- Operating Capital Generation (OCC): Increased by EUR244 million to EUR658 million.
- Solvency II Ratio: Increased to 180%; pro forma basis at 196%.
- Operating Results: Increased by almost 50% to EUR677 million.
- Combined Ratio (Non-life): Improved to 91.8% from last year, ahead of the target range of 92-94.
- Non-life Premiums: Grew organically by close to 5% in the first half of the year.
- Operating Return on Equity: Increased to 13.4%, above the target level of 12%.
- P&C and Disability Premiums: Increased by almost 17%.
- Combined Ratio (P&C): Increased to 92.2% due to claims inflation.
- Combined Ratio (Disability): Improved by 2.9 percentage points to 91.5%.
- Combined Ratio (Health): Stands at 99.3%, similar to the first half of 2023.
- Operating Result (Life): Increased by EUR182 million to EUR492 million.
- Mortgage Origination: Increased by EUR2.9 billion.
- Assets Under Management (Third Parties): Increased by EUR3.2 billion to over EUR32 billion.
- Operating Result (Asset Management): More than doubled to EUR50 million.
- Operating Result (Distribution and Services): Rose by EUR9 million.
- Solvency Ratio (Half Year 2024): Amounts to 181% after deducting the interim dividend.
- Capital Generation: Increased by almost 60% compared to the first half of 2023.
- Business Capital Generation: Amounts to EUR156 million.
- Finance Capital Generation: EUR325 million.
- Remittance: EUR530 million from different entities.
- Capital Distribution: EUR342 million relates to the payment of the final dividend.
Release Date: August 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- ASR Nederland NV (FRA:A16, Financial) reported a significant increase in OCC by EUR244 million to EUR658 million, reflecting strong underlying capital generation and the addition of Aegon NL businesses.
- The Solvency II ratio increased to a robust 180%, and on a pro forma basis, it would be 196%, indicating a very strong capital base.
- Operating results increased by almost 50% to EUR677 million, driven by strong business performance and contributions from Aegon NL.
- The combined ratio of Non-life improved to 91.8%, ahead of the target range of 92 to 94, while growing Non-life premiums organically by close to 5%.
- The operating return on equity increased to 13.4%, well above the target level of 12%.
Negative Points
- The combined ratio in P&C increased to 92.2% due to claims inflation, despite tariff adjustments to counteract this.
- The Health business saw a decline in the portfolio due to disciplined pricing, with a combined ratio of 99.3%, similar to the first half of 2023.
- The operating results of the holding and other decreased by EUR48 million, driven by higher interest expenses and optimization of the debt profile.
- The integration of Aegon NL is still ongoing, with significant milestones yet to be achieved, including the full migration and integration of asset management services.
- The impact of the sale of the bank and the redemption of the remaining part of the 5% Tier 2 capital instrument will affect the Solvency II ratio, although it is expected to remain strong.
Q & A Highlights
Q: Could you give more clarity on the CPI case and its potential impact on your residential houses' valuation and solvency?
A: The Attorney General's advice to the High Court was that the 3% indexation is not unfair. If the High Court follows this advice, it could positively impact the valuation of our rented houses, which are currently valued at around 70% of their fair value. This could improve our solvency ratio, given our EUR4.5 billion valuation of rented properties.
Q: Can you update us on the market effects in July and August and their impact on solvency?
A: Rates decreased by around 40 bps, and we saw market spread widening and tightening of government bonds, especially in Germany and the Netherlands. The overall market-to-market movement is more or less neutral, similar to H1.
Q: Why was the bank sale impact on solvency higher than expected?
A: The SCR impact of the bank was larger than initially presented, and we included the EUR80 million received from transferring the mortgage business to BAWAG. This resulted in a higher contribution to the pro forma solvency ratio.
Q: How sensitive is your capital generation target to interest rates and spreads?
A: The main sensitivity is on mortgages. Current spreads are in line with our assumptions. For interest rates, there are offsetting effects; a 50 bps move is manageable, but a 100 bps move would require reassessment. The OCC remains stable within these ranges.
Q: Can you detail the breakdown of Non-life premium growth and the outlook for pricing?
A: In Non-life, two-thirds of the growth is due to premium increases, with the rest from customer growth, especially in SME. We expect continued growth from premium increases over the next 12-18 months. In Disability, growth is driven by large contracts and premium increases.
Q: What is your view on the mandatory disability insurance for entrepreneurs?
A: The proposal is based on an agreement between unions and employers. It is likely to be implemented by 2027, which could benefit new business. However, the final product details will determine its attractiveness compared to regular insurance products.
Q: Can you provide guidance on expected revaluations of your real estate portfolio?
A: We are positive about residential and rural real estate due to scarcity and fair value being higher than book value. Retail and office spaces are neutral to slightly negative. Overall, we expect positive revaluations for the larger part of our portfolio.
Q: What is your outlook for full-year 2024 OCC and IFRS operating profit?
A: For H2, we expect at least EUR500 million in OCC, leading to a full-year OCC of at least EUR1.15 billion. This aligns with our target of EUR1.35 billion in 2026.
Q: Can you clarify the impact of the partial internal model (PIM) on ASR Life's solvency?
A: The PIM is expected to contribute 10-12.5 points to the group solvency ratio. The exact impact on the combined Life entity will be clearer once both ASR Life and Aegon Life are on the PIM.
Q: What is your strategy for buyouts, and do you expect any deals in 2024?
A: We aim for EUR8 billion in buyouts over the next few years. While the business is lumpy, we are optimistic about seeing the first transactions in 2025, with potential smaller deals in 2024.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
