Asr Nederland N.v. · EURONEXT:ASRNL
Asr Nederland — H1 2019 Earnings Presentation
40 slides from Asr Nederland's earnings presentation, Aug 23, 2019
Slide 1: Strong performance in H1 2019
Strong performance in H1 2019 Jos Baeten, CEO Chris Figee, CFO Analyst conference call 23 August 2019
Slide 2: Strong performance in H1 2019
Strong performance in H1 2019 • Record operating result of € 459m, up Operating result Solvency II (SF)1 Interim dividend 21.0%, resulting in an operating RoE of 16.8%, well above target of 12-14% € 459m 191% € 0.70 • Strong combined ratio at 93.5%, ahead of +21.0% -6% pts +7.7% target range of 94-9
Slide 3: Solid progress in executing our strategy in H1 2019
Solid progress in executing our strategy in H1 2019 Portfolio matrix A Non-life business domains with growth potential C Asset management related growth business • Acquisition of Veherex1; an income insurer for personnel of railway • Assets under Management (“AuM”) for third parties increased by € 3
Slide 4: Sustainable employability: further enhancing our unique platform
A Non-life business domains with growth potential Sustainable employability: further enhancing our unique platform Pricing & Risk selection Customer 594 545 Claims GWP +9% management (in €m) (+6% ex. Distribution Loyalis ) H1 2018 H1 2019 Prevention & Added services 4
Slide 5: Non-life: record operating result and solid organic growth
Non-life: record operating result and solid organic growth Operating result (in €m) Gross written premiums (in €m) • Non-life operating result increased to € 122m due to both better underwriting +84.8% results and lower costs +4.3% 122 1,791 • Increase in GWP driven by solid organic 1,717 376 growth
Slide 6: P&C: increased efficiency and sustained profitable growth
A Non-life business domains with growth potential P&C: increased efficiency and sustained profitable growth Expense and commission (in %) Market dynamics 36.1% 35.7% 35.1% • Competitive landscape has evolved favourably over the last number 33.9% 33.9% of years. Consolidation has led to a decrease in
Slide 7: Life: strong and sustainable increase in investment margin
Life: strong and sustainable increase in investment margin Operating result (in €m) Investment margin (in €m) • Operating result of Life segment increased by Investment margin Technical result Direct investment income Required interest 8.3% to € 368m, mainly driven by a higher Result on costs Amorti
Slide 8: Operating result other business segments on track to achieve targets
Operating result other business segments on track to achieve targets Operating result Asset Management Operating result Distribution and Services Operating result Holding and Other (in €m) (in €m) (in €m) +30.2% -13.9% 11 12 11 9 -47 -53 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 • Fee-based bu
Slide 9: Non-life performance H1 2019 drives record operating result
Non-life performance H1 2019 drives record operating result Operating result1 (in €m) +21.0% 459 385 380 362 122 343 323 107 66 79 11 301 11 66 9 12 8 74 10 4 6 2 12 62 9 1 3 2 368 Non-life 319 340 324 314 Asset management 274 286 Distribution and Services Life Holding and Other -45 -42 -49 -49 -47
Slide 10: Solvency and capital position
Solvency and capital position Chris Figee, Chief Financial Officer 10
Slide 11: Solvency II: high quality balance sheet
Solvency II: high quality balance sheet SII Eligible Own Funds (in €m) 191% • Solvency II ratio 191% based on standard formula1 1,514 0 7,547 • Unrestricted Tier 1 capital increased by 5,505 528 € 126m to € 5,505m: 73% of total own funds and 139% of SCR, absorbing reduction of the UFR to 3.9% and VA
Slide 12: Solvency II ratio movements in H1 2019
Solvency II ratio1 movements in H1 2019 OCC: 5.1%p / € 189m • Solvency II ratio remained robust at 191% after interim dividend and 193% pre dividend 197% 13% -7% 203% 4.4% 2.3% -1.6% -15% 193% -3% 191% • Organic capital creation of € 189m (H1 2018: 163 40 € 179m) equals 5.1% pts of required capital.
Slide 13: Sensitivity of Solvency II ratio to UFR
Sensitivity of Solvency II ratio1 to UFR Stock of Solvency II (in %) • Economically, a UFR that is in line with long- 183% 187% 191% term investment returns would be an optimal 152% way to measure capital stock (compared to >100% threshold or >120% risk-appetite) • a.s.r. currently applies an econom
Slide 14: Sensitivities Solvency II ratio
Sensitivities Solvency II ratio 13 10 10 7 3 2 1 0 191%1 -1 0 -6 -6 -6 -7 -9 -10 -10 -9 -11 -10 -10 Optimal range >160%: entrepreneurial level VA -10 bps Sovereign Corporate credit Interest +100 bps Interest -100 bps Equities -20% Real estate -10% spread +50 bps spread +75bps >140% cash dividend Tot
Slide 15: Strong balance sheet with ample financial flexibility
Strong balance sheet with ample financial flexibility Financial flexibility (in €m) Market risk as % of total BSCR1 Solvency II composition (in % pts) Hybrids Unrestricted T1 191% 848 462 7,547 43% 43% 38% 13% 2,042 Tier 3 139% Tier 2 5,505 Restricted Tier 1 Unrestricted Tier 1 EOF T1 Headroom T2+3
Slide 16: Robust solvency and cash supports our businesses and dividends
Robust solvency and cash supports our businesses and dividends Holding cash (in €m) • Holding cash at H1 2019 stood at € 354m, in line with a.s.r’s policy to maintain cash at operating companies. Upstreaming of cash 493 -435 to cover dividends, coupons and other 191 -154 Holding expenses for the cur
Slide 17: Wrap-up
Wrap-up Jos Baeten, Chief Executive Officer 17
Slide 18: Key take-aways
Key take-aways Strong performance, record operating result in H1 2019 Solid progress in executing our strategy Strong balance sheet, robust high quality solvency with ample financial flexibility Well positioned to pursue profitable growth 18
Slide 19: Appendices
Appendices a.s.fr.
Slide 20: Appendices
Appendices A. Financial ratios J. Fixed-income portfolio government credit rating B. Combined ratio per product line K. Fixed-income portfolio corporates and financials credit rating C. Calculation of operating ROE L. Details of equities portfolio and real estate portfolio D. IFRS profit vs. operati
Slide 21: A. Financial ratios
A. Financial ratios Net result (€m) Operating result (€m) ROE Operating ROE 22.2% 16.8% 540 459 15.0% 380 15.5% 368 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 H1 2018 H1 2019 Combined ratio1 Solvency II2 Total equity (€m) Financial leverage 96.7% 93.5% 197% 191% 5,479 5,810 30.4% 26.7% H1 2018
Slide 22: B. Combined ratio per product line
B. Combined ratio per product line H1 2018 H1 2019 Net earned premiums (in €m) 1,456 1,518 Claims ratio 73.7% 72.7% Non-life segment Expense ratio 7.4% 7.2% Commission ratio 16.1% 14.8% Combined ratio 97.1% 94.7% Net earned premiums (in €m) 414 452 Claims ratio 71.8% 70.4% Disability Expense ratio 7
Slide 23: C. Calculation of operating ROE
C. Calculation of operating ROE (in €m) H1 2018 H1 2019 Operating result (before tax, annualised) 759 919 Minus: Interest on hybrid instruments through equity1 59 59 Operating result after hybrid costs (before tax, annualised) 699 860 Tax effect (25% tax rate) 175 218 Operating result after hybrid c
Slide 24: D. IFRS profit vs. operating result per segment
D. IFRS profit vs. operating result per segment IFRS profit Investment Operating IFRS profit Investment Operating Incidentals Incidentals before tax related result before tax related result H1 2018 (restated)1 (in €m) H1 2019 (in €m) Non-life 77 13 -2 66 173 67 -16 122 Life 440 97 4 340 465 101 -4 3
Slide 25: E. IFRS equity and Solvency II EOF multi-year development
E. IFRS equity and Solvency II EOF multi-year development IFRS equity (in €m) Solvency II Eligible Own Funds1 (in €m) 7,547 6,827 6,924 5,810 2,042 5,433 5,479 1,548 1,546 1,001 1,001 1,001 4,809 5,279 5,379 5,505 4,432 4,478 2017 2018 H1 2019 2017 2018 H1 2019 Hybrids Equity Hybrids Unrestricted Ti
Slide 26: F. SCR movement in H1 2019
F. SCR movement in H1 20191 (in €m) FY 2018 3,523 SCR decreases in SCR increases in Market risk 270 Market risk: Market risk: • Interest rate risk • Equity risk Counterparty default risk -107 • Concentration risk • Real estate risk • Spread risk Insurance risk Life 193 Counterparty default risk Insu
Slide 27: G. What would 'market observable' OCC look like?
G. What would ‘market observable’ OCC look like ...? c. 240 c. 30 189 c. 20 Excess c. 200 returns 152 Other 132 132 UFR drag -59 -59 Hybrid expenses -36 -36 OCC H1 2019 Actual spreads on Assume 5% pre-tax total return OCC at ’market fixed income incl. VA on equities and real estate observable’ inv.
Slide 28: H. Investment portfolio
H. Investment portfolio • Increase in total portfolio value, fixed Assets (in €bn, fair value)1 FY 2018 2019 H1 Delta % of total income in particular, mainly due to the acquisition of Loyalis and market effects Fixed income 26.4 32.3 5.9 68% • Total increase in real estate portfolio mainly Equities
Slide 29: I. Details of fixed-income portfolio
I. Details of fixed-income portfolio • The core of the portfolio consists of AAA government bonds, with selective Mortgages (in €m, book value)1 FY 2018 2019 H1 Delta peripheral sovereign exposure NHG 3,073 2,942 -4.3% LtMV < 55% 1,155 1,360 17.8% • The increase in value of the fixed income portfoli
Slide 30: J. Fixed income portfolio government credit rating
J. Fixed income portfolio government credit rating Market value governments1 (in €m) 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total Delta AAA 666 309 462 572 1,237 1,280 2,647 53 7,226 769 AA 240 695 460 416 825 681 626 981 4,924 615 A 51 47 122 237 187 138 92 27 902 151 BBB 271 20 6 529 199 33 33 0 1,0
Slide 31: K. Fixed income portfolio corporates and financials credit rating
K. Fixed income portfolio corporates and financials credit rating Market value credits (in €m) 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total Delta AAA 515 156 163 150 196 87 0 0 1,268 671 AA 175 77 108 377 423 214 0 0 1,373 81 A 343 247 640 1,330 2,015 389 4 0 4,968 513 BBB 295 365 414 1,133 1,710 292
Slide 32: L. Details of equities portfolio and real estate portfolio
L. Details of equities portfolio and real estate portfolio Highlights Equities (in €m) FY 2018 H1 2019 Delta • During H1 2019, multiple trades took place and overall, equity markets rose, resulting in Equities an overall increase in equity exposure Equities 1,803 1,976 9,6% • Continuation of the act
Slide 33: M. Calculation of asset leverage
M. Calculation of asset leverage Risky assets (€m) FY 2018 H1 2019 Equities 2,245 2,441 Real estate1 2,414 2,687 BB bonds or below 274 311 Preference shares 308 313 Fixed income funds (not rated & high yield) 329 280 Mortgages with LtMV >110% 109 58 Total risky assets 5,678 6,090 Unrestricted Tier 1
Slide 34: N. Life segment book development
N. Life segment book development Life reserves development (in €bn) Life reserves (in €bn) Individual Pensions Funeral Reserves Excl. (un)realised gains reserve 30 50 45 20 40 10 35 0 30 2017 2018 H1 2019 2017 2018 H1 2019 Reserves – H1 2019 (€ 47bn) (Un)realised reserves development (in €bn) Shadow
Slide 35: O. Life segment investment contribution
O. Life segment investment contribution In €m H1 2017 H2 2017 H1 2018 H2 2018 H1 2019 Direct investment income1 513 479 529 519 535 Amortisation of realised gains 161 161 155 159 161 reserve Total investment contribution 674 640 684 678 696 Required interest on liabilities2 -411 -389 -394 -421 -381
Slide 36: P. Medium term group targets (2019 – 2021)
P. Medium term group targets (2019 – 2021) Targets for the 2019 − 20211 period Solvency II Operating return on equity Dividend pay-out ratio (Standard formula) (% of net operating result after hybrid expenses2) >160% 12-14% 45-55% Substantial capital for Per annum Ambition to offer a stable to growi
Slide 37: Q. Medium-term business targets (2019 – 2021)
Q. Medium-term business targets (2019 – 2021) Targets for the 2019 − 20211 period Non-life Life operating result Fee based businesses, operating result2 (P&C and Disability) (€ million) 94-96% Stable € 40 million Combined ratio Compared to 5% growth € 633 million in 2017 per annum thereafter Non-lif
Slide 38: R. Medium term non-financial objectives
R. Medium term non-financial objectives Targets for the 2019 − 20211 period Meeting customer needs Sustainable investments Employee contribution to local society (Net promoter score) (in no. of hours) Carbon footprint: % measured of 95% >44 investment portfolio +5% € 1.2bn Impact by 2021 investments
Slide 39: IR contact details
IR contact details Email: ir@asr.nl Tel: +31 (0)30 257 86 00 39
Slide 40: Disclaimer
Disclaimer Cautionary note regarding forward-looking statements laws or regulations and/or changes in the interpretation thereof, including without limitation Solvency II, IFRS and taxes; (17) changes in the policies of governments and/or regulatory or The terms of this disclaimer ('Disclaimer') app