was perhaps a bit better than you would expect outside in because the shift wasn't a parallel shift at all durations. And maybe finally, the one to flag is that equity -- we all saw equity markets went up in the quarter and that also helped our ratio a bit.

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Benoit Petrarque, Kepler Cheuvreux, Research Division - Head of Benelux Equity Research [19]

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So far in Q3, what do you see?

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [20]

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Yes. Q3 -- yes, Q3, I see some pressure on the govie spreads and also rates down quite a bit quarter to date, so that will be -- put some pressure -- downwards pressure on the ratio, yes.

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Operator [21]

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The next question is from Mr. Farooq Hanif, Credit Suisse.

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Farooq Hanif, Crédit Suisse AG, Research Division - Head of Insurance Research in Europe [22]

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Just going back to Japan. I noticed that your kind of the payout ratio in a sense of the dividend has gone up a lot in Japan. And obviously, there are good reasons for that, given the lowest [rein] that you're talking about. But I'm just kind of wondering, going forward, whether this will be a theme? You're talking about sales not picking up that quickly. Just can you give us some sort of -- some discussion on where you think that payout ratio is going to go in relation to the net result -- net operational result?

Secondly, I realize that you've delayed your Investor Day for very good reasons. Does that mean that sort of really major decisions on things like capital return are also likely to be delayed? And related to that as well, one of your peers has talked about the increasing private equity interest in DB books in the Netherlands. Can you comment on that too? I mean, the potential for reinsuring possibly your DB book, for example.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [23]

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Yes. Thank you very much. Let me start with your last 2 questions, which I think are easier to answer, if I can say that. In terms of the capital markets update, I think it is quite normal after the appointment of a new CEO that the intention of David is basically to have the opportunity to engage actively with all the stakeholders, including, of course, you guys in the coming months. And as a consequence, we have decided to reschedule to -- the capital markets update to a bit later mid next year in order to provide the opportunity to do that with a bit more time.

In terms of the defined benefit books or closed books in general, I certainly should not comment on what others say or plan to do. We are focused on the integration of Delta Lloyd and also in finding further efficiencies with the operations and the systems of our closed books. And that is not a current priority and that is supporting us in reducing the expenses and will help us to open other opportunities and alternatives as the one that you mentioned in the future as having more strategic value to add. But for the time being, our focus is on improving and consolidating the administration of these books internally and future will tell about the rest.

In terms of the payout ratio, I -- to be fair, I don't understand what you're referring to as payout ratio.

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Farooq Hanif, Crédit Suisse AG, Research Division - Head of Insurance Research in Europe [24]

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Sorry. What -- I mean, if you look at -- I think the dividend is up (inaudible) EUR 79 million, the whole [higher] proportion of your earnings in Japan that has ever been.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [25]

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Okay. Sorry for that. I -- the dividend from Japan is -- keep in mind that also -- as we said before, we want to maintain some regularity in terms of the dividends. Last year was a bit atypical because of the need of doing a particular strengthening of reserves in the Japanese GAAP. The driver for the dividends, let me remind you, is not the IFRS profits, but is the Japanese GAAP profits. And as a consequence, the Japanese GAAP don't have the same pressure due to lower sales. On the contrary, when sales decrease, there is -- because of not being able to capitalize acquisition expenses. Usually, the Japanese GAAP earnings are under pressure when we sell more. So as a consequence, I think in terms of the dividends from Japan, the remittances from Japan, I think the guidance that I've given you of maintaining stability of dividends is the best guidance I can give you.

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Operator [26]

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The next question is from Mr. Matthias De Wit, Kempen.

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Matthias De Wit, Kempen & Co. N.V., Research Division - Analyst [27]

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My first question is on Insurance Europe. Can you provide me the contribution of the acquisition of Aegon's Czech and Slovak activity during the quarter?

And secondly, on Non-life, I noticed it's already first quarter with decent underwriting result. Is this sustainably below target now or is it too early to say that? And can you say anything on pricing now that VIVAT is about to disappear from the market?

And then lastly, on capital generation of the -- in the operating bucket, the EUR 0.3 billion. If I strip out the bank, would that still be close to EUR 0.3 billion then? And can you say anything on capital generation on what to expect going forward now that rates have declined, but also considering the spread widening we've seen in mortgages?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [28]

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Good. Thank you very much, Matthias. I think quite a few questions here. So let me go one by one. So contribution from Aegon in Czech and Slovak, we mentioned that there was a small modest contribution from these activities. This -- we'll expect it to increase further over time. But also keep in mind that at the time of the acquisition of these 2 -- actually, 3 operations because also there were life and pension in Slovak, there was significant amount of profits recognized upfront and this was through the negative goodwill that was reflected in Q1 of EUR 33 million. So some of the profits, if you like, under IFRS have been recognized upfront. And in any event, as you know, the contribution is going to increase going forward. Still we are pleased with the progress we have done so far in terms of the integration. And it's of course still early days and we are comfortable with the guidance we gave of double-digit return on the investment.

For Non-life, certainly, we are very pleased with the evolution so far of the combined ratio of Netherlands Non-life. This quarter, it benefited from a strong result in Property & Casualty across different portfolios and also the favorable development of the group income. We flagged in the press release that we also saw some higher claims in individual disability, which were covered by our reinsurance arrangement with NN Re. And therefore, you see, if you like, a combined ratio for Disability & Accident a bit better, if you like, that what is the overall impact within the group, but you also see the negative of that coming through the segment Other under NN Re.

We have seen already for quite a few quarters a combined ratio below 98%. I think it has been 5 consecutive quarters. And yes, we see some sustainability on -- not at the level of 95.8% that I mentioned before because there is a certain element of the reinsurance with NN Re, but I think that all the effort that has been made over the last months in terms of improving the Non-life business is coming through.

Difficult to comment on pricing. Certainly in this type of calls and -- but you have seen that whatever is necessary and the portfolios require it, we have been proactively reacting to that.

Capital generation, the answer is yes. Even if you exclude the dividend from the bank, the rounding will be still at EUR 0.3 billion. So that means that, of course, the EUR 0.3 billion that is presently reported is very close to the EUR 350 million this quarter.

Capital generation going forward, we could have been discussing that for long, but I know already that I'm spending myself a bit too long with my answers. But I think it's -- we all know that with lower rates, there is headwind in our capital generation due to the higher UFR drag. But at the same time, please do keep in mind that we have some levers to improve the capital generation that has been already been shown in the capital generation over the last quarters. To mention a few of them is they move to higher-yielding assets that can be very substantial, improvement in the Non-life results also, including the expected acquisition of VIVAT Non-life next year. The profitable new business that is being written in Europe and dividends coming, as you know, from the bank.

As a matter of fact, if you can see that our operating capital generation as a whole during the past quarters despite the falling rate environment has been relatively stable. And when I look back to the last 8 quarters since the acquisition of Delta Lloyd, the operating capital generation has been quite stable and contributing around 5 percentage points per quarter. So on that sense, low interest rates are not welcome, but there are other aspects that make us feel confident to the future.

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Operator [29]

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The next question is from Mr. Bart Jooris, Degroof Petercam.

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Bart Jooris, Banque Degroof Petercam S.A., Research Division - Analyst [30]

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Two questions from my side. This is the second quarter in a row that your private equity dividends are very low. How confident are you that there is going to be some catch up in the second half, that we will see a more normalized level over the year?

And then secondly, special items. There were project costs. Are those projects more or less finished? And some of them are on the implementation of IFRS 17. Could you give some guidance of what the impact of IFRS 17 will be now that you have done those projects?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [31]

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Yes. Thank you, Bart. Private equity dividends fluctuate a lot, but it's not right that this is the second quarter in a row because in the first quarter -- last quarter, we actually have EUR 63 million of private equity. So in relationship to what happened in Q2, the timing has changed. So in relationship to 2018, in 2018, the first quarter has very little private equity and the private equity came in the second quarter. This year, the private equity is in the first quarter...

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Bart Jooris, Banque Degroof Petercam S.A., Research Division - Analyst [32]

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(inaudible) mainly in Korea instead of private equity.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [33]

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A part of it was Korea, but there was also private equities included there. What I'm saying is that it varies from one quarter to another. And as a consequence, you have to just look at the overall timing of this coming. Keep in mind that, that doesn't mean that the valuations of private equity in the quarter have not occurred, but that comes below the line. Sometimes, you've got appreciation on the private equity as nonoperating. And then when a dividend is paid, it's being translated into the operating result.

Special IFRS 17. In terms of the guidance for IFRS 17, it's still quite early in order to indicate any effect of it. So we know that implementation will take place as of -- we expect to take place as of January 2022. And that's going to have some important implications in terms of the balance sheet, but also the P&L.

In terms of the cost, let's say that this quarter, we have approximately EUR 10 million of cost, but this will fluctuate. We'll continue to have some special items for the rest of this year -- next year mainly, maybe a few -- a little bit coming into 2020 -- in '21 as well, but we have not provided an overall estimate of that cost so far.

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Bart Jooris, Banque Degroof Petercam S.A., Research Division - Analyst [34]

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Yes. There was a small follow-up on -- still on private equity. You talk about valuation. But mostly, if I'm not mistaken, the dividends come from deal flow. Do you see less activity in deal flow for the moment than we had last year or is this just plain volatility?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [35]

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I think -- I mean, it's very difficult to predict the deal flows in just -- because in 1 quarter. It's not only deal flows, it's also when, as you know, the private -- the vehicles that owns the private equity, sometimes they receive dividends from the companies they own and these dividends are dividend out to the ultimate shareholders or owners. So it's not only deal flow, but -- we have a portfolio between EUR 800 million, EUR 900 million invested in private equity, and we do expect over time to -- this portfolio to provide a good return similar to what could be expected for these type of investments.

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Operator [36]

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The next question is from Mr. Albert Ploegh, ING.

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Albert Ploegh, ING Groep N.V., Research Division - Research Analyst [37]

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Sorry to come back to the questions raised also already on the capital generation. Can you maybe help us out a little bit what the annualized increase of UFR drag is in 2019 so far? And can you remind us what the amount was that's in capital generation of 2018?

Second question is on reinsurance. You mentioned in the press release claim on the legacy portfolio. I think it was probably about EUR 10 million or so, but can you give maybe a bit of color on the duration of the portfolio and should we see this completely as nonrecurring or could this pop up going forward as well?

And the final question is on Asset Management. I noticed an outflow in third-party assets of EUR 2.4 billion. Is this just a concentrated mandate that has been lost or is it more spread across different mandates?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [38]

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Thank you, Albert. First question will be handled by Jan-Hendrik. I will cover the other 2. Please, Jan-Hendrik.

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [39]

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Albert, I mean, the UFR decreased by 15 basis points again in January and we expect it will keep decreasing by 15 basis points. So every time it decreases, of course, it results in higher capital generation going forward. On the other hand, when rates go down, that increases the benefit we get from the UFR. We've given a sensitivity on the UFR adjustment of 15 basis points in our sensitivities, which we published again today. And as a rule of thumb and this has to be a rule of thumb because it depends on lots of things like the level of rates and the shape, but we will earn back the negative Own Funds impact through higher capital generation in approximately 10 to 15 years. It's tough for me to give you a precise figure because, again, it depends a lot on market conditions. But what I can say is that the net impact of the UFR drag and the risk margin release in the operating capital generation was negative in 2018 and also in the first half of 2019. Of course, we are also able to do other things like shifting increasingly to high-yielding assets such as loans, mortgages and real estate to partly offset that effect.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [40]

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And Albert, on the reinsurance claim, this is a portfolio of -- we are participating. This is a legacy business that came from the time when also Voya was part of the group. And this covers U.S. mortality risk, and we are participating in a pool of reinsurers and this can be quite volatile. So some quarters you have very little claims and then suddenly, there is one or several deaths with relatively large claim amounts. And so it can be quite volatile. It can be going up and down. Since the inspection of this contract, it has been basically not breakeven. So not making losses or gains, but it will continue to give us some quarters good results in reinsurance or a bit of bad results, difficult to predict, but could be recurring -- will be recurring.

In terms of the outflows that you referred to, these are very specific because we saw some positive inflows of assets under management, but these were 2 clients actually. One, which hold for decisions related to their own strategic thinking. One of them transfer a number of funds that we were managed to their newly created management company. So they decided to in-source the asset management of those assets. And the other basically was another U.S. client that decided to shift from active management to passive. And therefore, they shift our mandate with them to passive. So unfortunate, but very specific for these 2 cases. Assets under management increased, as you know, by EUR 8 billion over the quarter, but this was driven by the positive market performance.

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Operator [41]

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The next question is from Mr. Johnny Vo, Goldman Sachs.

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Johnny Vo, Goldman Sachs Group Inc., Research Division - MD [42]

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Again, I just -- I'm not sure whether you answered this question, but it's just in relation to group pensions. I know that you wrote a lot of volume in Q1, and it's less volume in Q2. But certainly, over the half to half, it's quite a lot. So it would appear that -- can you tell me what the margins are on that product? And clearly, the Q1 volumes, which are very large, that would be, I guess, on a mark-to-market basis negative margins. Is that fair? And also, could you just give me a mark-to-market on the Solvency of the Dutch Life entity, given where rates have gone so from 212%?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [43]

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Yes. Thank you very much, Johnny. Yes, large volumes in the first half of the year, more to do with just the maturity of these pensions because these are renewals. And therefore, it comes, if you like, in batches and just 2018 again with the largest number of pensions to renew.

In terms of margins, it's difficult to just be too precise about it. Overall, the group pension is providing some -- a value of new business relatively flattish in general. And that basically means that we're able to not only cover the cost of equity, but also be able later on over time to have the release of the risk margin that is not reflected in the value of new business.

In terms of the mark-to-market of the Solvency II ratio, it's a very tricky and complicated question to answer. And then Life Solvency II ratio is 212%. There are different elements moving that along and that is the Solvency ratio that takes -- that we should focus on. Maybe I -- Jan-Hendrik, you might add something on this?

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [44]

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Yes. Thank you, Johnny. Just to add to Delfin, I think quarter to date, we've seen rates come down and govie spreads widen a bit. We've also seen mortgage spreads widen a bit. So definitely, I would say some downward pressure on it, but also still robust if you consider the starting level of 212%. And like the group, the Dutch unit also has some sensitivities and tolerances. And these are not very different. So that gives you an idea that it's a relatively stable downwards pressure, but not significantly so.

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Operator [45]

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The next question is from Ms. Fulin Liang, Morgan Stanley.

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Fulin Liang, Morgan Stanley, Research Division - Former Research Associate [46]

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I just have 2 questions. One is actually a follow-up to Johnny Vo's question. On the -- your Dutch pension business, it seems like the margin has been compressed. And just wonder, did you actually compromise your pricing discipline to -- for the commercial consideration or is that some other things going on there? And that's the first question. And then what is the tipping point for you to say, okay, that's the minimum margin we have to keep on writing the new business? And that's the first one.

And then second one, it seems like the one thing I really quite can't figure out is apparently some of your peers have had negative impact from the widening mortgage spreads, which you also have a very large, actually, mortgage book. Just -- but you're well -- you are managing it very well. I just wonder, is that because of the hedging strategy you are taking or is it because of the intermodal techniques in Solvency II, you're able to cope through that.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [47]

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Thank you, Fulin. I will cover the first 2 questions, and Jan-Hendrik will talk about the impact of the mortgage spreads. For the Dutch pension business, as for all the business that we do, we keep our financial discipline. Obviously, you always need to look at commercial implications or cross-selling of other products and everything else, also the potential for transfer of pension to defined contribution later and other business that we have with companies. Nevertheless -- you ask about the tipping point. The way that we look into this business is, the tipping point is the value of new business. We don't write business with negative value of new business. And from there, there are different connotations about how much of additional profitability you need to get on top of that.

With this, I think Jan-Hendrik, please.

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [48]

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Yes. Thank you, Delfin. The mortgage spreads, I mean I can't comment on other companies, but what I can tell you is that we saw our mortgage spreads widen by 17 basis points in the quarter, which had a negative impact on our ratio of around 3 percentage points. So that was in line with our expectations. And if you saw this quarter, again, we have seen a slight widening of the mortgage spreads by just less than 10 basis points, but at that sort of quantum, I think, is still well within our overall tolerances that we disclosed for our sensitivities. And just for clarity, maybe to mention that in the sensitivity we disclosed on corporates, that includes fixed income investments as well as mortgages. So you can see that in the appendix of our publication today.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [49]

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Thanks, Jan-Hendrik. Maybe just to add that of course, the other side of the coin is that with mortgage spreads increasing, that help us originate mortgages with higher spreads that help our profitability going forward.

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Operator [50]

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The next question is from Mr. Jason Kalamboussis, KBC.

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Jason Kalamboussis, KBC Securities NV, Research Division - Executive Director Research [51]

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Just on mortgage, as a follow-up, would you consider just providing like some of your peers' specific sensitivity to it? And now a couple of other questions. On the combined ratio, it was a good combined ratio. But of course, there was a part of it that was a bit shifted to NN Re. So there are 2 questions within it. One, it is a disability combined ratio, was actually -- if you take back the, let's say, or just move to the reinsurance, was above 95%, a bit high. Now we are -- we can understand that there are bad quarters once in a while. But in general, I would have expected probably that come every 2 years, whereas, we had one such quarter last year. So could you let us know a bit of the trends in there? And what is there to stay, so be it's a longer sick leave or an -- the individual disability, specific issues there.

And the second part of the question is on the reinsurance side. Does it make more sense to actually not retain that much? And to do that only when you are going to be delivering stellar combined ratios of 95%, so -- because it keeps coming again as well, but we get hit on the Non-life, it goes and we receive it through internal reinsurance.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [52]

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Thank you very much, Jason. So on the question of the combined ratio for Disability & Accident, yes, you're right, and that's why we have provided this information. The combined ratio for Disability & Accident will be actually around 95% if you were to take the amount of loss transferred to NN Re. So still at 95% is a relatively good level. And then for the total Non-life, as you know, if you want to do the same adjustment, there will be actually around 97% combined ratio. In terms of the trend, actually, individual disability is difficult to predict on a quarter per quarter basis. It's, as you know, very volatile. And no doubt, there is some pressure, as we have seen in the industry, as a whole, an increase in the average duration of sick leave for the company's sick pays schemes. But also we've seen some increased claims related to burnt house. That's part of the industry. We monitor that very closely, perform regular pricing studies and have adjusted pricing when required.

In terms of the insurance, the majority of the other volatility, that we told before, was related to this legacy -- U.S. Life legacy portfolio that has nothing to do with internal reinsurance. And for the internal reinsurance, I think it's very healthy to have an internal reinsurance that help us optimize capital utilization and risk -- and manage our risk -- transfer risk in the entities that can absorb them better. So I think we're happy with the current arrangements. Yes. I hope that answers your questions.

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Operator [53]

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The next question is from Mr. William Hawkins, KBW.

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William Hawkins, Keefe, Bruyette & Woods Limited, Research Division - MD, Head of European Insurance Research and Senior Analyst [54]

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You mentioned helpful comments about Japan Life earlier. But could I just ask you to go back and either repeat or give us a little bit more detail about the IFRS earnings sensitivity from what's happening in sales? So would you [adjust] for the first half of this year, whether the IFRS earnings were at all distorted by the volatility that you experienced in sales? And then secondly, if we were conservatively to assume that your COLI sales now stay at 0, what would be the [fade] of your 2020 IFRS earnings relative to 2019?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [55]

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Yes. Thank you, Will. I have commented that it is not easy to predict how the sales will develop as from now onwards because for the whole industry, there is new products. We are adapting. It depends on how other competitors react. In -- sometimes in the past, in previous tax changes, we have seen also some competitors that left the market. And we have been systematically, in the past, maintaining in the top leadership of the top 3. So it's really difficult to predict the dynamics precisely. But to give you -- of course, the first half of the year has -- because of the first quarter has resulted in elevated sales, so we do not expect this same level to come in the short term. But also keep in mind that a significant part of the fees- and premium-based revenues are related to the in-force book and the in-force book has been increasing over time and actually, in 2018 and the first half of 2019 has also increased this value, the in-force, as you know, business. And we were expecting to receive continued regular premiums coming from that part. That's one element. Sales might be down. Technical results might be better because of the lower surrenders. Also, as sales are lower, there is less impact on the deferred acquisition cost. I cannot give you a more clear guidance on that respect. But yes, the levels of sales and profitability of 2018, for example, as you know, are a bit on the high side. But 2020 will be a year, on which we are benefiting from the larger in-force book. And then we see how that adapt for the years to come.

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William Hawkins, Keefe, Bruyette & Woods Limited, Research Division - MD, Head of European Insurance Research and Senior Analyst [56]

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So just to confirm then, again, none of us know what's going to happen with sales. But if I assumed the sales were 0, then it sounds like there may be a bit of a fade, but not much because the in-force book is moving very slowly.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [57]

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Yes. But that will be the wrong assumption. I mean we know that COLI sales will not be 0. We have already launched 3 products. Approximately 25% of our value of new business, our protection, our COLI protection products, and this has been growing like a 20% over time. And therefore, we also know that the new products are with lower surrenders, the need of the SMEs are there. And I don't know the percentage, but certainly, I'm very confident to say that the sales will not be that negative. I know you asked the question in order to have an order of sensitivity, as you know, about it, but it's difficult to do it this way.

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Operator [58]

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Next question is from Mr. Robin van den Broek, Mediobanca.

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Robin van den Broek, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [59]

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Firstly, I wanted to talk a little bit about pending Solvency II review. Obviously, the UFR is a topic there. If you look at year-to-date, beginning of the year, you had a Solvency II ratio of 230%. And I think your UFR benefit roughly represented 65 percentage point in that ratio. If you would do a similar constellation today, I think your actual UFR ratio would probably be below 100%. I'm just wondering, the fact that this issue has grown that much in a short time frame, do you think that makes it more or less likely for EIOPA to make this move off the last local point. That's the first question.

Secondly, what do you think is the key driver for your remittances to stay at these levels because if we stay at these rates for longer and your ex UFR ratio would be below 100%, that would imply that you need to remit less than you're generating in the unit. Otherwise, you'll have some issues further down the road. How do you look at that? And how does the regulator look at that?

Then in connection to this, you've always argued that the risk margin is a proper offset for the UFR drag. Can you just explain that a little bit further? Because if I look at your risk margin, it's around 5% of your best estimate liabilities. And I think the amortization period is closer to 20 years. While the UFR is a lot more sensitive to rate moves and the amortization I think is closer to 10 years, as you alluded to in the past. So it feels to me that the risk margin is only a very small offset for the UFR drag. So it seems to me that the offset you're talking about in the call was more coming from the higher mortgage spreads and the rerisking that you're undertaking. Just your view there would help. And I think that was actually it.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [60]

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Yes. Thank you, Robin. Maybe why don't you -- Jan-Hendrik takes the first question, and I'll cover the other 2.

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [61]

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Robin, yes, of course, we've taken notes of the EIOPA review of 2020 and the review of the Solvency II framework. It has quite a broad scope. There are many elements in the review, and we have also in the past said that we think you need to consider all the different elements of the Solvency II framework in conjunction with each other and not in isolation. As to whether current market conditions will influence thinking of EIOPA or not, I think that is for EIOPA, so I can certainly not speak for them. But at this stage, it's too early for me to say much more on this review.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [62]

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In terms of the remittances, you've seen the spread. The breakdown of remittances coming from different units. And Life is the largest contributor in terms of dividends, but it's also the unit that with 212% is well positioned to pay dividends. Also is the unit that every time that we move to higher-yielding assets, increase the capital generation. And you can see that, you're right, absolutely, that in terms of the impact of the UFR drag versus the risk margin release, with lower interest rates, this compensation has -- I mean they -- we have always said that the UFR drag is a net with -- the risk margin release is a net negative as interest rates were higher. We saw that, that drag was closer to the release, but over the last quarter with the reduction -- basically, this year with the reduction of the interest rate, that is lower. What I was referring before, it was, yes, a part of the higher-yielding assets. Their spreads are part of the contribution of the bank, a part of the contribution of asset management, Non-life and so on and so forth, that also -- and that is the case with lower interest rates that the release of the risk margin increases. And that is another offsetting factor, even if it's not fully.

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Robin van den Broek, Mediobanca - Banca di credito finanziario S.p.A., Research Division - Research Analyst [63]

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Okay. And then Jan-Hendrik, the fact that you're not commenting about the size of these UFR benefits, I guess, you don't want to comment about it specifically? Or can you give some indication there?

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [64]

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Yes. I can only repeat a little bit what I said before, which is that one has to consider all the elements of the framework in conjunction with each other, so not really in isolation. I mean, in the end, there may also be other changes in the framework such as the risk margin calculation or the cost of capital. So I think we will just have to wait for the impact of the changes of the package as a whole. And I also can guide you a little bit to the UFR sensitivity that we published again today. And we also published at year-end, which gives you a sense of how sensitive we are to the changes in the UFR itself.

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Operator [65]

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The next question is from Mr. Andrew Baker, Citi.

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Andrew Baker, Citigroup Inc, Research Division - Analyst [66]

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Just 2, please. Can you just give an update on the potential Poland pension reforms? And any potential impact that, that will have on your profitability? And then secondly, I know you've done a small longevity reinsurance transaction in the past around your 2017 Capital Markets Day, I believe. Is this still something that you look out on the larger scale, as you look at ways to optimize the Netherlands Life book?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [67]

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Thanks. I'll answer the first question and then Jan-Hendrik will comment on the longevity reinsurance. In relation to the Poland reform, this was announced in April of this year, so not so long ago. And basically, it provides the option to individuals to decide if they want to transfer the funds of their accumulated pension to the so-called private individual pension accounts i.e. retain it, maintain it with ourselves. And if that is to happen, then there has to -- they have to pay 15% onetime charge, tax charge, in order to allow future withdrawals to be tax free. So in case the -- our clients decide to stay with us, our expectation would be that assets under management will reduce by this 15% because the tax will be paid from the current funds. The other alternative for them would be that they transfer their savings, their pension savings to the public administrator, the public individual pension accounts administration by the state. In that case, they don't need to incur any tax upfront. But as you know, when they receive the pensions, as you know, the taxes will be paid. It's relatively early on to analyze or consider what's the percentage of individuals, what they will do, and as a consequence to provide too much clarity about the impact. These negatives comes with some positives in the sense that, that allows actually to have an individual proper third pillar pension system, on which we are very well positioned, in order to maintain these private pensions, as you know, going forward. But in the short term, it will have a negative impact in the profitability, which is difficult to account at this point of time. Maybe you can answer on the longevity?

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Jan-Hendrik Erasmus, NN Group N.V. - Chief Risk Officer & Member of Management Board [68]

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Yes. Thank you, Delfin. Andrew, longevity risk is from our DB pension and group pension business in the Netherlands. It's one of our largest risks, and we actively manage it by shifting to products with lower guarantees, by repricing at renewal debts using the latest mortality tables. And of course, then shifting to DC products where you have a far lower exposure to the longevity. On top of that, we are actively looking into, for example, reinsurance to manage this risk provided that we can enter into such a transaction at the right price. So of course, we consider risk/return, but this is something we're still looking and we do have people allocated to this in the company.

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Operator [69]

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The next question is from Mr. Ebrahim Saeed, Deutsche Bank.

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Ebrahim Saeed, Deutsche Bank AG, Research Division - Financials Credit Trading Analyst [70]

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Just one quick, please. Could you give us an update as to the timing of the VIVAT transaction? When that might close? And some sort of sensitivity as to how soon it might be? Or if it gets delayed, how late it could get?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [71]

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Thank you, Ebrahim. We believe, we're working towards closing in the first quarter of next year.

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Ebrahim Saeed, Deutsche Bank AG, Research Division - Financials Credit Trading Analyst [72]

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Is that realistically the earliest you see it? Or is there a possibility that might happen before that?

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [73]

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I think it's the timing, at which we are aiming for. Also even from a financial accounting point of view, I prefer to do it in close periods, not just in the middle of December or whatever. So the objective is basically to be done at the first quarter. And in any event, it's now not so much subject only to us. It is pending the normal regulatory approvals and that is basically the expected timing, on first quarter 2020.

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Operator [74]

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Ladies and gentlemen, we have come to the end of the Q&A session. I would like to hand back the conference to Mr. Delfin Rueda. Go ahead please, sir.

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Delfin Rueda Arroyo, NN Group N.V. - Vice Chairman of Executive Board & CFO [75]

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Thank you very much. Let me just wrap up by saying that we have today reported a good set of results, a strong commercial momentum and a solid capital position. Thank you for joining the call, and I wish you all a pleasant day.