Good afternoon, everyone, and thank you for joining this educational webinar on Aegon's approach to implementing the new IFRS 9 and IFRS 17 accounting standards. With me today is Aegon's CFO, Matt Rider. He will talk you through the presentation. The presentation consists of two main sections. After each section, we will have a Q&A session. The analysts on the call will have the opportunity to ask questions, but in the meantime, please remain muted. We would like to ask you to review our disclaimer on forward-looking statements, which you can find at the back of the presentation. The aim of today's presentation is to explain the choices we have made in implementing IFRS 9 and IFRS 17 and to provide you with an understanding of the impact on our financial statements. For this reason, we will focus on our businesses outside of the Netherlands, as the transaction with a.s.r. will fundamentally change how we report on our Dutch business. Please bear in mind that this is an educational webinar, and that the figures that we share with you today are unaudited. Even though we have been preparing for the implementation of IFRS 9 and 17 standards intensively, further refinements may still take place before we present results later this year, including fine-tuning our definition of the operating results. Before I hand over to Matt, we will show you a short video to introduce some of the key choices that we have made in the implementation of IFRS 17. This video is available on our website in case you would like to watch it again later. Welcome to Aegon and welcome to a short introduction to IFRS 17, which is the new standard to account for insurance liabilities. In this short video, we'll present some key choices that Aegon made on the implementation of IFRS 17. We'll start by having a look at the balance sheet. Comparing the IFRS 17 balance sheet with the current and more familiar Solvency II balance sheet. While there are differences in scope, methodology, and nomenclature, the principles are actually very similar. For example, both frameworks follow the concept of best estimate liabilities, where Solvency II adds a risk margin to cover for uncertainty of the product cash flows. IFRS 17 adds a risk adjustment for the same purpose. There are, of course, also differences. The contractual service margin, or CSM, is a new item and relates specifically to IFRS 17. CSM is a measure of the expected future profits, which is booked as a liability on the balance sheet under IFRS 17. Own funds under Solvency II and equity under IFRS 17 form the remainder of this side of the balance sheet. This is conceptually the amount of assets we hold in excess of the best estimate liabilities, risk margin or risk adjustment, and CSM. The CSM is one of the key reasons why the IFRS 17 equity is lower than own funds under Solvency II. However, CSM and risk adjustment are expected to be released over time as profits through the income statement. The lower equity stock leads to a higher earnings flow. Now we will take a closer look at how we get to these balance sheet components by looking at the corresponding cash flows. Let us start with the Best Estimate Liabilities, or in short, BEL. In both the Solvency II and IFRS 17 frameworks, it represents the expected future cash flows, such as premiums, expenses, and benefits related to the insurance contracts. The resulting annual profit forms the basis for the calculation of the CSM. These cash flows are discounted as to allow for the time value of money. Obviously, the discount rate is a key parameter for this. It needs to reflect the time value of money, the liquidity characteristics of the product, and market observable prices. For IFRS 17, Aegon chooses to use a risk-free rate and add an illiquidity premium to determine the discount rate. The illiquidity premium is derived from the implicit return of Aegon's own assets as reference portfolio minus expected credit losses. The expected future cash flows from premiums, expenses, and benefits are discounted and added up to build the BEL. In Solvency II, a risk margin is the product cash flows. IFRS 17 allows for uncertainty using a risk adjustment, which is defined based on the BEL. For the calculation of the risk adjustment, Aegon uses the confidence interval method, a default choice under the standard. BEL and risk adjustment determine the expected profit and therefore the CSM. If the total is a positive, this is a profitable contract. The expected profit is reflected on the liability side of the balance sheet as the CSM. This ensures that profits are not being recognized on day one, but over the duration of the contract. CSM and risk adjustment are recognized as profit on the income statement over time. Under IFRS 17, profit recognition is firmly linked to the duration of the policy and needs to reflect the services provided to the customer over time. Note, however, that the cumulative profit of the insurance policies does not change since the cash flows do not change compared with the current IFRS 4 standard. IFRS 17 only changes the timing. In addition to experience adjustments for claims and expenses, CSM and risk adjustment releases are the core elements of the insurance service result on the income statement. There is one other core item that will impact the income statement structurally. This is the excess income from owning assets in addition to the assets required to cover the liabilities. This income will be reflected as part of the net investment result. Obviously, this short introduction to the IFRS 17 income statement is strongly simplified and there are many more elements driving profit and loss under IFRS 17. To summarize, IFRS 17 changes the way we present our IFRS balance sheet and earnings, but it does not change the fundamentals of our business. Within the possibilities of the IFRS 17 framework, Aegon has chosen to align the IFRS 17 earnings recognition as close as possible to the capital generation determined by the regulatory frameworks. In addition, Aegon strives to prevent earnings volatility caused by accounting mismatches. However, important to note is that the cumulative profit over the lifetime of the insurance policies does not change since the cash flows do not change. IFRS 17 only changes the timing of the profit recognition, which is firmly linked to the duration of the policy and needs to reflect the services provided to the customer over time. In addition, the presentation of Aegon's IFRS results will be closer to an economic view, which should make it more intuitive to discuss the business using this lens. Thank you for your attention for this introduction to IFRS 17. Good afternoon. Again, I would like to thank everyone for joining us today. I believe the video we just saw is a good starting point for today's session. I want to emphasize that IFRS 17 will impact our financial reporting, but it does not change the fundamentals of our business, nor our strategy or our approach to capital management or any of our financial targets. The first section of today's presentation will introduce how the implementation of IFRS 17 and the choices that we have made impact our financial statements. The implementation of IFRS 17 is the biggest sector wide accounting framework change since the implementation of the Solvency II in Europe in 2016. Although insurers have had some flexibility in the choices they have made when transitioning to the new standard, it will lead to more consistency and comparability between companies over time. It also increases the transparency of the drivers of earnings and reduces the accounting noise that was prevalent under the old standard. Ultimately, we believe that IFRS 17 is closer to an economic view of our business, as both assets and liabilities are valued on a mark-to-market basis, making it more intuitive to understand the developments. It is a big change to the status quo, and it will take some getting used to. Slide six sums up our key message on Aegon's implementation of the new standard. I want to reiterate that the implementation of IFRS 17 will not impact our strategy, our financial outlook, financial targets, our capital management approach. Our fundamental approach to managing the company continues to be based on the capitalization of our operating units under their respective local solvency standards, cash capital at the holding, and gross financial leverage. The most noticeable change under IFRS 17 is a reduction in shareholders' equity in comparison with the old standard, which is mainly the result of establishing a contractual service margin or CSM. The CSM represents a substantial stock of future value that together with the risk adjustment, is expected to be released into earnings over time. As a result, Aegon's operating result is expected to increase. The dynamic here is really stock and flow. Our stock of equity decreases, but the flow of earnings increases. We had to make several choices when implementing IFRS 17. In making these choices, we aim to simplify our processes, minimize accounting mismatches, and align our operating result with the capital generation of our units under their respective local capital frameworks wherever possible. Lastly, the new standard provides more insight into the economics of the business than had been the case under IFRS 4. Let us start with going into some details of the transition balance sheet. We have prepared a short video to explain the key methods used to generate transition balance sheet. Welcome. As of 2023, the insurance industry will transition to IFRS 17, which is the new standard to account for insurance liabilities. To capture the existing business, this new framework requires the calculation of a transition balance sheet as of January 1st, 2022. This short video clip explains the three approaches that can be used to create the transition balance sheet. The first approach is the full retrospective approach and has to be applied as a default. The IFRS 17 standard requires that an insurer goes back in time as far as possible and calculates the transition balance sheet using historical data. This approach intends to calculate the current balance sheet position for each policy as if IFRS 17 was in place from inception of the policy. This approach requires very detailed data for the IFRS 17 calculations and given the rich history of Aegon over a long period of time, reaching back several decades for some policies. Applying this approach can be challenging, for example, due to the limited historical data available and other reasons. Aegon has applied the full retrospective approach only to selected and mainly younger policies, predominantly in the UK and some newer businesses in the US. If the full retrospective approach is not possible, the second approach is the modified retrospective approach. This allows for some simplification and does not require all relevant historic data. Aegon has applied this method largely for certain younger Individual Solutions products in the US. A third and alternative approach to the modified retrospective approach is the fair value approach, which takes a prospective view. The insurance liability is assessed based on a third party view of its fair value. Aegon has chosen to apply the fair value approach for the majority of its business where the full retrospective approach cannot be applied. Please be reminded that all three approaches might be applied to the same product, but for different years of inception. As a result, the consolidated IFRS 17 transition balance sheet will be a mix of all three transition approaches. However, compared to the current standard, the IFRS 17 transition balance sheet will show a more economic view of the existing business. Thank you for your attention. As the video highlights, insurers have certain choices when setting up the transition balance sheet for IFRS 17. These choices determine the level and composition of shareholders equity and the Risk Adjustment and the CSM. I will summarize four key choices that we have made. The first key choice relates to the discount rate. When determining the Best Estimate Liability, cash flows need to be discounted. The discount rate for insurance liabilities consists of a risk free rate plus an illiquidity premium. Aegon has chosen to set the illiquidity premium based on the expected return on own assets less an adjustment for credit losses. By using our investment portfolio to determine the illiquidity premium, we better align the valuation of assets and liabilities. This choice also reduces the basis risk from using an illiquidity premium based on a more generic reference portfolio, which would have been the other option. The second choice relates to the risk adjustment, which is a new concept introduced under IFRS 17. This is similar to the risk margin concept that we already know under Solvency II. The risk adjustment reflects the compensation required for bearing the uncertainty around the amount and timing of cash flows due to non-financial risks. Aegon has selected the confidence interval approach to determine the risk adjustment, setting the confidence interval at 80%. We have also chosen to reflect the impact on the risk adjustment from changes in interest rates in the CSM for simplicity purposes. We expect that this approach will lead to a fairly stable risk adjustment over time. The third choice relates to our transition approach in cases where the full retrospective approach could not be applied. When the data is not available to apply the full retrospective approach, the standards offered the choice between the modified retrospective approach and the fair value approach. In general, our preference has been to apply the fair value approach as this allows us to value insurance liabilities at fair value independent of his historical events. Where we have applied the fair value approach, we have taken into account what we believe third parties would expect to be compensated for when taking over the best estimate liabilities. To the extent that our assessment has implied a value of the liability above our best estimate, this has led us to establish a CSM at transition for these books. Lastly, for business measured under the general measurement model and using the fair value transition approach, companies have a choice between using historical rates and current market rates with respect to the presentation of interest accretion on the insurance liabilities in the income statement. We have made different choices for different units in order to align the investment component of the IFRS operating result of each unit as much as possible with the investment component of operating capital generation under the respective local capital framework. For the income statement presentation for most GMM business of Transamerica and TLB, we have used historical interest rates at the time of issue of the in-force policies to determine the interest accretion on the insurance liabilities. When constructing the transition balance sheet, the value of these liabilities is based on market rates. This results in negative accumulated other comprehensive income, or AOCI, as market rates at the transition date were generally lower than interest rates at the time of issue. We have elected to use fair value through profit and loss for our assets and liabilities in the Netherlands and the UK. Consequently, we have used the market rates at time of transition to calculate the interest accretion on the insurance liabilities in the income statement. Let us now see how the application of our choices and the implementation of IFRS 9 and IFRS 17 in general changed the presentation of our IFRS balance sheet. On slide 10, we compare Aegon's group balance sheet under IFRS 4 with the transition balance sheet under IFRS 9 and IFRS 17. On the asset side of the balance sheet, there are a limited number of changes. Intangible assets like deferred acquisition costs are included in the best estimate liability under IFRS 17 and are therefore eliminated from the asset side of the balance sheet. The remeasurement of assets under IFRS 9 means that almost all investments are now being accounted for at fair value. US commercial mortgage loans are the main exception to this rule. Overall, the value of our investments on the balance sheet is not changing significantly. In contrast, the liability side of the balance sheet sees a couple of significant changes. First of all, contracts that do not contain discretionary participation features are classified as investment contracts under IFRS 9. Liabilities of about EUR 92 billion fall under this category. Insurance contracts, including contracts with investment components that cannot be separated from the insurance contract, are classified as IFRS 17 contracts. A Best Estimate Liability, or BEL, is calculated for these contracts as we have seen in the video. On Aegon's transition balance sheet, we will have a little more than EUR 300 billion of best estimate liabilities under IFRS 17. The risk adjustment, which is intended to cover non-financial risks, has been calculated to be EUR 39 billion. The transition approach has resulted in a CSM of EUR 11.8 billion on the opening balance sheet. Shareholders' equity under the new standard amounts to EUR 11.7 billion. This includes the AOCI and reflects the fair value of both assets and liabilities. Recall that we have traditionally focused on shareholders' equity after adjusting for AOCI from the investments. Under IFRS 17, AOCI from both assets and liabilities are reflected in shareholders' equity, so we will focus on the reported equity going forward. Moving to slide 11, we now zoom in on how shareholders' equity changes with the transition to IFRS 17. Compared with the equity excluding AOCI under IFRS 4, shareholders' equity at the transition balance sheet date under IFRS 17 reduces by about a third to EUR 11.7 billion. We begin with shareholders' equity excluding AOCI from assets of EUR 17.8 billion. We then add back the AOCI from our investments as both sides of the balance sheet are at fair value under IFRS 17. Next, deferred acquisition costs and value of business acquired are eliminated under the new standard. This is mostly offset by the remeasurement of liabilities according to IFRS 17, which is mainly driven by the elimination of deferred liabilities and the recognition of future profits in the best estimate liabilities. Setting up the CSM and risk adjustment reduces equity. Translates into higher earnings going forward. The positive revaluation reserve, or AOCI, from investments and a negative AOCI from liabilities results in a net negative AOCI position as shown on slide 12. The AOCI from investments increased by EUR 1.5 billion compared with IFRS 4 to EUR 7.9 billion by moving Dutch residential mortgages to fair value accounting. The negative AOCI of EUR 10.5 billion from our liabilities results from our choice to use the AOCI option for the fair value transition. For most of the U.S. business that is measured under the general measurement model, we have chosen to use historical rates to calculate the interest accretion on the insurance liabilities in the income statement. These policies were historically written when interest rates were much higher than those at the beginning of 2022. The difference between the two is reflected as AOCI in shareholders' equity and will be reflected as other comprehensive income, or OCI, over time. For businesses where we have elected the fair value through OCI option, the impact of changes in the market rates on the value of both assets and liabilities will be recognized directly in shareholders' equity as OCI. As both assets and liabilities are valued using market rates, the impact of changing interest rates on reported shareholders' equity will be a lot smaller than that under IFRS 4. Again, for fair value through OCI business going forward, we will see book value yields on assets and liabilities being realized in the income statement. As the U.S. RBC capital framework is based on book values too, the investment component of the U.S. operating result is expected to align better with the operating capital generation under the RBC framework than if we would've made a different choice. Slide 13 shows measurement models that we have applied to our different businesses. If contracts have a significant direct participation features linked to an underlying pool of assets, the variable fee approach, or VFA, is used. More than half of Aegon's best estimate liabilities are measured using the VFA models, including, for example, variable annuities in the U.S. and pension products with profit sharing in the Netherlands. For products with indirect participation features or products with a longer duration, the default model, the general measurement model, or GMM, must be applied. Aegon applies the GMM to most of its life in annuities portfolios with best estimate liabilities amounting to about EUR 116 billion. The premium allocation approach, or PAA, is applied to short-term business. This is mainly relevant for the majority of our Spanish business and the non-life business in the Netherlands. No CSM is recognized under the PAA measurement model, the income statement will look similar to that as that under IFRS 4. Moving to slide 14, we show the composition of the CSM and the risk adjustment for Aegon. The size of the CSM reflects the application of the various transition approaches. In the U.S., we have applied the fair value transition approach for most of our individual life and health businesses. As previously discussed, we have established a CSM for these businesses to reflect what we believe is the value of the relevant liabilities in the eyes of third parties. The CSM of the variable annuity portfolio largely reflects the net present value of the fees in the base contracts. We use mainly the modified retrospective approach when calculating the CSM at the transition date. The majority of the U.K. CSM is driven by the traditional insurance portfolio and the platform business, which has some insurance components that are accounted for under IFRS 17. The distribution of the risk adjustment across the business is a good representation of the non-financial risks inherent in these portfolios. In the U.S., the risk adjustment mainly relates to the individual life and health business lines given the underwriting risks that are present in these lines of business. For variable annuities, the risk adjustment is limited as these products have relatively little non-financial risk. For the U.K., the risk adjustment is driven mainly by the persistency risk associated with the traditional insurance portfolio and the platform business. Let me pause here for a moment as we want to give you the opportunity to ask questions on the transition balance sheet. Please do be so kind as to focus your questions on the transition balance sheet. There will be another Q&A session at the end of the presentation for all your other questions. Thank you, Matt. The analysts on the call who have registered up front will now be able to ask questions. We kindly ask you to limit yourself to two questions per person. Operator, please open the lines for questions. We will now open the floor for questions. As a reminder, please remain muted until we are ready to take your question. To enter the queue for questions, please click the Reactions button at the bottom of your Zoom screen and then press the Raise Hand button. Leave it on until we are able to attend to your question. When asking a question, please make sure to enable your audio and video connection. If you have dialed in by phone, press star nine on your telephone keypad and star six to mute and unmute. I'll now pass you back to our host for Q&A. Thank you, operator. While we wait for the first question from the analysts, I'll ask the first question to you, Matt. You've alluded to the AOCI option that we've chosen. That's something that other companies can do as well, but it's maybe quite specific to Aegon. Can you explain why we did that? Yeah, this is actually quite a key choice. We wanted to eliminate as much as possible differences between the earnings recognition under IFRS 17 and the earnings recognition under the appropriate capital standard. For us, that means a lot of business in the U.S. is valued at book value for purposes of statutory reporting. By choosing that approach, we align the net investment result that we will get under IFRS 17 with effectively the net investment result that we will get under a statutory earnings. Again, we wanted to minimize differences between the IFRS accounting standard and the earnings recognition under the relevant capital standard. Thank you, Matt. Operator, can I ask you to explain once more the procedure for the Q&A session, please? Yes. At the bottom of your Zoom screen, you'll see the reactions button. If you click on the reactions button, you'll be able to raise your hand. If you've dialed in via phone, press star nine to raise your hand and star six to mute and unmute. I see no questions coming in. I guess that people wait for the explanation on the P&L before asking questions. That means I'm off script for a second. We can go to the second part of the presentation, Matt. Okay. Let me now continue with the second part of today's presentation. Focusing on the presentation of financial results under IFRS 17. We will show you some of the illustrative figures for the first half year results of 2022 under IFRS 17. I continue on slide 16. To interpret our financial results, it is important to understand the rationale behind the choices we have made under IFRS 17. There are two overarching guiding principles that we have applied. We operate under different capital regimes, mainly the RBC framework and the Solvency II-based regulations. Capital generation under the respective framework determines the remittances that these businesses can pay to the holding. Our first principle was to align the emergence of profit under IFRS with capital generation under the relevant capital framework as much as possible. This means that we have made different choices for Transamerica, which uses the statutory RBC framework compared to the U.K. and the Netherlands that operate under the market consistent Solvency II framework. The second guiding principle was to limit earnings volatility from accounting mismatches. IFRS 17 is a more economic framework than the previous standard, accounting mismatches can occur, for example, from hedging. Application of these principles has resulted in three different choices that we have made across our businesses. Transamerica's life and health business falls under the general measurement model. We have elected to book assets and liabilities at fair value through OCI, which results in the impact of changes in interest rates and credit spreads being recognized directly in shareholders' equity. Book yields on assets and liabilities are reflected in the income statement. Therefore, the insurance investment result is aligned with the statutory earnings on in-force business that is reflected in the RBC framework. Second, for businesses operating under Solvency II, we have elected to book assets and liabilities at fair value through profit and loss for GMM contracts. This results in the income statement reflecting market yields on both sides of the balance sheet. By making this election, we expect that the IFRS earnings will be reasonably close to the Solvency II capital generation from in-force business. We have selected this method for most business in the Netherlands and for the U.K.'s protection and annuities portfolios. Finally, Aegon has several businesses that are measured under the variable fee approach or VFA. The US variable annuity business is the most relevant one. As Aegon is using derivatives to manage the financial risks associated with the guarantees embedded in these contracts, we have chosen to apply the risk mitigation option. This allows for the financial market impact of liabilities to be recognized directly in the income statement rather than being reflected in the CSM. The impact of financial markets on the value of guarantees is thus reflected in the income statement, along with the results of market movements on derivatives that are used to hedge the guarantees. Consequently, this choice minimizes accounting mismatches and reduces volatility in the income statement. Let's now look in more detail at the split between the operating result and the non-operating items on the next slide. We have defined our operating result in such a way as to provide a meaningful representation of the underlying business performance. The general idea is to show exceptional and certain market-driven items as non-operating items below the line. The insurance service result under IFRS 17 represents the current period results from the insurance businesses. We expect the result to be driven by the steady release of CSM and risk adjustment, while experience adjustments from claims and expense variances in the current period can cause some volatility. The results relating to onerous contracts will be booked through the income statement according to the standard, as these contracts do not have a CSM by definition. We believe that the information value of our published results is increased by reporting the impact of assumption changes for onerous contracts below the line. Furthermore, we consider financial market impacts of onerous VFA contracts as non-operating items. The insurance net investment component of the operating result is driven by three factors, investment income on assets backing insurance liabilities, interest accreted on insurance liabilities, and the investment income on surplus assets. As under the old standard, we move realized gains and losses below the line. Similar to the way in which we have traditionally reported impairments, we will show changes in the expected credit loss reserve under IFRS 9 as a non-operating item. There will also be fair value items from investments that are booked through the income statement, for instance, in the U.K. As previously reported under IFRS 4, hedge ineffectiveness, both positive and negative, will also appear under fair value items. To increase the transparency of our business performance further, we will separate out the operating result for non-insurance fee businesses such as the U.S. Mutual Funds business, large parts of the result of the U.S. Retirement Plans business, and the result of the World Financial Group distribution channel. There will also be some expenses that are not included in the best estimate liabilities, and these will be shown separately. While expenses under the normal course of business are reflected in the operating result, exceptional items, expenses like restructuring and one-time expenses will be reported below the line. The result from discontinued operations, such as the result of our Dutch business, will be shown as other income unchanged from today's practice. After closing of the transaction, we will report the result from our stake in a.s.r. as other income as well. You will see on slide 18 that we are introducing a source of earnings type of view for the operating result. Here you can see the operating result of Transamerica for the first half of 2022 as an example of what this will look like. The operating result of the U.S. non-insurance fee business comprises businesses like Mutual Funds, Stable Value Solutions, and a large part of the Retirement Plans administration business. Also, you will find the operating result of the World Financial Group distribution channel in this line item. The larger part of Transamerica's operating result comes from the insurance business. It is driven by the release of CSM and risk adjustment as well as the net investment result. The insurance service result will see some volatility from claims and expense experience adjustments in the respective reporting periods. The difference between actual and expected claims experience for the current period are being booked in the operating result, while experience adjustments for future periods will run through the CSM. Specifically, in the first half of 2022, the operating result was impacted by adverse claims experience in life and variable annuities. Let us turn to the next slide to have a more detailed look at the operating result for three key lines of business in the U.S. IFRS 17 allows to separate the expected result from experience adjustments. For U.S. individual life, the expected insurance service result from the release of CSM and risk adjustment amounted to $254 million in the first half of 2022, and is mainly driven by the runoff of the in-force block. This was partly offset by $153 million of adverse claims experience, mostly from COVID-19. Most of these products are measured with the GMM model and the transition balance sheet was set up using the AOCI option, the net investment income is driven by the spread between book yields and on assets and liabilities. For U.S. individual health, the insurance service result is mainly driven by the release of CSM of the long-term care portfolio. The favorable morbidity claims experience that we reported under the old IFRS 4 standard is now mainly reflected in the CSM rather than in the P&L. The income statement only shows the favorable experience from claims paid in the current period, while the benefit from lower expected future long-term care claims as a result of lower than expected number of new claims and a higher number of expected death claims terminations is recognized in the CSM. The investment return on the assets is largely offset by the interest accretion on the liabilities. The net investment result mainly reflects the return on surplus assets. The investment return for U.S. variable annuities is mainly driven by assets backing both the general account liabilities and the allocated capital for this line of business. The expected insurance service result will decrease over time as the portfolio runs off and the CSM is released into the income statement. In the first half of 2022, adverse experience adjustments and onerous contracts have had $128 million of negative impact on the operating result. Part of this was driven by impacts from lapses and other unfavorable claims experience. The impact on the operating result was amplified as some of the variable annuity contracts became onerous following the unfavorable equity market movements in the first half of 2022. A portion of expected expenses is being modeled based on basis points on account value for practical reasons. The market movements in the first half of 2022 reduced account values significantly, leading to relatively low modeled expenses relative to the actual expenses. The difference between the two is reflected in the operating result as an experience adjustment. As outlined on slide 20, the way claims experience is reported changes fundamentally under IFRS 17. Under IFRS 4, we used to report the impact of actual claims deviating from expectations in the current reporting period. This included impacts from paid claims as well as from reserve changes. Under IFRS 17, only the impacts from current period variances between actual and expected claims experience is booked in the income statement. Future period claims experience adjustments are booked in the CSM. For example, an earlier than expected death in a block of profitable life insurance policies will lead to higher than expected claims paid in the current period recognized in the income statement, while the loss of future profits from this policy will reduce the CSM. Under IFRS 4, we reported the impact of assumption updates under non-operating items. Under IFRS 17, the impact of assumption updates is reflected in the CSM for non-onerous contracts. Only the impact of assumption updates relating to onerous contracts are booked through the P&L as non-operating items. As a result, a comprehensive view of claims experience requires a look at both the income statement and the change in CSM. We will focus on this combined view in our future reporting on this topic. On slide 21, we take a deeper dive into the accounting for variable annuities. In the past, the hedging of our legacy variable annuity business caused significant volatility in the IFRS net result as the hedging targets the economic liability, but the valuation of IFRS liabilities for some of the business use locked in discount rates. This led to an accounting mismatch and resulted in a lot of fair value noise. With IFRS 17, we expect that this situation will markedly improve. The income statement should become less volatile, and the accounting is better aligned with the economic hedging of the portfolio. Under the VFA method, future period impacts on the portfolio, in principle, impact the CSM. However, for the variable annuity portfolio, we apply risk mitigation. Therefore, impacts from financial markets on the value of liabilities are recognized in the income statement as fair value items. This matches the results of market movements on derivatives which are also booked to the income statement, thereby aligning the accounting treatment. Any basis risk and unhedged risks for onerous contracts will also be reported as fair value items in the income statement. Overall, the new accounting standard should result in a less volatile and more meaningful net result. You will see this on page 22, where we show the illustrative income statement for Transamerica for the first half of 2022. We expect less noise from accounting mismatches as both assets and liabilities are now measured at fair value. As shown on this slide, we expect a higher operating result under IFRS 17 compared to that under IFRS 4 from the US. The operating result is mainly driven by the release of CSM. Fair value items are mainly driven by market movements of alternative assets and any hedge ineffectiveness as the accounting mismatch for variable annuities hedging disappears, and we use the fair value through OCI option for large parts of the Americas business. Realized gains and losses on investments have a similar scope under IFRS 4 and IFRS 17, while net impairments might be somewhat more procyclical under IFRS 9. The impact of assumption updates will mostly be reflected in the CSM and not in the profit and loss, the remaining amount under other charges will mainly be the result of investments on our operational improvement plan and from restructuring charges. Far, we have focused on the U.S. to explain the workings for IFRS 17. On slide 23, we also show the operating result of the U.K. and our international businesses. The operating result of the U.K. will mainly be determined by the release of CSM from our traditional insurance portfolio and from the CSM release from the platform business, which is partly accounted for under IFRS 17. The U.K.'s operating result under IFRS 17 in the first half of 2022 was lower compared to the reported figure under IFRS 4. This is mainly due to lower earnings on the protection business. The contribution from the fee business in the U.K. is driven by investment contracts and is limited as the new business comes with upfront acquisition expenses. For our international businesses, the operating result is driven by TLB and Spain and Portugal. The Spanish business is, for the most part, measured using the premium allocation approach, which leads to similar results under IFRS 17 compared to IFRS 4. The operating result of TLB under IFRS 17 in the first half of 2022 was lower compared to that under IFRS 4. This is due to gains from surrenders that are reflected in the CSM under IFRS 17, rather than in the P&L under IFRS 4. This is a good example of a difference in claims experience reporting between the two standards. I'm now turning to slide 24, which shows the impact of the first half year results on Aegon's CSM position. This is the consolidated view and includes Aegon, the Netherlands. From the transition balance sheet, we started the year with EUR 11.8 billion of CSM. This balance will be steadily released into earnings over the lifetime of the policies. In the first half of 2022, this release contributed to about EUR 600 million to earnings. This amount reflects the runoff of Aegon's in-force business, including from our financial assets. Our strategic assets generated new business CSM of about EUR 200 million, mainly from the U.S. life insurance business. New business in the U.K. consists mainly of investment contracts, which are accounted for under IFRS 9 and consequently do not contribute to the CSM. Market movements lead to change in the BEL in every reporting period, for example, from updates to the discount rates. The risk adjustment is recalculated every reporting period based on the basis of the BEL. For reasons of practicality, Aegon has chosen to reflect the impact of changes to the risk adjustment from financial market movements in the CSM. Increasing interest rates over the first half of 2022 had a significant positive impact on the risk adjustment. As discussed earlier, experience adjustments and other items can also impact the CSM. For example, this included the adverse impact of lower equity markets on the value of future fees on the base contracts of the variable annuities portfolio, which is reflected in the CSM. In total, this brings the CSM balance to EUR 12.1 billion at the end of the first half of 2022. I'm now turning to slide 25, where we show the IFRS 17 shareholders' equity roll forward for the first half of 2022. Shareholders' equity on the transition balance sheet date amounted to EUR 11.7 billion. Over the first half of 2022, this reduced to EUR 11.2 billion, mainly as a result of negative comprehensive income over the period. While the group's net result was positive, the other comprehensive income was a loss of about EUR 400 million. This resulted mainly from the negative impact of higher interest rates and credit spreads on the value of surplus assets. This will reverse over time to the extent that we hold these assets to maturity. With the introduction of IFRS 17, we have also reviewed the definition of some of our performance indicators as we show on page 26. For shareholders' equity under IFRS 17, we will no longer correct for the AOCI as shareholders' equity reflects market yields on both the asset and the liability side of the balance sheet. Therefore, we will apply a simpler definition for the return on equity and compare the net operating result with the average common shareholders' equity as reported. As a result of a lower equity, including from setting up a CSM and higher earnings reflecting the release of that CSM, the return on equity increases. We are still contemplating how we will reflect the result from our stake in a.s.r. in the return on equity calculation after closing the transaction. As the CSM re-represents future profits, we include the CSM in the definition of the gross financial leverage ratio and again, use an adjusted shareholders' equity to calculate the ratio. This is in line with the emerging practice under European life insurers. The definition change does not change our capital management perspective on our debt position. We take a holistic view considering different metrics, including the gross financial leverage relative to operating capital generation and free cash flow. It remains our aim to deleverage up to EUR 700 million once the transaction with a.s.r. has closed. We are now coming to the end of our educational presentation on IFRS 9 and IFRS 17. During this presentation, we have tried to give you a comprehensive overview of what the standard means for Aegon. Let me conclude with a summary on slide 29. The new standard fundamentally changes the way we reported the IFRS figures financials based on our businesses. However, it does not change the way that we manage the businesses. Our strategies and our capital management approach remain unchanged. Aegon's group targets are untouched by this new standard. Under IFRS 17, we will see a lower shareholders' equity, but this is offset by setting up a CSM which will be released into earnings over time. Our guiding principles were to better align IFRS earnings with the capital generated from our in-force books and to minimize accounting mismatches. This has guided many of the choices we have made when implementing the new standard. With this, we hope to increase the information value of our reported financial results and to provide better insight into our business performance. In the coming months, you and we as well will have the opportunities to get used to this new standard as the timeline of upcoming events on the right-hand side of this slide suggests. With this, I am at the end of my presentation, and as promised, now we have time for your remaining questions. Jan-Willem, do we already have someone in the queue who would like to ask a question? Thank you, Matt. I see the first hand being raised, but before we go to first question, I would like to hand over to the operator to explain the procedure once more. Thank you. Once again, please remain muted until we're able to take your question. To enter the queue for questions, please click the reactions button at the bottom of your Zoom screen and then press the Raise Hand button. When asking your question, please make sure to enable your audio and video connection. If you have dialed in by phone, press star nine on your telephone keypad and star six to mute and unmute. I'll now pass it back to our host for Q&A. Thank you, operator. We'll start with the first question from Farquhar Murray from Autonomous Research. Farquhar, go ahead. Cool. Afternoon. Afternoon, all. Actually, thanks for the presentation. Just actually, it strikes a really nice balance in terms of early quantitative disclosures. Actually, probably one of the best I've seen so far, so thanks for that. Apologies, I was a little bit caught off guard at the start in the first session, so actually I might have some things which should have come in earlier. Two questions from me to start. Firstly, on earnings. If I crudely back up the net operating ROE numbers on the slide, I seem to be arriving at a kind of a net operating result that looks to be about maybe 16, mid-teens, kind of higher under IFRS 17 than the original IFRS 4 framework. Is that kind of a fair understanding of the magnitude and direction of travel there from one framework to the next? You did that on operating result? Using the ROE, I think that slide with the ROE numbers. Yeah. It's not a bad, it's not a bad way to do it. Let's just recognize going into it that the ROE number that we had presented on the slide was for the first half of 2022, which did reflect some adverse claims. Don't use it as a run rate. That's just reflecting the current period or the first half of the year results. You have it basically right. Yeah. Okay. Secondly, just on the CSM development on slide 24. That's potentially actually a very useful disclosure. One question is actually are we gonna get that probably systematically going forward? If I could ask how indicative that CSM release and new business figures are, and is it fair to assume the kind of EUR 0.7 billion is mainly a kind of market movement should structurally be probably around zero over time, ceteris paribus, et cetera? In that case, is the CSM kind of running off at, say, maybe 5%-7% per annum? Is that a fair understanding of the direction of travel on that balance? Maybe to go to your last point first. The direction of travel is we would expect the CSM to roll off at something between 8% and 12% per year. That will be dependent on the CSM balance at the beginning of the year. And you have seen like in different, let's say, different blocks of business, like in variable annuities, we saw a pretty big reduction in the CSM balance over the first half of the year. Again, largely due to the impact of credit or equity markets on the present value of future fees. The number will move around a little bit, but you can think of it as between 8% and 12% per year on CSM roll-off. Just to be clear, is that the 8%-12% is the CSM release figure? Yeah. The first part. Yes, exactly. Yeah. I wouldn't say my seven is actually kind of the net after the new business run rates. I tell you one thing, you asked a very important question at the beginning. Are we gonna be providing you kind of similar type of detail going forward? The answer is yes. It is for this reason that we will provide that detail. It is important to understand the development of that CSM in terms of what is being released in the current period versus what is being put up in terms of new business and trying to get a sense of that, as well as market value movements on the CSM. We will be providing more detail on this. Is that market movement element structurally zero, ceteris paribus? Is that fair? Yes. I would say, I would say yes, but I think the best example of it would be in the variable annuity portfolio. In the, you know, in the first half of 2022, you had this big reduction in equity markets that impacts the present value of future fees, and that is reflected mostly in a reduced CSM over the, over the course of that period. There is, let's say, yeah, there's no unstructured elements in it. It's the release of the CSM, market value movements, and experience adjustments, of course, that would roll through there. All right. Great. I have other questions. I'll let it at this go. Thanks. Maybe good to I think one of the questions also the + EUR 0.7 billion that we show on the slide, maybe good to talk about the interest rate impact on the risk adjustment. Yeah, that's a very big one. I'd mentioned it in the presentation, but in general, what's happening here is, you have a certain amount of the risk adjustment, which we had pegged at EUR 3.9 billion as of the opening balance sheet date. You can imagine that that is impacted by interest rates. If you think about it as ongoing, risk charges, the fact that interest rates have come up lower the value of that risk adjustment. The way that we have elected to do it is that effectively the risk adjustment comes down but the CSM goes up, and that is a big reason for that, let's say, that +7. There's also some other things that roll through there, for example, foreign exchange movements. We can give you some more detail on that. It's important to get the moving pieces. We just use this as a high-level summary of what's going on with the CSM development. Yeah, thanks. Thanks very much. Yeah. Thanks, Farquhar. We will be back to you later. Let's go to the next question first. Next question comes from Cor Kluis from ABN AMRO Oddo BHF. Cor, go ahead. Hello, good afternoon. Thanks for the presentation. Very clear indeed. I got a couple of questions. Maybe first on the CSM release. It's down to 8%-10%, so 8%-12%, around 10% release a year. That's EUR 1.2 billion, which is approximately the same as the operating result. Is that the right conclusion that the operating result is going to be the same as the CSM release, or are there some other items in the operating result in the IFRS 9 and IFRS 17 going forward? It would make it quite simple for us to calculate operating results. Second question is, could you help us a little bit through to making the link between IFRS 9 and IFRS 17 profits, which is quite clear, and the capital generation? You already mentioned that the earnings in force are quite similar to the profits. Could you just be a little bit more specific? Is that true for the whole group? About which profits do we talk? Is it IFRS 17 and IFRS 9 bottom line profit, or do we talk about operating profit from IFRS 9 and IFRS 17? To get a better relation between the capital generation figure and the IFRS 17 figures. I think the other, Cor, the other important element that you need to look at is the net investment result on the insurance businesses. That's gonna be, you know, for example, on the, on the life blocks, that's gonna be pretty stable, I think, because we're looking at book value returns. It's negligible on the long-term care block. It's small-ish on the variable annuities. As you think about, you know, getting to a, let's say, a run rate for the operating result, the key things are that insurance service result, mainly driven by the CSM and the risk adjustment release together with that net investment margin. There's gonna be things that happen in the course of the quarter. The, you know, the claims experience, the claims variance adjustments, let's say, that go through are gonna be a source of some volatility. The nice thing is that it's gonna be pretty transparent as to what exactly is as to what's going on. Yeah. Maybe to add to that, the first half of 2022 was quite unique obviously, because we still had COVID-19 death claims coming in, into the U.S., which you see coming through there as negative claim experience, as well as, impact from onerous contracts which resulted from significant market movements in the first half of 2022. Hey, Cor, the one that you didn't. You focused on the insurance result, of course, but I think we're showing that, you know, we are going to be giving more transparency on the operating result that is attributed to non-insurance businesses. You know, the whole Mutual Funds thing, a lot of the Retirement Plans administration, Stable Value Solutions, and that sort of thing are gonna be coming through that. WFG is gonna be coming through that non-insurance fee related result. Okay. Thank you. Sophie too, I think. Yeah, we had last question on the link between operating results and OCG. I think what we're trying to compare is. You remember that OCG has three basic components, right? It's an earnings on the in-force plus a release of required capital minus a new business strain. We focus on the very first one. It's the earnings on the in-force. It's the earnings on the in-force that if we've done this about right across the group, that's going to be quite similar to the, let's say, the operating result under IFRS 17 after tax. That's what I was looking for. Right. Thank you. So were we, Cor. Thank you, Cor. We'll go back to Farquhar again with your second question. Farquhar, go ahead. Thanks again. Chiefly, obviously, this is one I should have asked in the first session actually. It's just on the kind of onerous contracts topic. Is there a deduction coming through in the kind of transition balance sheet? Actually, in terms of the operating result that you're showing, is there a kind of structural component of onerous contracts coming through there, or we assume it's probably zero? No. No, that's not the case. Let's see if I can go through a little bit of onerous contract mechanics with you. To the extent that you have an onerous contract already, then you are going to see if the market's impacted, if there's a different claims experience or whatsoever, you will see it in some form in the P&L, in some form in the P&L. It's not a structural thing. It's not a structural drag. Those things coming through the P&L on certain types of business. You will see that. All right. Actually, I think the slide I'm trying to refer to is actually probably 19, where the. I'm just trying to understand which element of the onerous contract is flowing through the operating results, and is that kind of structural thing. I just assume it's probably zero. Just using the Do you wanna use the, like, the variable annuity as an example? Maybe, yeah. That might be useful, please. Okay. To the extent that... We said that onerous contracts are created in this case, as a consequence of equity markets reducing present value future fees to the point where the CSM goes away. Does that make sense? Yeah. In the current period, the impact on those, onerous contracts, so for example, on lapse experience or mortality experience or other claims experience, that will roll through the P&L. We can give you. I think we can follow up with you a bit later and give you a more detailed explanation because this one does get a bit complicated whenever you talk about onerous contracts. There is no structural element in it. It's not an ongoing drag. Yeah. Okay. Then the transition balance sheet impact? At transition, there really aren't any onerous contracts. You're setting a CSM to zero effectively. You would've seen the impact of any, let's say, unprofitable products coming through the transition balance sheet in equity. How much was that impact? Less than 1% of the best estimate liabilities was from onerous contracts at the opening balance sheet. It was very limited. Okay. Perfect. Thanks. All right. Operator, can I ask you to repoll once more? Yes. As a reminder, to ask a question, please click the Reactions button at the bottom of your Zoom screen, then press the Raise Hand button. If you've dialed in by phone, press star nine to raise your hand and star six to mute and unmute. Farquhar, I see you have your hand up, but I don't know whether that's by accident or whether you. It's not by accident, actually. I have one final question. All right. I should have asked at the end of that one. Just in terms of targets, what's your kind of early preliminary thinking about how you might morph the targets? At the moment, I think there's only one IFRS 17... IFRS 4 based target within your frameworks in terms of just the operating result. Would we just expect a reframing of that in IFRS 4 or? You wouldn't expect it. We don't put a target out for an IFRS operating result today. I think as you know, the targets that we put out in the market are more related to capital generation, free cashflow, things of that nature. I would not expect anything to change at this moment with respect to the IFRS 17 implementation. We will continue to run the business on, let's say, a capital generation basis. That will not change. IFRS 17 will give you a new lens into that a little bit, but I would not expect it to be reflected in the targets, which we will talk about when we do the capital markets day in the last part of June later on this year. I would not expect IFRS 17 targets there. Okay. That's essentially you're ditching from one IFRS 4 target to zero IFRS 17 targets. We don't have an IFRS 4 target, period. I think you've got an underlying earnings target. Maybe I'm wrong. I'll double-check. No. No. I can see the next question is coming through from per email, actually. It's from Michael Huttner from Berenberg. Well, the question's coming in as we speak. It's a question, I guess, about the comparison between the US OCG and the US operating results. The US OCG for the full year, so operating capital generation for the full year 2022 was $685, and the operating profits was $695 for the first half of 2022. Matt, can you talk about a few of the drivers there? Yeah. I can do so. Just, just looking at the question, you have to adjust for a few things. The operating profit for the half year is... First of all, it's pre-tax number, and the OCG is an after-tax number. Most importantly, the OCG in the US is already being reduced by the new business strain. That's where we're, you know, we're talking with Farquhar there that it's important to understand, let's say, the composition of that OCG, breaking it down between earnings on in-force, release of required capital and the new business strain. That's more information that we will be providing, but I think you'll see that they are more closely aligned. I hope that answers your question, Michael. We will go to the next question online, which is from Michele Ballatore from KBW. Michele, I hope you can hear us. You can go ahead. Yeah. Thank you. If we compare the key elements of volatility between IFRS 4 and the new accounting regime, can you expand a little bit more? I mean, what kind of volatility we can expect? What are the key drivers? What is changing You know, on a general broader level, let's say? Thank you. I would say the biggest thing that's changing is the elimination of vast majority of the accounting mismatches that we've seen between IFRS 17 and IFRS 4. You can kind of see it on that slide, where we talk about the U.S. results. Really, it becomes much cleaner. Just being able to match the asset side of the balance sheet together with the liability side is gonna be a big advantage. Like I said in my presentation, the net income actually becomes a bit more re-relevant. You will still see volatility in the net income number, but it'll be based on things that are, I would say, more real, like, you know, claims experience and the like. A lot of those accounting mismatches disappear. I think it's gonna be a better lens for us all to look through. Thank you. You're welcome, Michele. Maybe one last time, operator, could you re-poll, please? Yes. To ask a question, please click the Raise Hand button at the bottom of your screen. If you are dialed in via phone, press star nine on the telephone keypad, and star six to mute and unmute. Okay. I see no further questions coming in. With that, thank you, operator, and thanks, everyone online. This concludes today's educational webinar on IFRS 9 and IFRS 17. Matt and I want to thank you for your questions. Have a good day, and thank you for your participation in this call.