Earnings Transcript for NNGPF - Q4 Fiscal Year 2018

Operator: Good morning Mr. Friese, over to you.

Lard Friese: Good morning everyone. And welcome to our conference call to discuss NN Group's results for the fourth quarter of 2018. I will start today's presentation by talking about the highlights of the fourth quarter results. I will then take this opportunity to look back on 2018, in particular at the progress we've made to integrate Delta Lloyd, as well as the financial and commercial developments in the past year. Delfin Rueda, our Chief Financial Officer will then take you through the details of the financial performance and talk about the free cash flow and the capital position of the group. After wrapping up the presentation, I will open the call for Q&A and Jan-Hendrik Erasmus our Chief Risk Officer is also with us today to answer your questions. So let me start with the highlights shown on slide number three. NN Group's operating result of the ongoing business for the fourth quarter of 2018 was EUR 343 million, broadly stable on the same quarter of 2017. We saw improved results at the main insurance businesses offset by lower results at the segment other and asset management. We continue to increase efficiency across the organization reducing the expense base of the business units in scope of the integration by a further EUR 20 million in the fourth quarter bringing the total cost reductions to EUR 289 million compared with the full year 2016 expense base. The integration of Delta Lloyd is progressing well with the legal mergers of the Life and Non-life entities now executed as announced in December. This triggered the elimination of the goodwill allocated to Delta Lloyd Life, which is the primary reason for the net loss for the fourth quarter of EUR 533 million. Our commercial performance was again strong with total new sales in the fourth quarter of EUR million, up by 8% of constant currencies on the same period in 2017. Value of new business which we report twice a year was up 13% when comparing 2018 to 2017 and I will talk more about the commercial performance on a later slide. We are announcing today a proposed final dividend for 2018 of EUR 1.24 per share, bringing the 2018 full year dividend to EUR 1.90 per share. This represents an increase of more than 14% on the 2017 full year dividend per share. The NN Group's Solvency II ratio at the end of the fourth quarter of 230% already reflects the full deduction of this proposed final dividend. And finally, I'm pleased to announce today a share buyback program for an amount of EUR 500 million to be executed over a period of 12 months. So let's move to slide number four. As I already mentioned, the integration of Delta Lloyd into NN Group is progressing well and we achieved several important milestones in the past year. In December, we received approval from the Dutch regulator to expand our Partial Internal Model to include the Dutch Delta Lloyd entities creating a uniform risk and capital management framework across our largest insurance entities in the Netherlands. As we reported this resulted in a nine percentage point uplift to the group's Solvency II ratio. The legal mergers of the various Delta Lloyd and NN entities have now all been executed. The operational integration of the head office and the asset management businesses are completed and we continue to integrate teams, systems and processes at the other business units. We will remove duplicate NN and Delta Lloyd's IT platforms by decommissioning applications once migrations are completed, which will support our aim to further increase efficiency. Perhaps more importantly, we now offer most of our products and services under the Nationale-Nederlanden brand, truly becoming one company for our customers and advisors. So let's not turn to slide number five. Throughout the integration process, we have never lost sight of our customers with the objective of helping them secure their financial future. We aim to provide products and services that meet our customer's needs. For example, our international insurance businesses launched various new products, including a new protection product in Spain, offering various modular options tailored to a customer's profile and that of his or her family as well as a health app giving customers 24X7 access to medical specialists. In Japan, we launched a successful new COLI product in November providing coverage to business owners in the event of unforeseen accidents, the need for nursing care or disability. We're seeing growing demand for products that contribute to a more sustainable future. Our asset manager has embedded EST criteria across the whole investment process and offers responsible investment funds such as the recently launched European Sustainable Infrastructure debt fund. In 2018, we saw lower sales in the Netherlands due to a lower volume of group pension contracts that were up for renewal. On the other hand, sales of higher margin businesses in Europe and Japan were up, so despite an overall decrease in total new sales. The value of new business for 2018 was up 13% on 2017. I will now move on to slide number six. On this slide, I would like to briefly recap on our performance in 2018 in terms of the medium term financial targets that we have set for the group as a whole. To start with, we have achieved total expense savings to date of EUR 289 million compared with 2016 full year administrative expense base. So we are well on our way to reach our target expense reduction of EUR 400 million by the end of 2020. The operating result for 2018 grew 3% versus 2017, compared with our target of 5% to 7% annual earnings growth on average for the medium term. Adjusting for non-recurring items in both years, the growth with 7%. Delfin will talk more about the development of the operating units and operating results on a later slide. Let me just remind you that this is a medium target and we expect growth in some years to be higher than others. Finally, we aim over time to generate free cash available to shareholders in a range around the net operating result. In 2018, the free cash flow of EUR 1.2 billion was broadly in line with the net operating results for the year, whereas the free cash flow in 2017 was impacted by capital flows related to the Delta Lloyd acquisition, as well as a deduction for the provision related to ING Australia Holdings. Delfin will go into the details of our free cash flow later in the presentation, So let's not turn to slide number seven. We have today announced that we are proposing a 2018 final dividend of EUR 1.24 per share. This brings the total 2018 dividend to EUR 1.90, an increase of more than 14% on the 2017 dividend per share. This is in line with our guidance of a double digit increase in a dividend per share as 2018 is the first full year of incremental cash flows from the Delta Lloyd acquisition. The 2018 dividend represents a payout ratio of 50% of the 2018 net operating result of the ongoing business. The proposed dividend will be voted on at the annual general meeting of shareholders on the 29th of May. We remain committed to our dividend policy in which we aim for a sustainable ordinary dividend per share. This also means that unless we can deploy excess capital in value creating opportunities that we will look to return that capital to shareholders in the most efficient way. The acquisition of Aegon's life insurance business in the Czech Republic and its life insurance and pension businesses in Slovakia in 2018 is an example of a value creating investment that we believe will strengthen our position and distribution capabilities in these markets. In view of our robust capital position, we have announced that we will execute an open market share buyback program for a total amount of EUR 500 million. We intend to cancel all of the shares acquired in this program. This share buyback program demonstrates our disciplined capital management as well as our commitment to returning excess capital to shareholders. At the same time, we believe it is essential to maintain a strong balance sheet and the financial flexibility to be able to pursue value creating corporate opportunities going forward. I will now hand over to you Delfin.

Delfin Rueda: Thank you, Lard and good morning everyone. Let me start with NN Group's operating result of the ongoing business for the fourth quarter of 2018. This was broadly stable at EUR 343 million compared with the fourth quarter of 2017. The current quarter reflects a higher technical margin at Netherlands Life, higher results at Insurance Europe and Japan Life as well as expense savings across the organization. Our Non-life business reported an improved combined ratio in both disability on accident and property and casualty. The total combined ratio for the fourth quarter was 96.4%, reflecting the various measures that we are taking to improve performance at this unit, as well as a generally favorable quarter in terms of claims experience. On the other hand, we saw lower results at the holding, mainly due to a nonrecurring charge and a revised method for charging head office expenses to the segments. Lower results were also reported by the reinsurance and banking business and asset management. Please note that our asset management business benefited from 10 million of non-recurrent items in the fourth quarter of 2017. Taken as a whole, the group's operating result for the current quarter includes negative non-recurrent items of EUR 10 million, while the fourth quarter of 2017, including 14 million of non-recurrent benefits. Excluding these items the operating result for the fourth quarter of 2018 is 7% higher than the same period in 2017. The negative net result of EUR 533 million reflect the 852 million impairment of goodwill that Lard mentioned earlier, as well as lower non-operating items and a higher tax charge. Let me remind you that this impairment is a non-cost item that does not have an economic cash or Solvency II input. Moving now to the next slide which shows our full year 2018 results, the full year 2018 operating result of the ongoing business increased 3% compared with 2017 to EUR 1,626 billion. The operating result in 2017 benefited from a total of EUR 104 million of private equity and a special dividend as well as non-recurrent items, while the operating result in 2018 benefited from 38 million of such items. Excluding these items, the operating result increased 7% on 2017. This increase reflects improve results of Netherlands Life, Netherlands Non-life and Insurance Europe and expense reductions as well as the inclusion of Delta Lloyd from the second quarter of 2017, partly offset by a lower operating result at Japan Life. The full year 2018 net result reflects the elimination of goodwill as well as higher special items relating to restructuring expenses and other projects. The not operating items mainly relate to capital gains on the sale of debt and equity securities as well as the reevaluation of real estate. Before we move on to the next slide, let me mention that we will be changing our segment reporting as from the first quarter of 2019 to include the banking business as a separate segment and moving Japan Closed Block VA into the segment other, as well as some smaller reclassifications. The impact of these changes will be reported in our pro forma financial supplement based on the new segmentation that we will publish on our website tomorrow. On Slide 11, I will talk about the expense savings. As Lard mention, we aim to review the administrative expense base for all the business units in the scope of the integration by EUR 400 million by the end of 2020. Compared with a full year 2016 expense base, we have already realized a total cost reduction of EUR 289 million representing around 72% of the total targeted cost savings. While we continue to make good progress, please bear in mind that the more complex parts of the operational integration are still ahead of us. This means that the expense reductions will not be linear and that some units may at times see expense increases to support growth and make necessary investments. On the next slide, I will like to talk about our cash capital position. The holding company cash capital increased to just over EUR 2 billion at the end of the fourth quarter of 2018 from 1.9 billion at the end of the third quarter. The free cash flow during the fourth quarter was EUR 329 million, driven by EUR 463 million of dividends from subsidiaries. This was partly offset by capital flows comprising own shares repurchased for an amount of 147 million, as well as the amount paid to terminate warrant agreement with IMG Group of 26 million. Total free cash flow for 2018 was over EUR 1.2 billion. Total dividend received from subsidiaries amounted to almost EUR 1.6 billion. This was partly offset by 298 million for holding company expenses, interest on long-term debt and other holding company cash flows and 78 million of capital injections. Total capital flows to shareholders in 2018 amounted to EUR 645 million. Details of the dividends upstream by segment this quarter can be found as usual in the appendix of this presentation. On a Slide 13 and 14, I will take you through the development in NN Group's Solvency II ratio. NN Group's Solvency ratio was 230% at the end of the fourth quarter, down from 239% at the end of the previous quarter. This ratio reflects the deduction of the proposed 2018 final dividend of EUR 415 million that we announced today and which will be paid in June, as well as the termination of the warrant agreement. Excluding these items, the solvency ratio was 237% at yearend 2018. The operating capital generation for the fourth quarter added six percentage points to the ratio. On the other hand market variance lowered the ratio by seven percentage points mainly as a result of negative equity revaluations. The category other reflects the expansion of the Partial Internal Model which positively impacted the ratio through our lower SCR. This was more than offset by the impact of the reduction of the corporate tax rate in the Netherlands, which negatively impacted the ratio through a lower DTA in Own Funds and higher SCR. Economically of course, the lower corporate tax rates will be positive resulting in higher capital generation and profits over time. Let's turn to the next slide for the full year movement. The Solvency II ratio was 199% at the start of 2018 and increased to 230% at the end of the year. The total operating capital generation in 2018 was EUR 1.4 billion, of which around 1.2 billion was the growth of Own Funds and around 300 million the decrease of the solvency capital requirement. This added 23 percentage points to the ratio. Market variances had a positive contribution to the ratio of 20 percentage points, mainly reflecting the favorable impact from movements in credit spreads, as well as positive real estate revaluation. This was partly offset by equity movements and movements in interest rates. Capital flows represents the 2018 interim and final dividends, as well as the impact of the termination of the warrant agreement with IMG last November. Finally, as you know the legal merger of Delta Lloyd Life into NN life was executed at the 1st of January this year. And so we'll report just one ratio for NN Life as from the first quarter of 2019. To give you an idea of the combined ratio of these two entities at the end of 2018, the simple some Solvency ratio of NN Life and Delta Lloyd Life after the legal merger on 1st January 2019 is estimated at 231%. And with that I will pass you back to Lard for wrap up.

Lard Friese: Thank you, Delfin. Looking back on 2018, NN Group has delivered a solid financial performance posting healthy operating results and further increasing efficiency throughout the organization. We achieved the number of important milestones in the integration of Delta Lloyd with the approval of the expanded Partial Internal Model, the completion of all the legal mergers and the rebranding of products and services to Nationale-Nederlanden. One of our priorities is to maintain a strong capital position and this has enabled us to propose a final dividend for 2018 of EUR 1.24 and to deliver on our aim for a double digit increase of the 2018 dividend per share. We've also announced the 500 million share buyback program to be executed over a period of 12 months showing our commitment to our dividend policy of returning excess capital to shareholders unless it can be used for value creating corporate opportunities. Going forward, we will continue to focus on executing our strategy of successfully integrating Delta Lloyd, further improving performance, accelerating the transformation of the business model and continuing to allocate capital rationally. I will now open the call for your questions.

Operator: Thank you, Mr. Friese. Ladies and gentlemen, we will not start the question-and-answer session. [Operator Instructions] And the first question is from Mr. Ashik Musaddi, JP Morgan. Go ahead please.

Ashik Musaddi: Hi, good morning Lard. Good morning Delfin. I have a few questions. I mean, first of all, thanks a lot for the dividend and the buyback I think, it's all going as per plan, but well done. Just on dividend outlook now, basically, now, if I think about your dividend, you've increase the dividend by 15%, you have done the buyback which is around 4%. So it looks like the natural progression for DPS growth is at least 4% for 2019. So what would you say on that? I mean, do you plan to maintain a flat dividend cost or any thoughts on dividend that'd be great. Secondly, if I look at the capital generation, the organic capital generation before holding company cost, 2018 was very strong at around 23 percentage points which is slide number 14. Any thoughts on what the normal level should be or is this you reckon a more normal level? And third one is in terms of remittance the Dutch Life remittance, can you give us some guidance on that because now it's a legal entity and you still have a strong Solvency around 230% in Dutch Life. So any thoughts on what the remittance and the limitance some Dutch Life should be? Thank you.

Lard Friese: Thanks Ashik for your questions. I will hand over to Delfin for the answers.

Delfin Rueda: Yes, thank you Ashik for your questions. The dividend increase in 2018 was already announced to be double digit because of incorporating for the full year the benefits of the integration of Delta Lloyd. It will be a little bit too much of a boost to assume a continuous growth of double digit going forward as our capital generation and the free cash flow generation is more or less in line. In the medium term expected to be similar to the net operating result. And we gave the guidance over time somewhere between 5% and 7%. But obviously, the objective is to continue with a stable growth of the dividend and any decision on the dividend we'll be taking according to their circumstances at that time. Capita generation, indeed, I concur with your assessment that it was strong at 23% and the question about how to normalize it is always a difficult one because as you know, the operating return on the Solvency II is influenced by several aspects, the business performance, the financial markets, the assumptions, additionally changes in tax rates, the UFR as well as the level of interest rate impact the operating capital generation. I think, however, if you take a step back and you look for the full year 2018, this 23%, which excluding the impact of the storm was 24%. You can also look at the last six quarters since the acquisition of Delta Lloyd and then it was 35 points increase over the six quarters with a relatively stable over that period. And even when I look, from the start of Solvency II since January 2016, capital generation there was 57 points or 52 points excluding the cost of the qualifying subordinated debt. The point I'm trying to say is that although you cannot predict already, we have quite few quarters on which as you can see that model is that has been certainly stability on this. So going forward, I think it's again the volatility we will maintain and maybe just a few comments, one about the Japan Closed Block VA runoff that that you know that after - we still expect a small release in 2019, but not material contribution later. Also of course our effort to improve and grow our business is supposed to lead to improvement in the free cash flow generation. Elements like the decrease of the UFR also increases the operating capital generation going forward, but this is just an example of the different elements that are changing every quarter. In terms of remittances from Dutch Life, there was an increase in the dividend coming from the Dutch Life business from the normal 150 million to 175 million to reflect the increase capacity capital generation coming from the segment. And as you have seen, we have maintained a stable dividend of 175, per quarter. I think that the best guidance is that we will maintain stable dividends from the unit also based on the strong capital solvency.

Ashik Musaddi: Yeah, but if I look at the Dutch Life dividend for 2018, it was 837. So, what's the difference between 175 times four with a 700 and 837?

Delfin Rueda: Yes, in 2018, there was some dividends coming also from ABN AMRO and that it was not - you cannot just assume as being our current amount going forward. We will of course expect some dividends coming from also ABN AMRO, Life joint venture, but not to the same level.

Ashik Musaddi: Okay, thank you. That's very clear.

Operator: The next question is from Mr. Matthias de Wit, Kempen. Go ahead please.

Matthias de Wit: Hi, good morning. Two questions as well please. First of all, on M&A you mentioned in the press release that you want to maintain financial flexibility for opportunities. Can you confirm whether or not these include divest [ph] please and just linked to that if you were to finance large acquisitions or any acquisitions, could you use the excess capital sitting in the Netherlands for those either through special dividends or through acquiring directly from the level of NN Life. And then just second question on asset management, we've seen a quiet strong decline in fee margins during the quarter to I think an all-time low now. Is that expected to continue, the pressure you see on the fee margins? Or are we approaching a level you consider sustainable? Thank you.

Lard Friese: Yes, hi, Matthias. Good morning. I'll take both questions. So first on M&A, I will not comment on particular names. What I can say is that in general, we are always open to opportunities if they present themselves, especially with the priority of markets where we already have a presence and M&A is a matter of opportunity and discipline. And both are very important to ensure that we take that into account. We do want to have financial flexibility for that, obviously if these opportunities are there and they will assess them at their own merits .When it comes to NNIP - the margins, what you see happening over the last year at the asset manager is a couple of things. First of all, the asset managers don't have standing job and integrating Delta Lloyd asset management quickly. That's been done and they've concluded that in a good manner. Secondly, you can see that there are lots of - expense reductions have taken place as well where the asset manager has been confronted like the entire industry with fee pressures and they have been able to withstand that by making sure the platform as a whole is more efficient. The second thing - the third thing I would like to mention is that also the cost that need to be absorbed as a result of the MiFID, so research costs, a result of MiFID regulation has also been absorbed. So please take that into account. If you look at the entire context of the industry, it's been a difficult year for the entire industry. What I find actually quite encouraging is in the fourth quarter we saw that third party net flows were flat. So the outflows that we saw early in the year with a combination of risk off or other investor considerations, but also combined with some investor considerations about concentration of mandates when moving - when integrating Delta Lloyd and NNIP, we see that in the fourth quarter third party was stable and that's good. We've launched a new plan as you know for the coming year, so we focus on building out commercial momentum as specific strategies. And we're going to continue to do that. We also need to note Matthias that in Q4 '17, we had of course a 10 million number that was the performance fees related to Delta Lloyd funds that we flagged at that point in time as a one off, which you in the comparable quarter don't see back for the last quarter of 2018, as these funds have been integrated. The margins for the future as we know in the industry will remain under pressure, so the focus on efficiency is going to be - is going to continue

Matthias de Wit: Okay, thank you. And maybe just on the possible financing of acquisitions through NN Life by using the expense, is that something you consider realistic or not at all?

Lard Friese: We maintain in general our flexibility for opportunities if they present themselves and if they adhere to the strict financial and non-financial criteria that we have.

Matthias de Wit: Okay, thank you.

Operator: The next question is for Mr. Cor Kluis, ABN AMRO. Go ahead please

Cor Kluis: Good morning, Cor Kluis, AMRO. Couple of questions, first of all the Solvency II ratio developments from the beginning of this year, given the fact that interest rates have been coming down somewhat and corporate credit spreads of course come in somewhat. So is right there that this market effect would have some negative effects on the Solvency ratio too. Could you give an indication how large that market effect has been year-to-date? And the second question is on the dividend from the bank. I think if I read it correctly that in 2018 you only have strength in Q2 EUR 8 million from the bank and the bank makes almost EUR 100 million profit. Good Solvency ratio and the [indiscernible] growing at 2%. So why not up streaming more capital from the bank and if you have not yet done that, maybe put it into a little bit on what you think about up streaming of capital from the bank in 2010 and '19. And my last question is somewhat M&A related whatever case might come on the table, if the case will be a little bit larger would there be a chance that you put a pause on the 500 million share buyback or do you feel comfortable with the cases that you have on the table that the 500 million can be fully executed as you've mentioned today? Those were my questions.

Lard Friese: Yeah. Thanks, Cor. So let me take the third question then Jan-Hendrik, can you do the first and then Delfin, the second question, so first on the on acquisitions. Well, we've said in the press release that we maintain financial flexibility to do acquisitions if an opportunity arises and we have - we also maintain the flexibility to stop or pause a buyback if we would go for very large M&A, but it's all speculative. So let's say - yeah, I don't have much to add to that to be honest, so Jan-Hendrik over to you.

Jan-Hendrik Erasmus: Thank you Lard. Good morning Cor. There are some things that we'll see in the Q1 ratio that we already know. The first is the reduction of the UFR to 3.9%, which will have a 4% negative impact on the ratio in line with our sensitivities. There's also the buyback, which will come out of the ratio in 1Q '19, which you can work out the impact is going to be around seven points. And then EIOPA published an update of the VOLA reference portfolio as well, which will also be a small negative. And on top of that, we saw - you're correct, the markets we saw equities increasing, corporate brand spreads tightening and we've also seen a reduction in rates and also a bit of steepening, all of which if you look at our sensitivities will be negative as I think you would expect.

Cor Kluis: It's somewhat indication on the market effect than exercised percentage wise?

Jan-Hendrik Erasmus: Yeah, it's a little bit too early to say. But I think if you look at the sensitivities, those are the best guide inside I would give on that, so where they are moving very much in line with the sensitivities.

Cor Kluis: Thank you. Sorry, the dividend on the bank.

Jan-Hendrik Erasmus: Yes, the dividend on the bank, so Delfin please.

Delfin Rueda: Yes, Cor. The dividend of the bank indeed - let's don't forget that the bank is only if I'm correct only eight years old. So it was founded in 2011 and basically it has gone first into breakeven, then increasing their profitability quite well, then 8 million of dividends in the second quarter of 2018 going forward. We do indeed expect some dividends coming from the bank and depending on their growth and other characteristics, I think what I would say is to expect some modest dividends coming from the bank going forward, including 2019.

Cor Kluis: Thank you very much.

Operator: The next question is from Mr. Johnny Vo, Goldman Sachs. Go ahead please.

Johnny Vo: Good morning, everybody. Thank you very much for the questions. Just the first question, now that the lead legal merger has been done, can you give us an update of the guidance of the cash buffer you want to keep at the holding company? I think previous guidance was 0.5 to 1.5, so where is that number today? And the second question is just in terms of like the gross debt and leverage ratio, I mean if I pro forma the leverage ratio for the final dividend plus the buybacks and you're not too dissimilar from where you were in 2017 post that Delta Lloyd deal, a little bit better off, but not that drastically. So is there a plan to reduce gross debt or will be deleveraging come through growth in shareholder's equity? Thank you.

Lard Friese: Yeah, thanks Johnny. Delfin, can you take both questions actually?

Delfin Rueda: Yes, I think the - hi, Johnny. The first question on the guidance on the cash buffer stays the same between 0.5 and 1.5. When we introduced the guidance, we did it in such a manner in order is relatively a wide range, but we did it with the eyes wide open with the idea that this should be suitable for different circumstances depending on the level of solvency of the subsidiaries. So basically the guidance is unchanged. In terms of the question on the amount of debt, I think that is very important to just take into account not only - not to focus too much into leverage ratio because as you said, at the time that we did the acquisition of Delta Lloyd, we originally increased our level rates by 2.5 billion, but however, the fixtures ratio increase from 2016 to 2017 from 12.8 times to 13.5 times. So I think it's always very important to take into consideration the capacity to cover your interest and just to give you an indication, currently our total debt is basically - has a cost of weighted average of 2.2% after tax. So I think that this is a quite low certainly in comparison to the cost of capital. Our financial leverage as has been indicated by many different factors is a strong which actually doesn't come as a - the conclusion for that is that we should not reduce the amount of leverage because financial capability is there and the cost of debt is relatively moderate. Also keep in mind is that since the acquisition of Delta Lloyd, we reduced already by close to EUR 1 billion immediately following the acquisition and next year we have 300 million that will mature senior debt in June, so gradually that will increase.

Johnny Vo: So you're targeting another 300 million debt reduction?

Delfin Rueda: 300 million is the senior debt in June next year that mature and currently our plan is not to refinance that, so that will result in a reduction off leverage by 300 million.

Johnny Vo: Okay, thank you.

Operator: The next question is from Mr. Robin van den Broek, Mediobanca. Go ahead please.

Robin van den Broek: Yes, good morning, everybody. Thank you for taking my questions. I would like to come back on the capital generation, Delfin, you mentioned that the 23 percentage points that you consider as a sustainable rate. But I was just wondering about the moving parts, because you mentioned the Japan Closed Block VA contribution will drop, so the 0.3 reduction of SCR is more likely to go down to [indiscernible], 100 million maybe a year on the back of the individual Life drop in the Netherlands, but that does include a multiplying effect to get to the 23 percentage point capital built. So it seems to me that that 23 percentage points should actually come down and I appreciate that the corporate tax and UFR will probably increase your Own Fund generation maybe for 1.2 billion to 1.3 billion a year. But still if I if I look at the math I would say that the 23% point is a bit on the high side going forward, so your commentary there would be appreciated. Then on the Dutch remittances from Life, I guess the consistency in getting a similar number out every quarter is something that makes it very easily manageable from a regulatory point of view. But I think you did mention before that your - yeah, the cash taken out from Life should be higher than the net operating results, but 700 million seems to be basically in line. So when is the natural point for you to step that rate up now, so now that the legal merger is there, is that something you're thinking about shorter term or are you sticking with the 175 for now? I was also thinking about the Japan business dividends last year you excluded that. This year should come back any visibility on what kind of number we can expect. And lastly on the combined operation ratio I think a very good progress this year, Q4 even below the 97% that is targeted. I'm just wondering how sustainable you think that is, how many efforts do you still have on the planned debt to come through and then yeah, what kind of shorter expectation can we expect on the back of that? Thank you.

Lard Friese: Thanks, Robin, quite a number of questions. I will take the last one and I'll ask Delfin to take the other questions. So on the Non-life company. Yes, the combined ratio that we printed this morning for the total Non-life company is 96.4%. What I find encouraging is that we now see - of course the storm that we had in January is part and parcel of our business. So don't get me wrong, but if you want to look at the - to what extent the measure that you were taking are taking effect you kind of need to look at the underlying without the storm. And then I'm seeing five quarters on a row where our combined ratio is improving. And that is encouraging as we aim to implement the measures - the range of measures that we announced at the Capital Markets Day at the end of 2017. It's a combination of many measures as you know, underwriting, price increases where necessary and also expense reductions. And we've reduced as you know, for this year 2018, about 18% of expense reductions, where we target to reduce expenses on the Non-life company with 20%, 25% of the full year '16 cost base, 481million by the end of 2020. So there's still room to go on the expense saving side that's one thing and secondly, we aim of course to continue to improve the underwriting results. So bottom line, pleased with the progress that we're making, quite a number of quarters on a row, more to come. The key thing here is that our target is 97% or below And the important thing I always say is we need to make sure it's something that is sustainable, it's a real capability that we need to build to ensure that we have a structural improvement of the Non-life results. I can dig deeper if you want, but for now I'd like to keep with this.

Robin van den Broek: Yeah, maybe just a short follow up, so basically we should look at this from 97% is in a bad year and better - if it's a normal year it should actually be -

Lard Friese: We look at this that 97% or below as our target. We aim to structurally improve the profitability of this business. We are taking a lot of measures to do that, also making sure we're building capabilities around pricing, analytics and stuff like that. So this is a program that we've announced a while back and we'll continue to drive home. Then on the other questions Delfin, can you be so kind as to take us one by one.

Delfin Rueda: Yes, thank you very much, Robin. So in terms of the 23% capital generation if it is sustainable, you are right, indicating that the Japan Closed Block VA - and actually we have indicated that several times, we are still have some run off, helping both the SCR and some release of the surplus capital coming through 2019 and then , that will decrease significantly. But also keep in mind that the reinsurance business will continue contributing some contribution to the capital generation. But there are also quite a few other things that still remain positive, the runoff of the Life, individual Life business continues, we have seen over the last quarters and we expect that to continue a positive impact in improving the excess return due to the gradual shift towards higher yielding assets. The UFR has decreased and [indiscernible] although the Own Funds has been decreased due to that UFR track is lower and the operating return will continue. But also and I think even more important is that we are not staying still and we are improving the performance of the group and that is coming not only through the Non-life business, but also we have as you have seen in the evolution of the value of new business, very positive evolution both in Europe and Japan, so all those elements needs to be taken into account. We have however, as a policy, we don't try to give forward looking expectations of how this is going to evolve and we tend to be cautious because of the volatility that entails, but I think I'd mentioned a few more positives and negatives.

Robin van den Broek: It's very clear document, maybe one follow up because the SCR drop will reduce, right? So when you look at 23 percentage point contribution for the Solvency II ratio, there is basically a multiplier effect on that because it's the denominator and the numerator and I think your positives are more on the numerator side than on the denominator side. So yeah, I think it's very supportive what you say, but I'm just wondering if these positives on the numerator side are enough to offset that.

Delfin Rueda: Yeah, I think they are more than enough to compensate that. I think this multiplier with SCR has been a bit exaggerated. So I think the evolution of the Own Funds are very important even if the SCR were to decrease. Also keep in mind that when the SCR grows it's also because we are writing new business that even in the same quarter or later on will continue to contribute with additional Own Fund generation. Maybe moving to your second question on the remittances, maybe I will point to the pro forma combine solvency ratio at the end of the year for the Netherlands - for NN Life of 231%, so that I believe give some room in order to maintain some stability within the dividend, but as I said before we will just look at the amount of dividend according to their circumstances as they come. Japan Life, you are right. I can confirm that in 2018 this was a special year for Japan Life because of particular Japan GAAP adjustment that was required to do on the receiving end, but otherwise we do expect that to come and distribute dividends. In terms of the amount us for the other units we prefer not to be specific.

Robin van den Broek: Okay. Thank you very much.

Operator: Next question is from Mr. Farooq Hanif, Credit Suisse. Go ahead please sir.

Farooq Hanif: Hi, everybody. Thank you very much. Just going back to Johnny's earlier question on hold code [ph] cash. I get that you don't want to change the target. But when you do a one in 20 year stress test now, do you find the number is lower or higher than where you were in 2017 pre the merger? And the second question is again I guess on economic capital, with spread widening and the introduction of Delta Lloyd into the Partial Internal Model, presumably your dynamic VA impact in Solvency II will be much larger than it was disclosed last year and I was wondering if you could give us some - a picture of how much that is and whether I'm right? Thank you.

Lard Friese: Yes, Farooq. So gentlemen, you're taking the first one Delfin and then Jan-Hendrik, you take the second one. So Delfin please, over to you.

Delfin Rueda: So hey, Farooq. Sorry the microphone was not on, so good morning Farooq. On the whole company cost, we indicated of course that after one in 20, once we merge the legal entities we would have some benefit on being on the lower range. But please keep in mind that because of the very positive evolution of the Solvency of Delta Lloyd Life at that time benefited - was ready obtained, so there is not a big change as you know from the level at the end of 2017.

Lard Friese: Jan-Hendrik, for the second question.

Jan-Hendrik Erasmus: Hi, Farooq. The first thing to say about the dynamic VAs that of course doesn't affect the Own Funds at all. In that case we just use the EIOPA disclosed VOLA and so we're really talking about the SCR here. And you're right when we expanded the scope of the internal model of course we also expand the scope of that mechanism, so you will see an increase roughly proportional to the size of the business that is now included within the scope there.

Farooq Hanif: You're able to - sorry to - you're probably not going to answer this, but what is that percentage increase roughly?

Jan-Hendrik Erasmus: You could just look at the relative size of the liability and asset books and I think that estimate will be as good as any I could give you now. I mean, the whole point here is that is, of course, part of our approved internal model with DMV. And what you see is that the Dynamic VOLA is in fact an offset of what the VOLA would be in stress scenario. So it is a - it's all part of an integrated model and I really think, the key point is that there's no change here. This is a model that we had before. It's a slight expansion of it and also the Own Funds are untouched by this mechanism.

Farooq Hanif: Okay, that's perfect. Thank you very much.

Operator: [Operator Instructions] And the next question is for Mr. Albert Ploegh, ING Bank. Go ahead please.

Albert Ploegh: Yes, good morning. A few questions left, one is that I mean, one of the other Dutch peers this morning announced the charge related to some - mortality ellipse assumptions in the in the Dutch business, so can you maybe comment on how you look at that and what he already refute your own assumptions also with Q4? And the second question, coming back a bit to the Non-life business which need very encouraging trends, so looking at 2019 in terms of the growth within premiums, yeah, what is your best estimate currently in terms of growth? Because I guess you're still pruning also some portfolios putting forward to price increases over the net-net fees on some low single digit growth possible or is that still too early given where you are in the whole optimization of that business line? Thank you.

Lard Friese: Yeah, so let me take the Non-life piece and then Jan-Hendrik, can you do the mortality discussion? So on Non-life what we've seen actually in gross written premium for 2018 as a whole, we actually saw it sort of moving slightly up and that is the combination obviously of many things right? So yes, we do call product lines where we believe that through the cycle we - we're not the right - we shouldn't offer that any longer. There are price increases and rate increases which of course create a higher gross written premium, at the same time it also depends on the lapse that you have on the contracts that leave your book. So far that that has been good and flattish type of trend overall, so for 2019 we do not expect much difference in the approach that we're taking there. We're just continuing with the approach that we've seen so far. Then over to you Jan-Hendrik for the mortality.

Jan-Hendrik Erasmus: Thank you, Lard. Hello Albert. Yes, we did update our assumptions in the fourth quarter. It's nothing special just our regular assumption review process and we did also see in 2018 quite a few mortality tables being published and we did have a small update and our assumption reflects the latest available information and our own experience and broadly a neutral for the Dutch life businesses.

Albert Ploegh: Okay, thank you for the clear answer.

Operator: The next question is from Mr. Bart Jooris, Degroof Petercam. Go ahead please.

Bart Jooris: Yes, good morning. Most of my questions have been asked. Could I just get some additional comments on, is there a specific reason while there are no private equity dividends this quarter and should we see some kind of a catch up in the first quarter of this year?

Lard Friese: Delfin?

Delfin Rueda: Hi, Bart, the short answer is no, no special reason; private equity volatile so no particular reason.

Bart Jooris: Okay, thank you.

Operator: The next question is from Mr. Farooq Hanif, Credit Suisse. Go ahead please sir.

Farooq Hanif: Hi, there, sorry just one follow up question. Can you give us some guidance on the tax rate given the changes that are going on in the Netherlands, I mean on an IFRS basis? Thank you.

Lard Friese: Thanks Farooq, Delfin can you do it?

Delfin Rueda: Well, I mean the corporate tax rate has been announced and agreed that will decrease to 20% to 50%, 55% in 2020 and then it will decrease to 20.5% in 2021. And as I think I mentioned before, this had a negative impact in our Solvency, but obviously that will result into lower tax charge going forward, so I think that's a positive change.

Farooq Hanif: So we can broadly use these numbers with an adjustment for other territories, is that how we should model it?

Delfin Rueda: Yeah, so I think - keep in mind that the effective tax rate in the Netherlands has always been relatively lower than 25 because of the investments because some of them are tax sent for the gains. And the investment portfolio on equity above 5% is relatively high, but indeed proportionally for the Netherlands it will reduce it by a four point percentage by 2020.

Farooq Hanif: Thank you very much.

Operator: The next question is from Mr. Ashik Musaddi, JP Morgan. Go ahead please.

Ashik Musaddi: Yes. Hi Delfin, hi Lard, just one follow up question on M&A. Now if you want to think about like any M&A potential in Holland, I mean, would you have a wish list like you want to do in DNC, you want to do an individual life any thoughts on that end? And where would you be restricted to do M&A because of the market share in Holland? I'm just talking about Holland, nowhere else. Thank you.

Lard Friese: Don't forget Ashik that - please may I remind you that we took a very important step in the consolidation of the industry in 2017, very willfully as you know and we're very pleased with the acquisition that we've done because we believe we have a very strong platform. So whatever consolidation will happen in the Netherlands, we have an outstanding strategic position to start with and we fully focus on integration benefits from that business. Now in general, anywhere else we are - so everywhere we're looking for opportunities if they are presenting themselves and with a priority on markets where we have a presence and obviously in those cases as we assess them at their own merits, antitrust considerations are always a part of that.

Ashik Musaddi: Okay, just one question, I mean, would there be any restrictions on any businesses? I think because, for example, in group pension, you can't do that because you already have 30%, 35% market share. Any areas where you have restrictions?

Lard Friese: Well, those are considerations that we would take if an opportunity like this is in front of us and if we are evaluating that opportunity. Let's say these considerations are not just one restriction, you need to think through how that would evolve. It's a more complex consideration you need to take there.

Ashik Musaddi: Okay. Sure. Thank you.

Operator: There are no further questions. Mr. Friese, back to you please.

Lard Friese: Yeah, thank you all for being on this call and for asking your questions. Now, before we end the call. Let me just conclude by saying that we have achieved a lot in 2018 both in terms of financial performance and in the progress that we made to integrate Delta Lloyd. We will continue to focus on delivering on our strategic priorities and on creating long-term value for all our stakeholders. I wish you all a pleasant day.