Good day and welcome to Aegon's second quarter 2022 results conference call for analyst investors. Today's call is being recorded. At this time, I would like to turn the conference over to Jan Willem. Please go ahead, sir. Thank you, operator. Good morning, everyone. Thank you for joining this conference call on Aegon's second quarter 2022 results. Before we start, we would appreciate it if you could take a moment to review our disclaimer on forward-looking statements, which you can find at the back of the presentation. With me today are Aegon's CEO, Lard Friese, and CFO, Matt Rider. After a brief update on our results by Lard and Matt, we'll open the floor to Q&A. Let me give the floor to Lard. Thank you, Jan Willem, and good morning, everyone. The first half year of 2022 was challenging for investors, with equity markets experiencing their worst start of the year in over five decades. Volatility remained as the war in Ukraine continued and central banks increased interest rates to curb rising inflation. Against this challenging backdrop, we performed well, a testament to the strength of our strategy. Despite the impact from lower equity markets, our second quarter operating result was strong. This reflects the receding impact of COVID-19 and the progress we are making on our operational improvement plan. We delivered further savings and continued to build on our growth initiatives. In our strategic assets, we maintained commercial momentum, even in a challenging market environment. Aegon's net result was impacted by a one-time charge due to reinsurance rate increases in the United States. Nonetheless, we remain on course to deliver on our objective of growing returns to our stockholders. Our balance sheet is strong, with the capital positions of our three main units above their respective operating levels. Cash capital at the holding stands above the operating range. Together with the growth in free cash flow, this is a solid basis to raise the interim dividends to EUR 0.11 per common share. We also continue to make progress on our approach to sustainability. As part of our efforts to contribute to a climate neutral world, Aegon Asset Management partnered in the launch of a $600 million venture to acquire multifamily dwellings and transition them to low carbon, energy efficient buildings in the U.S. In the recent months, we moved over GBP 3 billion of assets from our U.K. customers into strategies that consider ESG credentials. This is part of the commitment to achieve net zero carbon emissions in the default investment options of our U.K. pension administration platform by 2050. Based on the progress we have made on our transformation so far, we are comfortable increasing our expectations for cumulative free cash flow over the period 2021-2023 from a range of EUR 1.4 billion-EUR 1.6 billion to at least EUR 2.2 billion. We are also raising our expectation for operating capital generation in the units for 2022 to around EUR 1.4 billion. Let us move to slide three. You can see that we continue to progress with the execution of our operational improvement plan. We have now implemented 1,558 out of more than 1,200 initiatives as part of this plan. Just in the last three months, we finalized about 120 initiatives. Expense initiatives resulted in a reduction of our annual expressible expenses of EUR 250 million in the trailing four quarters. We continue to experience inflation headwinds, but so far we've been able to absorb these and further reduce our expense base towards our goal of EUR 400 million expense savings. I remain confident that we will reach this target by 2023. We are also increasingly seeing the benefits from our growth initiatives. The 240 growth initiatives that have been executed so far have had a positive impact on our operating result. Over the trailing four quarters, growth initiatives contributed EUR 215 million to the result. We will, of course, maintain an intense execution rhythm to further implement our operational improvement plan in the coming quarters. Let's turn to slide four to discuss the progress of our U.S. strategic assets. In individual solutions, we have the ambition to regain a top five position in selected life products over the coming years. As you can see, new life sales increased by 12% compared with the second quarter of last year. This was supported by the World Financial Group distribution channel, which benefited from a 12% growth in the number of licensed life agents compared with last year. In the retirement business, Transamerica aims to compete as a top five player in the new middle market sales. Written sales were approximately $850 million this quarter, while net deposits for the middle market increased to $467 million, benefiting from strong written sales in prior periods. We have further expanded our suite of financial wellness solutions in the workplace business by introducing a product called Emergency Savings Account. The product enables employers to help their employees save for unexpected events and improve their financial well-being. When we turn to slide five, we're looking at the performance of our Dutch and U.K. strategic assets. In the Netherlands, we are market leaders in both mortgage origination and defined contribution pensions, and continue to attract new customers. Mortgage sales amounted to around EUR 2.4 billion, a decrease compared with last year due to reduced financing activity in the market and increasing mortgage interest rates. Nevertheless, mortgages under administration continued to grow, increasing over EUR 3 billion compared with last year to almost EUR 62 billion. We also continue to consistently grow our workplace business. Net deposits for defined contribution pension products amounted to EUR 191 million in the second quarter of 2022, which is nearly on the same level as in the prior year quarter. Moving on to the United Kingdom, we saw the platform business generated net deposits of GBP 317 million across the workplace and retail channels. Net deposits on the platform positively contributed to revenues, but were more than offset by revenues lost from the gradual runoff of the traditional product portfolio. Expense savings initiatives offset the impact from market movements on assets under administration, leading to a stable efficiency ratio of the platform. On slide six, we see that our asset management business saw third party net outflows on the global platforms amount to approximately EUR 800 million, reflecting the challenging market conditions. Continued net deposits into the Dutch Mortgage Fund were more than offset by outflows in other asset classes as we saw customers freeing up liquidity in a rising interest rate environment. The operating margin of global platforms decreased by around 2 percentage points to approximately 12%. On a constant currency basis, lower revenues due to adverse market conditions more than offset expense savings. Our strategic partnerships in asset management continued to perform well with net deposits of more than EUR 1.1 billion. Performance fees normalized from their exceptional high level last year. This is why you see the operating result from strategic partnerships decrease to EUR 36 million. In our growth markets, Aegon is investing in profitable growth. New life sales from these markets increased by 5% to EUR 55 million, and non-life sales grew by 8% to EUR 31 million, both mainly due to sales growth in the bank insurance channel in Spain. In summary, we've performed well against a challenging backdrop, which is a testament to the strength of our strategy. Matt will now talk you through our financial results for the second quarter in more detail. Matt, over to you. Good morning, everyone, and again, welcome, and thank you for joining us. Let me start with an overview of our second quarter financial performance on slide eight. As you can see, Aegon's operating result decreased by 11% on a constant currency basis to EUR 538 million. Lower fees, in part due to adverse market movements and lower investment income, more than offset the benefits from favorable claims experience, growth initiatives, and expense savings. Addressable expense savings for the trailing four quarters totaled EUR 250 million compared with the full year 2019 expense base. Operating capital generation before holding funding and operating expenses was strong at EUR 391 million and included net favorable claims experience. The decrease in operating capital generation versus last year reflects the impact of actions we have taken to both release capital and improve our risk profile. These actions have led to an improvement in the quality of our capital generation and support the growth in free cash flow to EUR 318 million. Cash capital at the holding decreased only slightly to EUR 1.7 billion, despite the more than EUR 500 million in cash that we spent on deleveraging and the first tranche of the share buyback program during the quarter. We have reduced our gross financial leverage to EUR 5.7 billion or EUR 5.4 billion based on a euro-U.S. dollar exchange rate of $1.20, which is the rate at which we set our deleveraging target in 2020. This means that we have reduced our gross financial leverage to within the range of EUR 5 billion-EUR 5.5 billion, the target that was set to be accomplished by 2023. Our balance sheet remains strong with the capital positions of all three of our main units remaining above their respective operating levels. The group Solvency II ratio increased by 4 percentage points over the second quarter to 214%. Turning to slide nine, we saw the second quarter operating result come in at EUR 538 million. Lower results in the U.S. and asset management were partly offset by increases in the contribution from other units. A 16% decrease in the operating result in the U.S. was driven by lower fees due to adverse market movements and outflows in the U.S. variable annuity business. Claims experience in the second quarter was favorable and broadly in line with last year. Mortality claims experience was a favorable EUR 5 million in the quarter. This included EUR 10 million adverse experience related to deaths that were directly attributable to COVID-19. This is more than offset by favorable experience from other causes of death. Next to that, favorable morbidity experience in the long-term care book amounted to EUR 27 million. This included the release of the remaining incurred, but not reported reserve of EUR 16 million. In the Netherlands, our operating result benefited from provision releases in the non-life business. This was driven by both an exceptional level of recoveries and a low number of new claimants than expected in the disability income business. These items more than offset lower investment income in the bank and the life business, which is in part driven by the sale of corporate bonds to protect our liquidity position in a rising rate environment. Aegon U.K. and Aegon International both performed well. The increase in the operating result of the U.K. reflects a one-time benefit in fee income net of hedging and a reduction in addressable expenses. Growth in Spain, Portugal, and Brazil, as well as favorable claims experience across the region contributed to the 72% increase of the result of Aegon International. Finally, the asset management operating result decreased by 31%, mainly driven by the normalization of performance fees in the Chinese asset management joint venture. The operating result from the global platforms decreased slightly, driven by the impact of adverse market conditions on management fees and lower other revenues, partly offset by expense savings. Now let's turn to slide 10, where you can see that our net result amounted to a loss of EUR 348 million in the second quarter. Non-operating items totaled a loss of EUR 450 million, driven by fair value items and realized losses on bonds. Fair value items were mainly driven by the interest rate hedges for the U.S. variable annuities with GMDB and GMIB riders. This program hedges the economic liability. However, under IFRS reporting, the discount rates for liabilities are locked in, which leads to an accounting mismatch and resulted in a fair value loss as a consequence of the increase in interest rates during the quarter. These hedges continued to effectively protect Aegon's capital position against market movements. Realized losses on bonds amounted to EUR 226 million. These were sold to protect the liquidity position in a rising rate environment. Other charges amounted to EUR 522 million, primarily resulting from EUR 192 million charge from reinsurance rate increases, as well as a EUR 159 million charge for various assumption updates in the Americas. Other drivers included a book loss of EUR 84 million from the sale of Aegon's business in Turkey, and one-time investments related to the operational improvement plan, which added up to EUR 69 million. Now moving on to slide 11. Here you can see the solvency ratios of our three main units ended the quarter above their respective operating levels. U.S. RBC ratio decreased 8 percentage points over the quarter to 416%. The sharp decline in equity markets in the quarter reduced the ratio by 29 percentage points. Furthermore, the previously announced adoption of a long-term implied volatility assumption reduced the R-RBC ratio by 4 percentage points in line with our previous guidance. Management actions partially offset these items in the second quarter. We made updates to the modeling of Indexed Universal Life reserves, which was possible due to a multi-year model enhancement program. This positive impact on the ratio was partly offset by the recapturing of liabilities from cap, from a captive reinsurance company. In the Netherlands, the Solvency II ratio of the Dutch life unit increased to 200%. The increase was mainly a result of a reduction in required capital, including from an update to our internal model and from the sale of bonds to protect our liquidity position in a rising interest rate environment. Market movements had a neutral impact as the negative impact from higher spreads was offset by a positive impact from interest rates and other market movements. Interest rates had a more favorable impact than our sensitivities would have suggested. This is the result of the magnitude of the interest rate increase and cross effects with other market movements. The solvency ratio of Scottish Equitable, which is our main legal entity in the U.K., increased by 1 percentage point to 178%. On slide 12, you see that cash capital at the holding decreased only slightly during the quarter to EUR 1.7 billion, despite the successful completion of our EUR 400 million euro debt tender. Next to that, we executed the first EUR 100 million tranche of our EUR 300 million euro share buyback program this quarter. Gross remittances from our business units and the proceeds from the sale of the business in Turkey contributed favorably, keeping the cash position above the operating range. We will spend part of this cash on dividend payments and buybacks during the remainder of the year. The second tranche of our share buyback is underway, and we announced today that the third tranche is expected to commence in October of this year. Slide 13 shows the results of our financial assets, where we continue to take actions to maximize their value. As we shared with you last quarter, we are now directly engaging with third parties to discuss a potential reinsurance transaction on parts of the variable annuity portfolio. Let me remind you that the outcome of those external engagements and the trade-offs to be made as part of a potential transaction will be weighed against the alternative of continued full ownership and active management of the now de-risked variable annuity portfolio. As soon as we have more to share on the outcome of this process, we will update you accordingly. As part of the ongoing active management of this block of business, we adopted a long-term implied volatility assumption for the valuation of variable annuity guarantees. The adoption of a long-term volatility assumption will better protect Transamerica's capital position against short-term market dislocations. Furthermore, Transamerica is taking actions to reduce the basis risk between underlying investment funds and hedge instruments. To this end, enhancements have been made to our hedging program in the second quarter, which will further increase the predictability of cash flows from the Variable Annuity portfolio going forward. We continued our track record of successfully hedging the targeted risks embedded in our Variable Annuity guarantees. The dynamic hedge program achieved a hedge effectiveness of 98% this quarter. On Long-Term Care, we have progressed well on the in-force management of this book. In the second quarter of 2022, Transamerica obtained regulatory approvals for additional rate increases of $23 million, bringing the value of approvals achieved to $391 million. This means that we have achieved 87% of the $450 million rate increase expectation. Long-term care claims for the second quarter came in at an actual to expected ratio of 75%. This includes the release of the remaining incurred but not reported reserve that was previously set up for delayed long-term care claims. Excluding this release, the actual to expected claims experience for the second quarter of 2022 would have amounted to 88%. Claims experience mainly reflects increased claims terminations as a result of higher mortality, while new claims return to pre-pandemic levels. As you know, our aim has been to turn our Dutch life business into a low-risk cash generator, paying predictable regular dividends. This quarter's operating capital generation of EUR 79 million comfortably covered the EUR 55 million remittance to the holding. To reduce the sensitivity of the ratio to steepening of the interest rate curve at the longer end, NL Life updated its interest rate hedging program in the second quarter. Now let me turn to my last slide. I'd like to briefly walk you through an overview of our achievements since the Capital Markets Day in 2020 that have strengthened our capital position. We have reduced our exposure to financial market risk. We have maintained the capital positions of our three main units and cash capital at the holding above the relevant operating levels despite market volatility. We have reduced our gross financial leverage to within the targeted range a year and a half ahead of schedule. The active management of our balance sheet and the overall progress we have made to transform Aegon allow us to increase our outlook for free cash flow. Barring unforeseen circumstances, we now expect to achieve at least EUR 2.2 billion cumulative free cash flow over the period 2021 to 2023, of which approximately will come in. One-third of it will come in 2022. This is well ahead of the EUR 1.4 billion-EUR 1.6 billion target range that we had provided at the 2020 Capital Markets Day. This outlook is supported by operating capital generation from the units. Operating capital generation benefited from strong business performance, one-time items, and more favorable claims experience in the first half of the year. Following the strong performance in 2022 year-to-date, we now expect to achieve operating capital generation of around EUR 1.4 billion for the full year. This compares to the guidance of around EUR 1.2 billion that we provided at the fourth quarter 2021 results. With that final note, I now pass it back to you, Lard, for the wrap-up. Thanks, Matt. On slide number 16, I'd like to end our brief update by repeating that while uncertainty in the financial markets and economic outlook is expected to remain, we will continue to stand by our customers and help them navigate through the challenging economic circumstances with our expertise and high level of service. I also want to thank our colleagues for their continued dedication, and I am confident that together, we will deliver on our 2023 strategic and financial commitments. I would like to open the call now for your questions, and in the interest of time, I kindly request you to limit yourself to two questions per person. Operator, please open the Q&A session. Thank you. If you wish to ask a question at this time, please press star one on your telephone keypad. Please ensure the mute function on your telephone is switched off to allow your signal to reach our equipment. Again, please press star one to ask a question. We will now take our first question from Andrew Baker from Citi. Please go ahead. Great. Thank you for taking my questions. The first is on, I guess, on free cash flow and dividends. Free cash flow expectations are now obviously significantly higher. Was there any thought of increasing the EUR 0.25 DPS target by the end of 2023? Secondly, just on OCG, be able just to walk through a bridge on your thinking of how you get to the EUR 1.4 billion, obviously second half performance. Really, has anything improved in your outlook for the second half or is it really just a reflection of strong 2P performance? Thank you. Yes. Andrew, thank you very much for your questions. I'll answer the first one and then hand over to you if you don't mind, Matt. Yeah, we're very pleased to see that the strength of our capital positions and the way we run is allowing us to increase our free cash flow outlook and also our operating capital generation outlook for this year. The progress that we have made on strengthening the balance sheet and growing that free cash flow to date has allowed to accelerate our dividend trajectory compared with the expectations that we had at the time of the Capital Markets Day. For 2023, we expect a level of sustainable free cash flows that will allow us to further grow the dividend per share to around EUR 0.25. Matt. Yeah, I'll pick up the operating capital generation for 2022. The way to think about this is in the second quarter, we reported EUR 391 million of operating capital generation. Now that included about EUR 56 million in favorable claims experience and other one-time items in the U.S. and in the Netherlands. If you deduct that, it gets you to a clean number for the quarter of about EUR 335 million. If you kind of take EUR 335 million times two quarters for the next two quarters, add that to the year to date operating capital generation that we reported of EUR 776 million, and that gets you to a number that's a little bit north of the EUR 1.4 billion that we're guiding. Thank you. We will now take our next question from Michele Ballatore from KBW. Please go ahead. Yes, thank you for taking my question. I have two questions. The first one is on the RBC ratio. I don't know if you can give us more details about a breakdown of what was the negative impact from the market's volatility and the positive impact from management action and exactly maybe a little bit explore, give a little bit more color on these actions. That's the first question. The second question is about the free cash flow. Of course, I mean, the way you determine the free cash flow depends on variety of factors, but to what extent free cash flow depends on your IFRS numbers. If it does, therefore we can. I mean, you highlighted some level of confidence today about the, you know, the effect that IFRS 17 may have on this factor in 2023. Thank you. Yeah, thank you, Michele. Matt, you take both of them. Thank you. Yeah, thank you for the questions. On the first one for the RBC ratio, I mean, we saw some, you know, some big moves obviously because of markets during the course of the quarter. If you look at just the effect of markets, it ended up being about 33 percentage points negative. That's mostly driven by equity market movements, and that was pretty much in line with our sensitivities that we had put out there. There were some management actions that we had taken. They totaled about 25 percentage points during the course of the quarter that were quite important. I would say that highlights our commitment to active capital management. This is what we are doing. There were some puts and takes mainly on the management actions giving a positive to the RBC ratio. Actually those management actions had very little effect on the operating capital generation outlook going forward. On that standpoint, I think that we did a good job during the quarter managing the capital base. On the free cash flow, I would just remind everyone that the free cash flow, it's a very simple definition. It's the remittances from the business units minus the holding and funding expenses at the group level. When you ask the question about how much does it relate to IFRS or IFRS 17, the answer is not. These are simply the result of the solvency capital regimes in each one of the units that we're doing business in. Thank you. We will now take our next question from David Barma from BNP Paribas Exane. Please go ahead. Thank you and good morning. Just to come back on your answer just now, Matt, on free cash flows. Based on your revised targets, I think the remittance payout ratio over operating capital generation moves up slightly to the high 60s. Can you explain what the remaining gap between the two, where it comes from and what you need to see to improve this further in the future? That's my first question. Secondly, on the US retirement plan business. It seems like the margin level on this unit continue to be either pressured or flat versus previous periods. When do you think we'll start seeing in the margin numbers the efforts you're taking in what I think is a more profitable middle market segment? Thank you. Thanks, David. Matt I'll pick up the first one. Yeah, we, you know, right now, you've got the numbers right on the convergence between the operating capital generation and the free cash flow. There are a couple things that we have to make sure that we take into account. One is we want to make sure that there's sufficient capital in businesses, especially the U.S. business, to make sure that they can execute on their growth initiatives, because that's our goal here is to grow the strategic assets. There are still some investments that we're making in the operational improvement plan that causes a little bit of that gap. We also want to make sure that we take into account future uncertainty with respect to credit risk. That's a big deal. In that free cash flow guidance that we have given for the three-year total, we are kind of factoring in a thought that credit risk could be heightened over the remaining period in that target. We've assumed that roughly one and a half times our normal level of credit impairments. Those are some of the reasons. We would expect that to converge, operating capital generation and free cash flow. And- Yes, David, on the retirement plan. First of all, this is all about scale. We focus on the middle market in retirement plans. We do compete also in the large case market, but only on a more opportunistic basis. The reason for that is that we believe that our ability to extract better margins is in the middle market, where actually also our existing market position is a very good one. You have seen over the last quarters that we were able to grow continuously in our middle market retirement plan space. Even in this quarter, we were able to post net deposits again in that market segment. This is going as we expect it to go, which is step by step improving and getting more scale in that chosen market segment where we operate currently in a position of strength as a top five provider in terms of the number of new middle market retirement plan customers. We've onboarded roughly 4,400 new cases in the last 12 months. Of course, the flows of that will come through in the coming periods in full. We're doing well, but it's a scale question, and we need to continue to drive our growth up in the middle market space, which, by the way, we have seen consistently over the last quarters improving. Thank you. We will now take our next question from Michael Huttner from Berenberg. Please go ahead. Fantastic. Thank you so much. I have two questions. Two and a half, so maybe you'll cut it to two. The first one is on mortality. I think in the budget, there was EUR 75 million left for the second half, but the mortality trends at the moment are so positive. I just wondered if you can say, you know, how you see the balance of charges in the second half. The second is, we have these one-off items in the net profit title, $192 million for reinsurance and $159 million for various assumption changes relating to North America. I just wondered whether you can give a little bit more color as to what this relates to. Is it, you know, hedging costs or rates or mortality? I don't know, it's just interesting. Thank you. Thank you very much, Michael. These are amazing numbers and please can we have more buybacks? Sorry. Thank you for the suggestion, Michael, and thank you for the compliment. No, you are right, Michael. The mortality in the second quarter was actually pretty good. We see a reduction, obviously in COVID-related claims, down to about $11 million during the course of the quarter. That was based on 34,000 US population deaths in the second quarter. By the way, that number had reduced dramatically from more than 155,000 in the first quarter. We really see the effects of COVID on real mortality coming down. Our outlook for the balance of the year is perhaps something like 40,000 US population deaths due to COVID. That translates into about $20 million a quarter in adverse mortality. For the rest of it, let's see how the experience goes for the remainder of the, you know, mortality claims in the U.S. Again, for the second quarter, they were actually pretty good. Maybe I touch on the two charges that you had mentioned. The first one, the $192 that related to reinsurance was an action by one of our reinsurers to increase YRT reinsurance rates on significant blocks of business that we had reinsured with them. That's where you're getting that one. That has very little impact on the RBC ratio or on our statutory books. It does have an ongoing drag of about EUR 40 million in operating capital generation per year. That will decline over time as the book matures. That was purely related to mortality experience. This is going back to reinsurance agreements and policies that were written, you know, decades ago. This was one where it was better. You know, let's say mortality expectations now are very different than what they were back then. The assumption charges, or the charges related to the assumption update in the second quarter in the U.S. were actually quite modest I think. On an IFRS basis, you mentioned the $159 million number. It actually has very little impact on ongoing operating capital generation, very little impact on the solvency ratio for the U.S. business. It was a mix of things. I think we updated maybe 70-some-odd assumptions. They're very small. One example would be, for example, premium persistency on contracts. We updated for, let's say, Universal Life type contracts where we saw that people were paying higher premiums when they had lower account values, so it keeps the contract in force for longer. That would be one example of the updates that we had made. One thing that we did not do during the course of the quarter was look at COVID-19 mortality experience during the experience that we've had during the pandemic. Most insurance companies don't really know what to do with it. We basically threw out the data set, and the assumption was related to many other things, but not generally population mortality. I hope that answers your question. That's really helpful. Thank you. We will now take our next question from Robin van den Broek from Mediobanca. Please go ahead. Yes, thank you. It's Robin van den Broek. A follow-up question on free cash flow. I think if you break it down over the years to EUR 2.2 billion, I think you're sort of getting to an equal level per annum. So I appreciate the commentary you made on 1.5 times your normal level of the credit impairments, which is a 10 basis points impact on our $60 billion book. So that's only $60 million, but it feels like you're still holding something back. Can we assume that maybe at least is a level of conservatism? That's the follow-up question. On OCG, I was just wondering if you could give us a bridge for 2023 on moving parts so far. You mentioned the reinsurance repricing, which has a negative impact, I guess, on OCG next year. You've got the UFR falling out, and of course, a lot of macro movements, quarter to date. That would be very helpful to get some more visibility there. The second question is around Secondary Guarantee Universal Life. One of your peers in the U.S., I think on the back of a private study, yeah, made some assumption changes in relation to that book. I was just wondering if you could explain what that entails to and to what extent that could be a future action for yourselves. Thank you. Take the first one. On the free cash flow guidance, I think your question was really do we have conservatism built into that EUR 2.2 billion number. One thing that I can say is that, what do we have in it? Just to let you know, we have assumed that the Dutch life business will pay a growing dividend. What we see is their capital generation capacity is going up, and we would expect them to pay a bit of a growing dividend. What we also would expect is that the U.S. remittances would remain stable. This is an important one because we're still trying to invest in the strategic assets part of the U.S. business, to be able to propel organic growth. That's a key thing. The other one is that, you know, I think I had mentioned that we had benefited from the first half of the year from special dividends that we're getting out of some of the companies, primarily the U.K. and TLB. But we have not baked in any material kind of special things for the balance of the year. I don't know if you would call that conservatism or if that's just what we have baked into the north of the EUR 2.2 billion guidance. As far as operating capital generation for 2023 goes, we tried to give you some guidance for 2022, to say that we would get to about EUR 1.4 billion of operating capital generation in the business units. There are a couple moving parts that you need to take into account for 2023. The first one is, and I think you're familiar with this, the UFR, the ultimate forward rate, under Solvency II is not gonna decline in 2023 next year. That 15 basis point decline that we've been suffering from each year ends up giving a benefit of about EUR 100 million in operating capital relative to this year. Additionally, you know, we talk a lot about the operational improvement plan and the number of initiatives and the expense savings and all these things, but ultimately, it's important that this stuff comes through in the operating capital generation. That's what we would expect for 2023, that we would have some tailwinds from those successful completion of those initiatives to the tune of about EUR 100 million. Then I previously mentioned, you know, with respect to to the YRT rate increases on reinsurance, I mean, just round it, just say that it's maybe, you know, between all the management actions and whatsoever, you know, maybe EUR 50 million headwind, so negative relative to 2022. One thing we would expect, though, is that we would get. We expect that there will be a normalization of U.S. claims experience that we've seen in 2022, but we expect that at this moment to be offset by the non-recurrence of favorable experience in other units, like you saw, you know, for example, in this quarter, in the Netherlands among others. What we are not doing is providing a more detailed OCG outlook for 2023, given the fact that we have a lot of macroeconomic uncertainty, and obviously we're making a lot of investments to grow organically in the strategic assets part of the business. What you can say is that the level of operating cap gen is really a good basis for the units to pay the planned remittances to the holding and to invest in creating competitively advantaged businesses if we see opportunities to accelerate organic growth. The, the- Secondary Guarantee Universal Life. You know, for us, we review our assumptions in the second quarter and we again reviewed lapse assumptions in this type of business. Based on our experience, we saw actually no reason to change them. In fact, we have, you know, actually very low lapse rates among especially the sensitive blocks of business, where lapse rates tend to really matter. I think most people on the call will recognize that this is particularly sensitive for, one, older age population, two, higher face amounts, and three, if contracts are in the money, then you can have, you know, very low lapse rates. That's where we have actually quite granular modeling and have been routinely updating these assumptions over time, so that for those sensitive blocks of business, we have, they're very close to zero, very close to zero lapse rates. The lapse issue is something that we're routinely updating, but this is not an issue for us. That's great color. Thank you very much. We will now take our next question from Nasib F. Ahmed from UBS. Please go ahead. Thanks for taking my question. First one on the U.S. variable annuity book. I appreciate you may not be able to say anything more since 1Q, but if there's any update on how your internal process is going in terms of preparing the book and how your conversations are going with the third party, that'd be great. Secondly, again, on the EUR 1.4 billion OCG. Matt Rider, you said 350 times that by 2, and then maybe there's about EUR 40 million of COVID excess mortality that you're expecting, and that kind of gets you to the 1.4. Is that correct? Thanks. Thank you very much, Nasib. Let me take the first one on the VA book. You know, we've been very transparent and updated you regularly on the steps that we are taking on the VA book, and we have been taking. We said that we would look at all options ranging from potential reinsurance transactions to continued full ownership of this now de-risked portfolio. You know, if we have more to share about this, we'll provide an update. At this point, we're working on it and in general, we don't comment on this in this period. The moment we have something to share, we'll get back to you. Matt, over to you. Yeah. I mean, I think you have it right on the OCG guidance for 2022. The one thing I would mention is that COVID claims are actually coming in, you know, for the balance of the year, they're gonna be relatively small. Frankly, we would expect them to be more or less canceled out by continued good morbidity experience. That's not really a factor. You can get to something north of 1.4 quite easily without factoring in the sort of mortality, morbidity experience for the second half of the year. Perfect. Thank you. We will now take our next question from Sudarshan Bhutra from Société Générale. Please go ahead. Hi. Just one question from my side. On your cash holdings or your excess cash, given your current levels and the upgrade in the FCF guidance, you're going to easily be above the EUR 1.5 billion, EUR 0.5 billion-EUR 1.5 billion target range. I mean, how should we start looking at this, you know, the surplus cash? I mean, what are the actions that you could take? Any color on that? Yeah. Thank you. Thank you very much, Sudarshan. I'm gonna take this one, Matt. You know, we have a clear policy for this, which is that, if there's surplus cash capital above and beyond what we need to execute on the transformation of the company, then our first priority remains to return to stockholders over time, and that's most likely done in the form of buybacks. As you know, we've given you guidance on how we wanna keep the cash buffer between EUR 500 million and EUR 1.5 billion. We are active in buybacks. I mean, we take this commitment seriously, as demonstrated by the fact that we have launched a buyback program announced earlier this year, and that underscores the commitment to return that surplus cash to stockholders. We will spend roughly EUR 200 million, I think, on the last two tranches of this program, of which today we announced that the third tranche will start on in October, the balance of the year. Also please don't forget that we will return EUR 400 million to stockholders for the payment of last year's final dividend and the interim dividend that we announced today. Thank you. We will now take your next question from Steven Haywood, from HSBC. Please go ahead. Good morning. Thank you. On the Netherlands, you mentioned the sale of bonds to protect liquidity position in rising rates. Can you explain what's going on here? Do you anticipate higher redemptions, so your liquidity has to be higher than it was at the end of the first quarter? Or is the Dutch business remitting too much upfront and waiting for actual cash to come out of the business over time? I mean, selling the bonds will obviously lower your operating capital generation from the Dutch business. Is this material? Can you give us an indication? Obviously, selling the bonds has increased your Solvency II ratio in the Netherlands. How much was that contribution to the Solvency II ratio increase versus other model updates here? Secondly, just a quick one, if you can, how much of the free cash flow and OCG increase in outlook comes from, foreign exchange moves, the US dollar increasing significantly? Thanks. Thank you. Matt, can you take those? Yeah, let me take the first one. The short answer on this is that the Dutch Life business has a lot of hedging positions out there to protect against lower interest rates. We need to do that in order to protect the Solvency II position of the company, so that when you have rising interest rates, particularly quickly rising interest rates, to the tune, by the way, in Euroland of about 100 basis points during the course of the quarter, that means we have to fund collateral needs against the derivative positions that we have to protect the solvency balance. In fact, during the course of the quarter, we sold about EUR 6 billion worth of bonds. As you mentioned, that did increase the solvency ratio because you lose the solvency capital requirement, the SCR, on those bonds. That had an impact of about 8 percentage points on the ratio. This is a big deal for all insurance companies, by the way, is that, you know, the quarter was a story of managing liquidity, and we have been able to incredibly successfully do that well. We have plans in place to be able to do this, and we manage it well. That did increase the solvency ratio because of the sale of those bonds. Model updates had a positive impact of about 6 percentage points on the Dutch life solvency ratio. It had mainly to do with having a certain infrastructure-related equity investments included in our partial internal model. So that was an important movement during the quarter. Otherwise, the big rising level of interest rates actually has done a lot to increase the operating capital generation outlook for the Dutch life business going forward. Now, you know, at the end of June, I think basically the interest rate curve on which we hedge is very close to the interest rate curve in which we do the solvency calculation. That's actually quite a benefit to us. We're actually looking at, you know, something like guidance of about EUR 240 million operating capital generation in the Dutch life business on a run rate basis. We've been able to manage the liquidity needs very well. In fact, the rise in interest rates have enabled us to increase the guidance on the operating capital. I'm sorry. Can you- Thank you. That was our final- No, wait. Sorry. Please go ahead. I had one question on the US dollar strengthening. The US dollar strengthening on the operating capital generation is a factor in there. I guess, for every 10% change in the euro-US dollar, it equates roughly to about a 5% change in the value of the remittances that they give us in euro terms. Thank you. Could you just say again what the run rate of the Netherlands OCG was? 240 is what we're saying. Okay. Thank you very much. All right. Thank you, operator. This concludes today's Q&A session. On behalf of Lard and Matt, I would like to thank you for the lively interaction. Should you have any remaining questions, then please do get in touch with us in Investor Relations. We're happy to help. Have a good day, and thank you for your participation. Thank you. That will conclude today's conference call. Thank you, ladies and gentlemen. You may now disconnect.