Good morning, ladies and gentlemen. This is the operator speaking. Welcome to NN Group's analyst conference call on the second half year 2020 results. The telephone lines will be in listen-only mode during the company's presentation. The lines will then be open for a question and answer session. Before handing this conference call over to Mr. David Knibbe, Chief Executive Officer of NN Group, let me first give the following statement on behalf of the company. Today's comments may include forward-looking statements, such as statements regarding future developments in NN Group's business, expectations for its future financial performance, and any statement not involving a historical fact. Actual results may differ materially from those projected in any forward-looking statement. Any forward-looking statements speak only as of the date they are made, and NN Group assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. Furthermore, nothing in today's comments constitutes an offer to sell or a solicitation of an offer to buy any security. Good morning, Mr. Knibbe. Over to you. Yes. Thank you, good morning, everyone, and welcome to our conference call to discuss NN Group's results for the second half of 2020. As always, I am joined today by Delfin Rueda, our Chief Financial Officer, and Bernhard Kaufmann, our Chief Risk Officer. Rest assured, we are sitting in a very large room at an appropriate distance from each other. I will start off this presentation with the highlights of the second-half-year results, including the strategic and commercial developments. Delfin will then talk in more detail about the solvency position and operating capital generation, as well as the financial results of the group. After wrapping up the presentation, I will open up the call for Q&A. Let me start with the financial highlights shown on slide three. A lot happened in 2020. The global COVID pandemic affected the lives of all of us. However, our employees showed exceptional resilience in adapting to remote working, and they continued to provide an uninterrupted service to our customers and support them through these difficult times. In financial terms, the pandemic had a limited direct impact on our operating result of around EUR 50 million. Our balance sheet remains strong. The volatile markets and further reduction of interest rates had a positive impact on the stock of capital, which is the solvency ratio, and a negative impact on the flow of capital, or in other words, OCG, which amounted to close to EUR 1 billion in 2020. We saw new sales in Japan and Europe rebound in the second half of 2020, which is testament to how well our brokers and agents in particular have adapted to new digital ways of reaching customers. The operating result for the second half of the year was up more than 9% compared with the same period in 2019. Strong results at Netherlands Life reflect a higher investment margin as well as lower expenses. In our Non-life business, the lower underwriting results in disability and accident were partly offset by lower claims in property and casualty, and the EUR 26 million contribution of VIVAT Non-life, which became part of NN Group on the 1st of April. The overall combined ratio was 95.7%. Further expense savings were made across the company, allowing us to achieve the cost savings target of EUR 400 million. As expected, and as already flagged at the Capital Markets Day last year, operating capital generation in 2020 was impacted by the exceptional market circumstances and low interest rates. On top of this, in the second half of 2020, we saw higher claims in our disability portfolio, higher new business strain in Japan as a result of improved sales, as well as the suspension of dividend payments by NN Bank following the recommendation of the ECB. This was partly compensated by the accelerated shift to higher-yielding assets and higher new business contribution from Insurance Europe. Delfin will talk more about the various drivers of operating capital generation later in the presentation. Let me confirm that the OCG of around EUR 1 billion is very much in line with our expectations. We are still very much on track to reach our target of EUR 1.5 billion of operating capital generation by 2023. The year-end solvency ratio is 210%, and this already reflects the deduction of the proposed 2020 final dividend of EUR 1.47 per share. Our strong solvency position allows for resilient capital returns in line with the commitments we have made in our dividend policy. The 2020 full year dividend per share represents a growth of almost 8% on 2019. We have also announced today a new share buyback program of EUR 250 million. Let's turn to slide four. The new strategy that we presented at the Capital Markets Day in June last year is geared to creating long-term value for all stakeholders. In addition to our financial targets, we also measure our performance against non-financial indicators because we believe that if we take good care of our customers, employees, and society as a whole, this also allows us to deliver solid long-term results for shareholders. We continue to provide an excellent customer experience through the challenges of the pandemic, and this is reflected in a broadly stable customer satisfaction score. I'm particularly proud of our employee engagement, which increased substantially with an overall score of 7.9. We aim to contribute to the transition to a sustainable economy through investing our assets responsibly. We track this based on the percentage of ESG integrated assets under management, which increased to 74%. We continue to play our part in supporting the communities in which we live and work through donations and gifts. We are pleased to have received external recognition for our ESG performance by again being included in the Dow Jones Sustainability Indices, both the World and the Europe Index. We announced these targets in June last year, so we are still at an early stage of the journey to meeting these objectives by 2023. However, we are working hard to improve our performance in all areas, and we intend to report our progress regularly. Now moving to slide five. All of our business units are implementing initiatives supporting our strategy to increase cash flow generation and drive growth in attractive markets. We took advantage of market opportunities in the first half of the year to invest in investment-grade bonds, high-yield bonds, equity, and emerging market debt. We also made additional investments in mortgages, real estate, and loans throughout the year, bringing the total investments in higher-yielding assets to around EUR 8 billion in 2020. Most of which in Netherlands Life. The additional returns that these investments generate are already visible in the higher investment margins. At Non-life, we are taking various actions to improve the results of the disability portfolios. We are continuing our drive for efficiency across the organization. Additional measures have been implemented in light of the pandemic. For example, in Japan, we shifted to a more digital branding strategy and restricted new hires to key areas only. The 2020 results reflect the contribution of the recent acquisitions of VIVAT Non-life, as well as the acquired Life & Pension business in Slovakia and the Czech Republic in 2019. These transactions have delivered better than expected returns, and the integration into NN is progressing well. At the same time, we have committed to regularly assessing all of our individual businesses against our financial and strategic criteria, and we are disciplined in deciding if we are the right owners. Last week we announced the sale of our business in Bulgaria as we believe this is in the best interest of our local customers, business partners and employees, as well as our shareholders. Similarly, we sold our broker business in Turkey in the fourth quarter of last year. On the commercial side, we have launched many new products designed to meet customer needs. Let me give you a few examples. We entered the general insurance market in Romania with a new home insurance product. In Japan, we have recently introduced a second round of products that have been adapted to the revised tax regulations in that country. In the second half of the year, NN Bank introduced a new label called Woonnu, which offers mortgage solutions for the purchase or improvement of energy-efficient homes by linking the mortgage interest rate to the property's energy label. Given the interest in the first months, we are confident that this unique proposition will show a healthy growth in the future. Responsible investment is at the core of the strategy of NN Investment Partners, our asset manager. Investment performance was strong across most funds in 2020, particularly in the sustainable and impact investing strategy. Underlining our belief that this approach is good for both the planet but also for returns. I'd like to talk more about the commercial momentum on slide six. The COVID-19 restrictions throughout 2020 meant developing new and improved ways to reach our customers and supporting brokers and agents with digital tools and online sales processes. It is encouraging to see that the sales both in Europe and Japan picked up again in the second half of the year, and that the value of new business also increased compared with the same period in 2019 and the first half of 2020. The mortgage market in the Netherlands remained strong throughout 2020, and NN Bank originated a record level of mortgages, passing the EUR 8 billion mark for the first time. The majority of these mortgages are transferred to the investment portfolios of our insurance companies and to the third-party mortgage fund offered by NNIP. Our asset manager saw strong inflows of new assets, bringing total assets under management to EUR 300 billion at the end of 2020. Performance across the different strategies was very strong. The over EUR 10 billion of third-party inflows was mainly in the fixed income and emerging market debt strategy. Turning now to slide seven. At our Capital Markets Day, we explained that a strong balance sheet is one of our priorities as it allows for resilient and growing long-term capital generation. We target operating capital generation of EUR 1.5 billion in 2023, as well as mid-single digit annual growth of operating capital generation over time. This is the basis for delivering on our dividend policy, which consists of a progressive dividend per share and an annual share buyback of at least EUR 250 million. The uncertainty caused by the pandemic led various regulators to request companies to apply prudency around capital returns. We followed this advice and limited dividend flows from our subsidiaries to the holding during 2020. At group level, we were able to fully resume our dividend payments to shareholders and a share buyback program in August last year. Today, we are announcing a proposed 2020 final dividend of EUR 1.47 per share, which will be tabled at our annual general meeting on the 20th of May. We have also announced a new EUR 250 million share buyback program. We have made a balanced decision on capital returns, taking several inputs into consideration. On the one hand, we have observed unprecedented market volatility in 2020, as well as regulatory caution with respect to capital returns. On the other hand, our balance sheet and capital generation is strong and resilient. All in all, our commitment to grow long-term capital generation over time, in combination with the capital return announcements made today, underpin our attractive investment proposition. With that, I will pass you over to Delfin. Thank you, David, and good morning, everyone. Let me start, as usual, with the movement in NN Group solvency ratio in the second half of 2020. Our solvency ratio remains strong at 210% at the end of 2020, versus 221% at the 30th of June. There are quite a number of items that have impacted the ratio, so let me take you through them. Firstly, operating capital generation added seven percentage points to the ratio. I will talk more about the drivers of operating capital generation later. On balance, market movements had a neutral effect on the ratio, mainly reflecting the positive impact of higher equity valuation, offset by the negative impact of lower interest rates. The category other includes model and assumption changes and the reversal of the corporate tax rate change in the Netherlands, as well as the additional capital requirement due to the move to higher yielding assets. Capital flows to shareholders reduced the ratio by 6 percentage points, and represents the deduction of the proposed 2020 final dividend, as well as the remaining part of the share buyback program that we resumed in August. We have included NN Bank in the calculation of the group solvency ratio at the end of 2020, in line with the new requirements of De Nederlandsche Bank. This had a negative impact to the ratio of around nine percentage points. Our solvency ratio before capital flows and inclusion of NN Bank actually increased to 225%. Let's now turn to slide 10, which shows the movement of the ratio over the full year. The solvency ratio was 224% at the start of 2020. Looking at the movements during the year, operating capital generation contributed 14 percentage points to the ratio. This is lower than we expected at the start of the year, but is in line with the guidance that we gave at the Capital Markets Day, and reflects the lower interest rates and the impact of the pandemic. We experienced extreme volatility in the markets, especially in the first six months of the year. As we've seen before, the longer-term market impact is relatively small, driven by our conservative asset mix. Market variances reduced the ratio by 4 percentage points in 2020, mainly due to the negative impact from credit spread movements, partly compensated by higher equity valuations. The category other includes various items. The main ones being the longevity transactions, the reversal of the government's planned corporate tax rate reduction in the Netherlands, and the lowering of the UFR. On balance, all these items had a positive impact on the ratio of eight percentage points. Capital flows to shareholders of, in total, EUR 1.4 billion, reduced the ratio by 17 percentage points. We also had a couple of non-recurrent events. One of them, the acquisition of VIVAT Non-life, and the other, the inclusion of NN Bank in the group solvency calculations. Together, this reduced the ratio by 15 percentage points. Altogether, these movements brought the ratio to 210% at the end of 2020. Let's now discuss the operating capital generation in more detail on slide 11. Total operating capital generation in the second half of 2020 amounted to EUR 450 million, compared with EUR 653 million in the same period of 2019. In the table on this slide, you can see the split by segment. At our Capital Markets Day, I already guided for a dip in operating capital generation in 2020 as a result of the exceptional market circumstances during the year. There was a net negative impact from the UFR drag and risk margin release due to the lower interest rates. This was partly compensated by the higher investment returns generated from the shift to higher yielding assets. You can also see this in the breakdown by source that we have included in the appendix on slide 20. Other items affecting operating capital generation in 2020 were the unfavorable developments in the Non-life disability and accident portfolio, as well as the new business strain following higher sales in Japan. There was no contribution from the bank last year as it suspended its dividend payments on the recommendation of the regulator. Operating capital generation was positively impacted by a higher new business contribution in Insurance Europe. The next slide shows the movement in the cash capital position at the holding, which was EUR 1.2 billion at the end of December 2020, compared with EUR 1.3 billion at the end of June, and therefore remains comfortably within our target range of EUR 0.5 billion-EUR 1.5 billion. Total remittances received from subsidiaries amounted to EUR 592 million in the second half of 2020, bringing free cash flow to EUR 613 million. As David mentioned earlier, we followed the advice of regulators in the light of the uncertainty caused by the pandemic, and limited the payment of dividends by some subsidiaries, including NN Bank. We intend to pay any suspended dividends in the future, as and when the situation allows. As usual, details of all the remittances upstream by each segment can be found in the appendix of this presentation. The main cash outflow in the second half of the year was the payment of the 2020 interim dividend in September, which included the catch-up of the suspended 2019 final dividend, as well as the shares repurchased under the buyback program. During the full year, we received EUR 1.3 billion of remittances from subsidiaries and returned EUR 1 billion to shareholders. Besides these capital flows to shareholders, we also had other cash outflows during 2020 for the acquisition of VIVAT Non-life and for the redemption of EUR 300 million of senior debt. Moving on to the next slide, I will take you through the IFRS financial results of the group. Starting on the left, NN Group's operating result increased to EUR 963 million from EUR 881 million in the second half of 2019, which included EUR 54 million of non-recurrent benefits. The second half of 2020 includes just EUR 8 million of non-recurrent benefits, as well as an estimated negative impact of COVID-19 of around EUR 23 million. Excluding all these items, the increase of the operating result was mainly driven by the shift to higher yielding assets and higher dividends in the investment margin of Netherlands Life. On the right-hand side, you can see that the net result for the second half of 2020 was EUR 1.3 billion. The increase compared with the second half of 2019 is explained by the higher operating result, as well as by a higher contribution from non-operating items, including a EUR 100 million provision release following the completion of a tax audit of a legacy entity in Australia. I will now take you through the operating performance of the individual segments on slide 14. Starting as usual with Netherlands Life, which reported an operating result of EUR 500 million versus EUR 397 million in the second half of 2019. I already mentioned the higher investment margin as a result of the shift to higher yielding assets. On top of that, the life company managed to reduce its expenses further, with the aim of lowering its cost base in line with the portfolio run-off. The result of Netherlands Non-life decreased to EUR 103 million due to lower underwriting result in disability and accident, where we saw higher claims in the group income portfolio, as well as the impact of the reduction of the discount rate used to calculate DNB technical provisions. The inclusion of VIVAT Non-life contributed EUR 26 million. The combined ratio was 95.7% for the second half of 2020. Insurance Europe's operating result increased to EUR 152 million, reflecting a higher investment margin in Belgium as well as higher pension fees in Romania. The operating result of Japan Life was EUR 102 million, which is an increase of 6% excluding currency effects. This was driven by lower surrenders, reflecting increased persistency as well as lower expenses. Asset Management's operating result decreased to EUR 78 million, mainly due to lower fees as the asset mix moved more to lower margin strategies as well as ongoing fee pressure. The operating result of banking decreased to EUR 74 million as the comparative period in 2019 including EUR 26 million of non-recurrent premiums on mortgage sales to NN IP Dutch Residential Mortgage Fund. On the other hand, the interest result was higher thanks to lower funding costs as well as higher penalty interest as customers continued to refinance their loans, taking advantage of the low mortgage rates. Finally, the operating result of the segment other was minus EUR 47 million, mainly reflecting the higher operating result of the reinsurance business, which included an EUR 8 million release of a claims reserve related to the Non-life disability portfolio. As David already indicated, the impact of COVID-19 on NN Group's operating results has been limited with a full year negative impact of around EUR 50 million. The last thing I want to talk about is cost reductions, which are shown in the next slide. At the Capital Markets Day in 2017, we announced our objective to reduce the 2016 cost base of the business units in the scope of the Delta Lloyd integration by EUR 350 million by the end of 2020. We later increased the target to EUR 400 million. With additional expense savings of EUR 23 million in the second half of 2020, we have now achieved total cost reductions of EUR 404 million, just ahead of our target. This does not mean the end of expense reductions. On the contrary, we will continue to focus on increasing efficiency throughout the organization, and this is reflected in the segment cost guidance that we have given. I will now pass you back to David for the wrap-up. Thank you, Delfin. Amid a global pandemic, our employees, brokers, and agents showed incredible adaptability to the new reality of remote working and online contact. At the same time, have continued to support our customers with excellent products and services, which is reflected in the ongoing commercial momentum shown by our businesses. NN Group has also shown great resilience during a turbulent year. Our balance sheet remains strong, and our financial performance has held up well. This allows us to deliver attractive and growing capital returns to our shareholders. Today, we announced a proposed final dividend of EUR 1.47 per share, as well as a new 250 million share buyback program. The new strategy for NN Group that we presented in June is geared to creating long-term value for all our stakeholders All in all, we have made a promising start with the implementation of this strategy and have a solid foundation for delivering on both our financial and non-financial targets. I will now hand you back to the operator to open up the call for your questions. Thank you, Mr. Knibbe. Ladies and gentlemen, we will now start the question -and -answer session. To register for the Q&A, please press star one on your telephone. As a reminder, in the interest of time, we kindly ask you to limit the number of questions to two. Your questions will be answered in the order that they are received. Please press star one for your question or remark. Go ahead, please. The first question is from Mr. Benoit Petrarque, Kepler Cheuvreux. Go ahead, please, sir. Yes. Good morning, all. Two questions on my side. The first one is on the UFR drag, going into 2021. You had a kind of EUR 130 million deterioration of the UFR drag between H1 and H2. Obviously, you use a monthly reference for the interest rate to calculate this UFR drag in H2. Going into 2021 with the increase of interest rate roughly 30 basis points up versus EUR, how much will be the drag on the new basis? Is the EUR 560 million definitely lower going into 2021? Could you help us to quantify this UFR drag into 2021? That will be extremely useful. The second one is on the investment spreads, again, on OCG. Clearly, 2020 has been a good year in terms of on the investment spread side with various spreads, especially in H1. Again, looking into 2021, do you expect a bit of spread decrease versus the levels we've seen in 2020? I think the corporate spreads and spreads are relatively low as we speak, and I was wondering if there's a small negative effect to be expected there. Thank you. Yes. Good morning, Benoit. Let me give the first question on UFR drag to Delfin, and Bernhard will cover the question on investment spread and OCG. Yes. Thank you very much, Benoit. Indeed, the changes in interest rate has quite a significant impact on the UFR drag. We'll see the 30 basis points that we have seen already over the year, that will give you approximately EUR 140 million increase on the OCG. Of course, keep in mind that interest rates are all the time moving in one direction or another, and it is always good to keep more of a medium-term trend. Indeed, ceteris paribus, the increase of the 30 basis points would be around EUR 150 million impact on funds, on OCG. Benoit, on your question on investment spread, and how this comes through in OCG. Our investments in 2020, the EUR 8.7 billion in higher-yielding assets that David referred to. As we have done these investments over the year, we expect the full impact to become visible now in 2021. We assume this to be an uplift of EUR 170 million in 2021. You're right, the risk premiums are moving, but the impact should be in this order of magnitude in 2021. I think there's another EUR 50 million coming in on the OCG from the reinvestment. On the stock of investment, you do not see any specific pressure from the current low spread level. That's what you say? Yes. Right. Yes. Okay, cool. Thank you very much. The next question is from Ms. Fulin Liang, Morgan Stanley. Go ahead, please. Hi. Thank you. I have two questions. Sorry to come back to the UFR drag. Just so I am clear. In 2020, you reported, of the whole year, reported about EUR 1 billion UFR drag. Presumably, in normal year, if I looking at a normalized UFR drag in your sensitivity, you did actually disclose that every 15 basis points of drops of UFR would have about EUR 300 million drag on own fund. Is that EUR 300 million, let's say, if the interest rate remains flat, that EUR 300 million would be a drag, would be a normalized number, right? The 2020 you have an extra about EUR 700 million, mainly because of the interest rate dropped by maybe 40 basis points over the whole year. If interest rates actually go up from here, which already actually went up from here, we would see some positive impact on the UFR drag on top of the EUR 300 million normalized. Is that the right way to understand it? Secondly, is on your Non-life. I spoke to IR earlier today, so I understand the sum of the so-called lower capital generation on the Non-life is mainly because you basically canceled the internal reinsurance. You basically canceled out some of the pass-through to external reinsurance. You essentially retained a bit more business with yourself. Is that the plan going forward? Presumably that will have positive OCG contribution in the future. Is that fair? Thank you. Thank you, Fulin. Let me give these two questions to Delfin. Thank you very much, Fulin, for your question. Maybe because there is a lot of details here, will be helpful that you call to investor relations to get into the details, with a bit more details. Indeed, the sensitivity of the UFR drag to the changes in interest rates is quite significant. From the sensitivity that we gave you on the increase of 30 basis points, increasing by approximately EUR 150 million. This is based on the sensitivities on the OCG that we have published. That will be an increase from, let's say, a decrease in the UFR drag from what was the situation at the end of 2020. In any event, I think it's fair to say that even with the volatility in these interest rates, I think that it's very important to highlight, because this is always going to change from one month to another, that we are comfortable with the target that we have set in terms of the OCG for 2023, but also that we expect quite a rebound from 2020, that is for different factors that we could get into a very depressed level. We see OCG improving from mainly near every segment into next year and towards 2023. Yes. The second question on capital generation for Non-life related to the internal reinsurance. Delfin? Yes. Non-life, as you have seen, has had a good result in terms of operating result, but in terms of Operating Capital Generation has been quite depressed. One of the factors there for the full year, the reinsurance contract, the stop-loss reinsurance contract for individual disability, which was a three years contract, terminated, came to an end at the end of 2020. As a result, the Solvency Capital Requirement, the capital requirement increased, and increased substantially. That was EUR 65 million. That is a non-recurrent item that happened in 2020 due to the increase in the Solvency Capital Requirement. Thank you. The next question is from Mr. William Hawkins, KBW. Go ahead, please. Hi, guys. Thank you very much. I apologize. I think we all know there's more to NN than the ultimate forward rate, but my first question is on that. Delfin, so far, your answers have been about sensitivity to changes in interest rates year to date. Can I just come back? If nothing had changed, I think I'm right, ultimately, the UFR is something that will amortize to zero at some point in the future. If there weren't any change in the market, what would this 978 be in 2021 and 2022? I'm just trying to get a feel for how it amortizes down. I'm assuming I'm right, one day it would be zero. Adjunct to that, can you just remind us what is the benefit of the UFR to your Solvency II ratio? You wouldn't get any of these questions if the UFR didn't exist, but maybe that's another point. Second question, please. Can you just remind us about how you're balancing capital distribution with M&A plans? I know you can't be too specific on M&A plans, but there is a worry given precedence for NN, that you say good stuff about buybacks and then they get suspended because you need to raise capital to do deals. There's evidence of that in the past. Bluntly speaking, I'm just trying to gauge the risk of suspending buybacks for M&A. I suppose the more precise question from that is can you remind us what your internal resources would be, for any transactions before it started becoming vulnerable for the buyback? Thank you. Yes. Thank you, William. Let me start with the question on M&A plans and what you call capital distribution. Then Delfin will come back on the UFR question and UFR benefit to the ratio. Well, as you know, in general, all of our plans are based on organic growth, including the targets that we have set. We have very strict criteria, strategic and financial criteria, before we would embark on M&A. If you look at our capital return, we have a very clear capital return policy, and we're very committed to this. We're very serious around this. This is around a commitment to return to shareholders, but obviously also to keep long-term stable returns. Now, this policy is around progressive dividend and around an annual recurring share buyback of minimum EUR 250 million, and additional capital also to return unless we see value-creating opportunities. We take this commitment serious like we have shown in 2020. I think in 2020, we had very challenging market circumstances. There was the VIVAT acquisition. Of course, there was the senior debt of EUR 300 million that was not refinanced, still we obviously kept the EUR 250 million share buyback ongoing. I think that also shows that we take our commitments very serious. In terms of internal resources for transactions, we're not going to speculate on this, clearly we have a strong balance sheet. We have flexibility in there. At the end of the day, this is really about that on the one hand, we have our organic growth plans and any potential M&A would really have to meet both financial and strategic criteria before we would embark on that. Delfin, on the UFR. Yes, Bill. Thanks for your question. The UFR, first of January, it decreased by 15 basis points. That in itself has a positive impact of approximately EUR 25 million on our operating capital generation. The benefit of the UFR changes of course, with the level of interest rates. It was certainly higher at year-end than it is now based on higher interest rates. The important thing is to know that this decrease is expected to run down in 10-15 years, you're absolutely right. After year 15, there is basically not more benefit coming from the UFR. Equally important, it means that there is no UFR drag in our operating capital generation and the capital generation, therefore, will keep be increasing gradually over that same period of time. Thank you, guys. That's helpful. The next question is from Mr. Farooq Hanif, Credit Suisse. Go ahead, please. Hi, everybody. Thank you very much. Just going back on our favorite question on OCG. When I add up some of the numbers that you've told us so far, I think you said, 30 basis points is EUR 140 million on the UFR drag. I think you said EUR 170 million on reinvestment in high-risk assets. And then, of course, you have some one-offs like the SCR impact of the internal reinsurance in terms of the flow. When I add those numbers up, you're getting to quite a considerably higher number than the EUR 1 billion guidance that you already gave. Is that sounding about right? I realize that there's going to be volatility, but getting to roughly EUR 1.3 billion, does that sound to you to be the achievable target based on the numbers you've just told us? How much more risking, are we going to see a similar sort of level every year? Generally coming back on those questions. Secondly, going back to Will's question on M&A. Being more specific, even more, clearly you've been linked in the press with targets in Eastern Europe, and I just wondered about your ambition there or your ability really to integrate, given that you've just done a deal. Did you comment further? Thank you. Yes. Good morning, Farooq. Let me just say a couple things on the OCG first and then give it to Delfin, and then after that I'll come back on M&A. On OCG, Hanif, the number we came out with of close to EUR 1 billion is very much in line with our own internal expectation. As Delfin also said, we reconfirm our target of EUR 1.5 billion that we set in the summer. Just as a reminder, where is this increase do we expect to come from? It's obviously the UFR and the portfolio development, a positive effect from both a lower UFR, the annual reduction, as well as the run-off of the portfolio. That's one element. Of course, the other element indeed is the shift to higher yielding assets at EUR 170 million that was mentioned is on a full year basis. Improvements in Non-life, both underwriting and expenses. Of course, there is the inclusion of the bank, which didn't have a free cash flow or OCG in 2020. That is another driver. Of course, new business. New business Europe continuing to sell a profitable new business. These are all important drivers which make us confirm the EUR 1 billion target of OCG. Let me give it also to Delfin. Yeah. There is not much more to add to this. Indeed, just maybe to complement the investments, the move to higher yielding assets actually had estimated around EUR 120 million positive impact on the OCG in 2020. The EUR 170 million, as David has explained, is the annualized level for that. When you look at 2021 compared to 2020, you can already expect another EUR 50 million or so additional investment margin. Particularly Non-life was really depressed in terms of OCG in 2020 for many circumstances. The impact on disability and accident actually on a Solvency II basis come a bit higher than under IFRS. More importantly, the EUR 65 million increase in capital requirement that has been mentioned, and it will come. The cost savings for Non-life coming from the acquisition of VIVAT Non-life, they are still to come through together with improvement on underwriting. There is quite an upside for the Non-life contribution to operating capital generation. I think these are the main elements. That make us confident, and that was, of course, if on top of that you see some increase in interest rates, will make that journey easier, but we're not counting on that to remain. Yes. Thank you, Delfin. On M&A and ability to integrate a business if we've just done a deal. Just to set the stage, we've done a small bolt-on acquisition in Czech and Slovakia with Aegon. That has progressing well. We had quite some benefits already from that deal. We just started also the integration of VIVAT, which as you might have seen also is already adding to our results. These two items, the integration is actually progressing well. Is that by itself a factor? No. The Non-life company, obviously in the Netherlands, is actively integrating the business. For Czech and Slovakia, there's still some ongoing integration activities on the back of the Aegon deal. In general, I wouldn't say that that is now an issue. What is, at the end of the day, very important is our own financial criteria and strategic criteria that are determining whether we would enter into M&A. Please keep in mind that really our base case is organic growth. That is our base case. You've also seen from the deals, I think, that we've done in the past, that we would only do that if they make strategic sense, and when we can make an attractive return. By the way, M&A also includes divestments. We're actively looking at our portfolio. You might have seen that also we have divested our broker business in Turkey and recently our Bulgarian Life and Pension business as well. Okay. Thank you very much. The next question is from Mr. Michael Huttner, Berenberg. Go ahead, please. Thank you very much. I'm afraid the UFR question could be answered that so well. Two things. One, the original question, the mortgages, you say they're up on the year, but in the second half, the mortgage origination looked lower. Unless I read them wrong? Sorry, Michael. We have trouble hearing you. Can you maybe speak up a bit? Is this better? Yes, it's a bit better. Yeah. Fantastic. Sorry about that. Mortgages lower in the second half, I think. I need to cross-check with some information. By what's happening there, and then the benefits of the Turkey and Bulgaria disposal. I imagine Turkey is already in the mix, but maybe you can talk a little bit about the benefits of- Sorry, Michael. We cannot hear you well. Maybe it's best that you dial in again, to try and reconnect and we'll make sure we'll get your question. We can't hear you right now. Okay. No problem. Thank you. Bye. The next question is from Mr. Ashik Musaddi, JPMorgan. Go ahead please. Thank you. Hello, David. Just a couple of questions I have is, first of all, how do I think about dividend? Clearly you have grown the dividend at 8% this year. Does that mean that 8% is more or less what you are expecting when you gave the guidance of mid-single digit plus the lower share count, related growth? Is that something we can think about as a normal dividend growth that we should be expecting in a normal market situation? That's the first question. The second question is, on M&A. Clearly you've been linked with Aviva Poland, which I think is an asset which would make strategic and financial sense to you. How do we think about your funding capacity for that? I mean, one thing is that your SCR has gone up, your own fund has gone up. A lot of leverage capacity has opened up for you at the moment. How do we think about funding capacity? How much excess capital you have at the moment, you believe? How much debt capacity you have? Would you consider doing raising equity, if you need to do that M&A, or you would mainly do it in-house, and you don't see much issues with that? Given that it could be a reasonable size acquisition, do you have any sort of hurdles in terms of ROE, et cetera, what you would want to achieve with that, with any such big size acquisition? Just one more question on the Japan recovery. Japan recovery has been pretty strong this year after a soggy 2019. How do we think about that going forward? Do you think that we are in an end state now, or there is still some lot of uncertainties on that? Thank you. Yes. Thank you, Ashik. Let me give the first questions to Delfin, and then I'll come back on Japan Life. Yes. Hi, Ashik. Thank you for your questions. We indicated, and that was a midterm guidance of growing OCG, and as a consequence of free cash flows, mid-single digit over time. We also indicated that, of course, because of the share buyback, the growth of dividends per share is obviously always above that level. I don't think there was anything unusual on the ordinary dividend paid in 2020, as full dividend. For your second question, I think, the way I will answer it is in terms of our financial flexibility in general. I mean, 210% solvency ratio has also to be understood in combination with the sensitivities to market shocks that we publish every six months. You have it as part of the press release, within the appendix of the press release, today, and our risk profile. In that sense, I think it's fair to say that we are very comfortable with the level of solvency and that we can absorb some deviations. We have also very well proved it in an environment of decreasing interest rates. In terms of our tiering capacity, if you like, we have the ability of increase up to EUR 1.3 billion in restricted Tier 1. We have, depend how you look at Tier 2. If you look at Tier 2 and Tier 3 together is approximately EUR 1 billion at year-end. If you were to max the Tier 3 capacity, is another EUR 0.5 billion of Tier 2 capacity. In addition to that, our leverage ratio decreased slightly at the end of year-end versus June. As you know, we reduced the level of senior debt by EUR 300 million in June earlier this year. I think there is no doubt that there is financial capacity to continue with our regular capital distribution to shareholders as part of our plan. If necessarily to take advantage of opportunities if they present themselves. Thank you, Delfin. On Japan, indeed, Ashik, I think we've seen a strong recovery of sales in the second half. VNB grew to EUR 46 million versus EUR 18 million in 2019. Granted, of course, 2019 was a very low level because the tax reform had just come out. The good news is, we've always said that we believe that we can get the sales on a much stronger path also with the new tax rules, we're starting to see this coming through. The EUR 46 million is a first step. We have introduced in February more products in the COLI space that we're actually optimistic on that will further support the growth of our Japanese sales. We feel we're still on track to deliver the EUR 150 million of VNB that we've set as a target for 2023. There's clearly uncertainties in the world everywhere, but I wouldn't say that Japan, from that point of view, there's more uncertainty in Japan than in other markets. I would say it's comparable. The good news is that we're well on track, and we see actually our sales channels being very active. Typically, brokers already do well. Banks are starting to pick up as well. Banks have been, across the globe, less active in insurance sales, but actually November and December, we've also seen starting to see a pickup of bank sales. That further supports, let's say, the trajectory that we're on in Japan. That's very clear. Thank you, David. Thanks, Delfin. The next question is from Mr. Steven Haywood, HSBC. Go ahead, please. Thank you very much. Looking at your operating profit generation, you had a -EUR 42 million experience variance in there. Could you describe where this came from? Also, did you take any mortality assumption changes or longevity assumption changes in the Netherlands last year because of the improved mortality tables? Then on the NN Re EUR 30 million dividend, can you just tell me where that came from, which business unit? Thank you. Yeah. Steven, thank you. Delfin? Yes. Thanks, Steven. In terms of the negative experience variance in Netherlands Life, I think you have to take it. It is always a volatile item, actually, for the full year because there were some positive experiences in the first half, and this has been negative. These are driven by different factors there, some related to lapses and some other small considerations there. Overall, you should expect this to be around EUR 0. As I said, for the full year for Netherlands Life, it was, I think, a -EUR 3 million or something, very limited. We had good technical result, and it was on the actual, in 2020, we have some positive longevity results within the technical margin. However, we did not really change our longevity assumptions because of the new mortality table that came in the Netherlands. We're looking carefully into the no doubt recent experience of increased mortality. We are a bit cautious, but I must say that there could be some upside on reviewing this within 2021. In terms of the dividend from NN Re, I mentioned before the negative that there was in the capital requirement from Non-life because of the cancellation of their insurance contract for the stop-loss insurance contract for individual disability. Here you see the other side of the same coin as 75% of that reinsurance contract was reinsured with NN Re. NN Re has also got a release of their own capital requirement. In addition, other parts of their business performed relatively well, and that explains the somewhat elevated dividend from NN Re in the second half. Perfect. Thank you, Delfin. The next question is from Mr. Colm Kelly, UBS. Go ahead, please, sir. Thanks a lot. Thanks, David and Delfin for taking my questions. The first one is on the move to higher yielding assets. Clearly, this is key to the OCG targets. In the past, I think NN has predominantly done this through Dutch residential mortgages and loans. Given the size of the UFR drag now, does it require an even more accelerated strategy around investing in illiquid assets beyond the typical illiquid assets that you have historically invested in? Rather, does it require more branching out into other illiquid credits where maybe NN doesn't have a strong track record in? Related to that, does the regulator have full sight into the types of illiquid credit NN is looking to move into over the course of the 2023 plan, and are they comfortable with that? My last question is related to M&A, and thanks for your comments on financial capacity. My question is more related to the disposal strategy. You mentioned the sale of the life and pensions business in Bulgaria. I appreciate it is small, but can you provide more detail on the rationale behind the sale of that business? Was it a case of market positioning, i.e., a lack of scale? Was it due to lack of market or business growth, or was it due to insufficient returns on capital? Some more detail on that would be appreciated. Thanks. Sure. Let me start on the question on Bulgaria, and then Bernhard can talk about the experience around high-yielding assets. Yeah, the thinking around Bulgaria. Well, as you know, Bulgaria is a relatively small country with 7 million people. Also we have a relatively small business there. The life business is small, and then we have a pension position. The combination of a relatively small market and a relatively small business unit was the reason why we decided to divest. It was not related to a broader commitment on the region, but specifically on Bulgaria itself. The business itself, it was profitable in terms of new business margin and returns. It made EUR 3 million profit. From that point of view, it wasn't insufficient return on capital, but it was really the size and, to be honest, also the potential upside or lack of upside debt that we saw in that market to get to a sufficient scale. I think we got a good price for it. EUR 77.7 million, I think is a good value for that. That's also helpful. To be honest, I think it's also important, KBC has plans in Bulgaria, and I think it's therefore they are also a better owner that they can combine with their business, and they're also a better owner for this business than we are. Those were some of the rationales behind the sale of Bulgaria. On higher-yielding assets, Bernhard? Yeah. To give you some background on the strategy behind higher-yielding assets. In 2020, we invested an additional EUR 3 billion in mortgages. that's also going forward our part of our strategy to build up our illiquid portfolio. We also invested in EUR 2.5 billion corporate bonds, emerging market debt, and around EUR 2 billion in equities, real estate. We have planned as part of our strategy until 2023 to step up OCG contribution by EUR 200 million. like Delfin also pointed to, the assumption is that, given the UFR drag, that we are not really have to change here our strategy. as we are so well on track and we also see flexibility going forward, we are considering, in a controlled way, also to look into the next years. As this is a risk manager speaking, you can be sure that we do everything within our risk-bearing capacity and tolerances and limits. also, by the way, reviewing our investment universe is part of our day-to-day business. again, we are here very well on track. Just to follow -up on the regulatory side, I suppose. As you say, it is branching out into other types of illiquids increasingly going forward than in the past. That is within your risk appetite and tolerance. I assume from a DNB perspective, they are comfortable that with the path you're taking around the asset portfolio. Yes. In all of the approaches or also discussions, this has never been a topic. Okay. That's very clear. Thank you, madam. The next question is from Mr. Robin van den Broek, Mediobanca. Go ahead, please, sir. Yes, good morning, everybody. One follow-up question. I think the question is not too dissimilar from what Farooq was trying to get at, but I'm just going to ask it a little bit differently. For Life, your OCG in H2 was 266. If I just multiply that by two and I add the 140 million UFR improvement driven by rates, and I add the 25 million due to the 15 basis points UFR reduction, I already get to 700 million. I guess I have to add something related to the negative experience that we just talked about, and there's still some residual re-risking benefits to come on top of that level. Could you just quantify those for me, please? Maybe a small clarification question, but the 140 million-150 million from UFR drag that you mentioned, I presume that includes also the VA still being at a lower average according to current levels, H1 this year versus H2 last year. Because I think that was one of the key things that was a bit of a surprise in the UFR drag move in H2 in your reporting today. That's question one. Secondly, more generically speaking, the sensitivities you provided are more for parallel moves. I was just wondering if we were assuming steepening. I appreciate that you, in your sensitivities, have disclosed that for your Solvency II ratio itself, that's a negative. Should we also assume that if there would be steepening, that your OCG generation would basically get stronger relative to your sensitivities as well? Lastly, the SCR contribution in H2 versus H1 was strong. I was just wondering if in any way that could be driven by the new pension agreement where DB basically is now, I think, entirely dead and will not be renewed. Is that SCR contribution going to be structurally higher, versus last year's level, so to speak? Thank you. Yeah, thank you, Robin. Let me give the first question on Life, OCG to Delfin. Bernhard will cover the sensitivities, and I will first come back on the pension reform in broad terms. Let's first go to Delfin. Yes. Thank you, Robin. On the operating capital generation about life. Indeed, you should not take the second half as a normal level. I think it will be better to consider the full year as this extraordinary effect on the life experience is level out. The shift to higher yielding assets for 2021 for Netherlands Life could easily be EUR 50 million higher than it is for 2020. We also have the EUR 25 million additional coming from the decrease of the UFR, the 15 basis points already happened in January. That together is already EUR 75 million. I think it's always dangerous to provide this guidance in relationship of the impact of the change of the interest rates on the UFR, because indeed, there are many factors affecting there, including, as well, the level of the volatility adjustment. No doubt, as the volatility adjustment decrease, of course, the spread on the investment assets also tends to improve. Overall, we have a target for life of EUR 900 million for 2023, and we feel comfortable with that. The second question about sensitivities, I think it's better that Bernhard takes it. Yeah, Robin. The steepening. We are duration long, meaning the steepening of the curve is impacting our own funds here now as pointed out negatively. That is mainly because of the difference between then the discounting of our liabilities versus the investments on the long end, and steepening then also leads exactly to this reduction of the UFR drag over time. It depends a little bit on where it is. If it's the 20- 30 year buckets where a lot of our liability is, it will be higher than if it's a 30- 40 year bucket. I don't have a number for it, but conceptually, this is moving in the direction that you suggested. Okay, the question on the pension reform related to the SCR. Now, the pension reform, and I know there's a lot in the media and there's a lot of talk about, but the implementation of that is expected in, well, I guess 2026, maybe 2025, but probably more 2026. The pension reform by itself confirms, of course, that defined benefit is ceasing to exist and that everything will move to DC. In terms of practically what has been happening in the life business, that was already the case. We did very limited defined benefits business. Every now and then, we still do some renewals, but that's typically only in the context of to buy the employer some time to work it out, either with his workers council or union to agree on a new pension scheme. Basically, we already see a slow runoff of the defined benefit book. All the new business is pretty much already in DC. Actually, we had a very good DC year renewal season. In terms of new business and renewal, our market share is, well, we don't have the final numbers yet because it's early in the year, but we do estimate that we would have, again, at least a 40% market share. We're doing well in the DC space, and the overall DC assets is now growing to EUR 24.6 billion. To make a long story short, the transition from DB to DC is ongoing and it will continue to go on. Keep in mind that the DB business, most companies leave their DB book paid up. it's really the new accruals that go to DC, but the run of the DB book by itself goes slower, basically with the retirement of individual employees. Okay, thanks, guys. There are no further questions, Mr. Knibbe. Okay. All right. We will then start wrapping up, and we will, of course, circle back to the one person that we lost, unfortunately, on the call. Thank you very much. Thank you for all your questions. Before we close the call, let me just wrap up by saying that the strong financial performance and the capital position reported by NN Group today allows us to deliver on our commitment to attractive capital returns for shareholders and long-term value creation for all of our stakeholders. Have a good day.