Operator
Good morning, ladies and gentlemen. This is the operator speaking. Welcome to the NN Group's analyst conference call on its first half year, 2026 results. The telephone lines will be in a 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 Knibber, Chief Executive Officer of NN Group, let me first give the following statement on behalf of the company. Today's comments are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those projected in any forward-looking statements. Such forward-looking statements may include future developments in NN Group's business expectations for the future financial performance and any other statements not involving a historical fact. Any forward-looking statements speak only as of the date they are made and an end 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 or an offer to buy any securities. References made to the legal information on the last page of the presentation. Good morning Mr Knibber, over to you.
Yes, thank you, Sharon, and good morning, everyone. Thank you for joining our conference call to discuss NN Group's performance of the first half of 2026. I'm excited to be here with you today, and with me are Annamie Femellick, our Chief Financial Officer, and Bilbert Alberg, our Chief Risk Officer. I'm starting off with an overview of today's key messages. I'm pleased to present another set of excellent results reflecting our continued business diversification towards our growth segments. while making tangible progress on our Future Ready program. Operating capital generation reached 1.1 billion euros supported by business growth in Europe. This result was achieved against a particularly demanding comparative base, resulting in a 5% year-on-year increase, and this was better than the flat guidance we gave. Our Group Solve-C ratio strengthened to 224%, increasing due to the exclusion of the banking operations as per the end of June 2026. Consolidating the bank under solo C2 penalized our ratio. With the exclusion of the bank from the ratio, the level playing field is improved. Future Ready continues to deliver tangible results. We are halfway into the program and it already delivered 65% of our target annual savings of 200 million by the end of 2027. commercial momentum remains strong value new business increased by 16 and this was supported by a pension transaction in the netherlands and by a 14 increase in vmb in europe in europe the growth was mainly driven by higher sales volumes in risk protection products underpinned by our strong distribution capabilities this more than offset lower vmb in japan where demand shifted towards shorter term products as new entrants affected the market and moderated sales growth in non-life gross written premium grew by six percent at netherlands life dc asset center management increased by 13 to 48 billion supported by higher net inflows and positive market movements in line with our dividend policy we increased the interim dividend to one euro and 55 cents which represents an increase of 12 percent versus last year's interim dividends this builds on our proven track record of consistent delivery on capital returns to our shareholders we continue to deliver value to our customers employees and society at large we are well on track to deliver on our 2028 targets let me highlight a few achievements made we aim for customer satisfaction score significantly above the market average and rank amongst the top three for broker satisfaction by 2028. Customer satisfaction continues to improve with both the Netherlands and European unions significantly above the market average. Additionally, we reaffirmed our number one broker satisfaction ranking in the Netherlands. We aim to be an employer of choice where people enjoy to work with a diversified population. Our employee engagement remains consistently strong and above the benchmark. Alongside this, we increase the volume of our investments in climate solutions to 14.3 billion, demonstrating our commitment to supporting the transition to a more sustainable economy. Our H-126 results once again demonstrate that our strategy continues to deliver. As a reminder, our investor proposition rests firmly on three core pillars. First, we continue to diversify our business mix. Future growth will for both OCG and free cash flow primarily come from international and netherlands non-life together with our banking business these are targeted to grow over 55 percent of total ocg by 2028 secondly with our future ready program we continue to standardize and automate operations scale ai and improve efficiency and scalability across the group and at the same time improve customer experience as you can see all the kpis are well on track. Thirdly, we remain fully committed to deliver on our capital return commitments, a progressive dividend per share and an annual share buyback program of $350 million. As I mentioned before, NN has been building its AI capabilities for years, and that early experience is now becoming increasingly relevant. NN operates in an environment that is particularly well suited to a ai adoption insurance is a service-based data-rich industry with complex decision making high volumes of customer interaction and extensive use of unstructured data these characteristics mean create meaningful opportunities for ai to improve productivity consistency and decision quality the key challenge is no longer the technology itself it is how we manage adoption, scale proven solutions, translate AI into tangible business impact. And that is why we launched the Future Ready program in 2024. Through this program we are simplifying our IT landscape, standardizing data, and build more digital and data-driven processes across the group. Our approach is deliberately selective. We prioritize scalable AI initiatives with immediate and visible business benefits. We focus on reusable capabilities and on copying proven use cases across NN. This allows us to benefit from our scale, avoid duplication and accelerate value creation across business units. The financial case is clear and disciplined. We expect to invest 450 million in future ready initiatives over the program period with an annual benefits building up to 200 million by 2027. Around 180 million of the benefits are expected to come from expense savings with the remainder linked to growth these investments and benefits are already reflected in our target so there's no hidden additional investment requirement AI yield significant productivity gains which outweigh the increase in token cost by the end of June we have completed 70% of the investment and already delivered 65% of the annual benefits last year at our capital markets day we showed an example where we applied AI to handle glass repair claims i'll show you later how we scale agentic claim handling but let's move first to the commercial performance of insurance europe our leading businesses in europe continue to grow impressively capitalizing on the momentum across the region in the first half vmb grew with an impressive 14 driven by both higher sales and attractive margins which will translate into ocg over time what is equally encouraging is that our vmb build-up is in line with our strategy and concentrated on capital-like protection products with attractive margins. Next to protection products, our pension business has also been growing consistently over recent years, fueled partially by strong financial markets across the region. We are a leading provider of Pillar 2 and Pillar 3 pensions across Central and Eastern Europe, providing a source of AOM-based fee income, a business model with attractive operational leverage. Our pensions assets under managed in Europe has been growing rapidly and has reached 50 billion euros during the first half of 26. It is worth noting that over recent years, our bank assurance channel in Greece has contributed strongly to the V&B growth in Europe due to a successful partnership with Bredeus Bank. This bank assurance agreement is still in place and we continue to see strong sales in 2026. However, we expect that sales via this channel will substantially be lower as of next year. At the same time, we remain optimistic that other opportunities in Greece will provide alternative sources of growth for the business, such as our Tide Agent Channel, which grew VMB by 30% last year and 25% year-on-year so far in 2016. So despite development in Greece, we remain very confident in Europe's underlying growth trajectory and its ability to reach the 600 million OCG in 2018. making our european tight agent channel future ready is a strategic priority for us and we see continued progress in this area with 46 of our tight agent sales now coming from digital leads we are also focusing our large language model visibility and while it's early days our initial efforts are proven successful with our average ai overview rank across insurance europe improving from the 12th position to the third position between December of 25 and May 26, already ranking as number one in several markets. As you know, in Japan, we operate in the sizable Kohli market with a total market volume of 250 billion Japanese yen at attractive IRRs of around 14%. After the business improvement order, we repositioned our offering towards long-term savings, a segment that has grown significantly in the recent years with a CAGR of 25%. This support a strong recovery of sales momentum with VMB increasing around 30% in 2025 versus 24% on a constant currency basis. In 26, however, we have observed a re-emergence of the short-term Koli products, with sales in this segment increasing by 20% following new product offerings by new entrants. This has weighed on our sales momentum, with VNB decreasing by 5% versus the first half of 25% on a constant currency basis. However, we remain well positioned to regain market share, given our SME focus, which brings important advantages. Firstly, we can utilize all available product approval windows for Coly, allowing us to bring new products to the market more quickly than larger diversified players that prioritize retail products. In addition, our specialized Salesforce tools and customer service provides deep expertise and excellent support, helping us maintain broad and diversified distribution. As such, we continue to believe we can recapture market share, independent of what type of products the market moves to. We managed to optimize capital solvency and sensitivities under the Neal Capital framework via a landmark reinsurance transaction, which also added significantly to our local equity position and increased fungibility of capital netland's non-life delivered solid commercial momentum with growth written premium up six percent year on year mainly driven by indexation but also some volume growth profitability was strong as well with a combined ratio of 19 90.5 ahead of our 91 to 90 credit range despite a severe hail storm leading also to several big event cancellations late in the period these adverse weather events were more than offset by strong performance in building insurance and margin improvements in motor last year we indicated elevated disability incident rates mainly due to mental health related issues that affect our group disability products recent data points indicate that a further increase in inflows which we have reflected in our provisioning this barely affected our combined ratio but had had some impact on our reported ocg for non-life we monitor the situation carefully and will continue to prioritize margin over volume at last year's capital markets day we introduced our first claim handling process using ai back straight through processing for simple windshield damage since then we have broadened AI-enabled claims and underwriting across most product lines, including property, motor, and travel insurance, with liability insurance to follow in the second half of this year. For our retail business, the target platform is now fully operational, with 35% of retail claims straight through processed, backed by AI. We recently added the NM Bank distribution products to the platform, adding another 15% of claims processed through AI. So we are currently at approximately half of the retail portfolio. In the second half of the year, we will connect the remaining bank distribution partners, which should bring the SDP levels close to 100% across the retail business, supporting great efficiency and higher customer satisfaction. This will enable us to deploy our people where they create most value and where human judgment is most important, rather than where automation still has limitations. Moving on to life. We are the market leader in the Dutch-defined contribution market, and that position becomes even more relevant under the new pension framework. Our broker relationships remain a clear strength. We are proud to have again achieved the number one ranking in broker satisfaction. These independently collected scores matter in a broker-led group pension distribution model, and brokers continue to value our digital services, the quality of our core processes, and our strong back-office execution. Our AUM in defined contribution during the first half of 26 grew further to $48 billion. Net inflows were strong at $1.7 billion versus $1.2 billion in the same period last year, partly supported by a value transfer. with strong customer satisfaction discipline pricing and our leading dc platform we are confident that we can continue the growth trajectory towards our target of 55 billion of aum by 2028 while maintaining an expected ocg margin of 15 to 20 basis participants will still need to convert accrued pension investments into annuities making this an attractive high margin segment with growth strong prospects growth inflows into immediate annuities were around 500 million in the first half of 2026 compared with around 400 million in the first half of 2025. This growth was not immediately visible in DC accumulation AUM development over the period as this line item also includes a legacy retail portfolio that runs off. This runoff will be largely completed by 2030. We expect a 10 to 15 percent annual growth of DC decumulation, mainly driven by the larger DC pension pots, potentially reaching 1.4 billion on an annual basis by 2030. Lastly, our track record on capital return speaks for itself, with over 11 billion euros of capital return to shareholders since the IPO. And we remain firmly committed to extending that track record with total capital return to shareholders foreseen to grow over 15 billion by 2028 based on current commitments in line with our different policy we announced an interim dividend of 1 euro and 55 per share a 12 increase versus last year's interim dividend and with that i will hand over to on the meeting thank you david and good morning everyone and let me begin with our continued financial delivery over the first half of 2026 rocg is up five percent versus an already strong 1h25 coming in at 1.1 billion with strong performance particularly in Europe
free cash flow is up 7% versus last year mainly driven by higher remittances from non-live in Europe compensating for lower remittances from the bank which included a much larger battle for remittance last year we remain well on track to achieve our 28 targets on both of these metrics Our solvency ratio increased to 224% driven by net capital build and the exclusion of MNBank from group solvency. Cash capital came in at 1.7 billion, where repayment of the remaining grandfathered RTL1 debt in January was largely offset by a strong net cash build over the period. Now, let me give you some more details regarding our capital progression. during h126 operating capital generation added 1.1 billion euro or 13 percentage points to the solvency ratio which is four percentage points higher than the capital flows to shareholders in the form of dividend and share buyback market variance decreased the ratio by five percentage points largely driven by widening government bond and mortgage threats the bucket other added five percentage points to the ratio here the positive impact from excluding the bank from the solvency to ratio was partially upset by the transfer of a large pension client from the separate account to the general account and model and assumption changes we have furthermore mitigated a potentially negative a potential negative impact of the introduction of the ics framework for solvency in japan with two management actions one being transitioning japan to our partial internal model and the other being the reinsurance transaction that David referred to earlier. Overall, this led to a net neutral impact on capital. The solvency ratio of Netherlands life remained strong at 213%, absorbing the adversities from market variances and the bucket other, except for the positive from the bank exclusion. Now let's move to OCG. As you can see on page 13, we managed to grow our OCG by 5%, to 1.1 billion euro, which includes very strong performance from Europe and some non-structural tailwinds. In the Netherlands live segment, OCG is fetish, where higher SCR release is partially upset by a lower positive experience variance versus last year. Netherlands non-life was impacted by adverse weather events that took place late June, as well as increased group income plane inflows, which more than upset the strong performance of the P&C portfolio, where we saw growth across the book and improved margins on the motor line. Insurance Europe reports a significant increase in OCG, driven by continued growth in capital like protection sales and higher fees from pension fund related assets on the management. We believe most of this growth is structural, except for the part of the performance related fees in the pensions business. as david mentioned earlier bank assurance sales in greece were very strong in h1 and given the developments with our distribution partner we expect these to decrease next year next to this a proposed pension reform in czechia will likely limit management fees that can be charged over assets on the management now strong organic growth across other european countries like poland and romania is expected to compensate for these developments and as such we remain very confident in europe's underlying growth trajectory and its ability to reach the 600 million target for 2028. in japan ocg benefits from the move to our partial internal model and higher interest rates more than offset these more than offset negative exchange rates and lower sales driven by the market dynamics as just explained by david david already highlighted the japanese reinsurance transaction which reduced lapse risk and sensitivity to interest rate increased local equity by around 240 million improving the fungibility of capital and ensuring a sustainable remittance pattern going forward since we exclude the bank from our group solvency ratio group owned funds are only affected by the net remittances coming from the bank therefore from 26 onwards bank's ocg is set equal to net remittances the net remittances in 1h26 from the bank still include a one-off related to the basel 4 windfall last year of a couple of tens of millions at the full year results we guided ocg for 26 to be flat with organic growth offsetting the positive one-offs of 25 with these strong h1 results in hand there is some upside to this guidance mainly driven by europe and non-life we would expect h2 to be in line with h1 levels with further organic growth and positive seasonality in non-life broadly offsetting the positive one-offs and seasonally hiring new business at netherlands life in h1 few words on our ivs results operating result was up four percent versus the first half of 25. since we steer the business based on solvency metrics i will only concentrate on the drivers that are different from the ocg analysis netherlands life results reflects a lower investment result which is largely driven by lower dividends from private investments which can be lumpy and were elevated in h1 last year non-life showed an improvement in the combined ratio from 91.2 percent to 90.5 percent despite the adverse weather which also translates into a higher operating result Japan's operating result was down, largely driven by adverse exchange rates and, to a small extent, a decline in the enforced book, all largely upset by a more favorable mortality result. Energroup's net result increased to 1.1 billion euros, mainly driven by the higher operating result and lower-below-the-line negatives, where H125s included negative re-evaluations on derivatives. Future profits under IVRS are largely determined by the CSM level. Our organic CSM grew 2% in the first half of 26, benefiting from organic growth in Europe, Japan, and non-life. Other movements include the negative impacts from higher incident rates in our disability book. Let's move to our cash capital position on slide 15. Free cash flow came in at 922 million euros up seven percent versus the same period last year free cash flow is lumpy by nature and therefore it always makes more sense to look at it from an annual perspective for the full year we expect to be broadly in line with the 1.6 billion reported in 25. 2025 includes a large battle for related contributions from the bank and some one-off payments within europe like the special dividends from the polish pension funds at the same time belgium didn't pay a dividend last year therefore underlying free cash flow does show some growth and we remain confident in reaching our free cash flow target of more than 1.8 billion euros in 28. the change in our debt and loans reflects the impact of the untended grandfathered rt1 notes which have been redeemed in january 26 our cash capital ended at 1.7 billion euros and we typically build between three to four hundred million euros per annum from free cash flow net of capital return this provides us with ample flexibility for value creative opportunities or to further enhance shareholder returns via small incremental steps in our structural capital return promise as we've demonstrated over the last couple of years as we indicated earlier this year we do not expect to refinance the 600 million senior notes that mature in 27 let me quickly summarize our attractive investor proposition on slide 16 we're confident to deliver on a 28 target which is a testimony of our growth and further diversification we are on track to deliver our future ready program we have a strong balance sheet that provides optionality and we
Operator
continue to extend our excellent track record of remunerating our shareholders with this i'll hand up over to david for the wrap-up yeah thank you very much annamique i don't think i could wrap that up nicely more nicely than you did so um let's open up the call for uh for q a karen thank you ladies and gentlemen we will now start the question and answer session to register for the q a please press star one 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 11 for your question or remark. Go ahead, please. Thank you. We will now go to the first question. And your first question today comes from the line of Kour Klaus from ABN AMRO, Odo BHF. Please go ahead.
Hello. Good morning and congratulations with the figures. First of all, the Solve C2 ratio, it's good that you have been able to reduce or remove the bank out of your Solve C2 ratio, increasing the Solve C2 by 10 percentage points.
Could you elaborate on what that would mean on future capital returns and excess capital determination?
Is it still the old 200% or going to are you going to rebase the target that solves you to a ratio for excess capital determinations that's that's my first question and second question is that the japanese re-insurance deal which was quite nice that you basically released uh 240 million in capital uh what did that what does that mean for future dividend streaming from japan normally of 70 80 90 million euros a year this is a lot of money 14 million euros with a pretty mean material yeah the pick of free capital general generation and different streaming from from Japan and the last question is about the disability disability cost basically in total in the Netherlands last year I think for the full year was a little bit higher could you give the latest issue of this market what adjustments are you taking do you still think that the market is attractive that are the main main items there were my questions thank you yeah thank you Cor good to hear you as always let me start with disability and then I think we can cover the reinsurance deal and the Solstice 2 question yeah I think on the via so group disability we continue to see elevated claims this year.
Mental health is obviously accounting for a significant share of that. To put it a bit in perspective, the total non-life company is around $4.2 billion of premium. $3 billion is property and casualty. About a quarter is DNA. The group disability book that we're talking about is around $300 million premium, or let's say 7% of total premium. So it is a small portfolio. However, it is a long-term product, so liabilities are higher. As you know, we've already taken management actions last year and the sector specific price increases and more flexible contract terms to to enable annual repricing now due to the the backlogs of the government agency which is clearly an industry problem i'll come back on that we've also recently seen even more elevated claims and these claims are now reflected also in our provisions and that has some impact on the reporting non-life OCG. Now, obviously, we're closely monitoring data developments. We continue to prioritize margin over volume. As you can imagine, we also have intense discussions with the government on how will they restructure this system and whether it's sustainable or not. And depending on that, obviously, we will assess at a later stage whether we want to remain active in this market or not. now i think it is good to note as i said the overall book is 4.2 billion of premium it is very healthy and in but in such a book there's always pockets that require extra attention and we've seen motor in the past individual uh some of the individual portfolios so there will always be pockets of uh that will require extra attention and and group disability certainly is one now but overall long life is doing very well and they're they're well on track and with the guidance of 91 to 93 year the with a combined ratio of 90.4 and we're also very confident that we will deliver on the 2028 OCG target of 475 million with an free cash flow conversion of at least 80 percent and with that let me give it to Annemiek on the Sol C2 and on the Japanese reenter transaction good morning good morning core on on Sol C2 and the impact of removing the bank Obviously, we're really happy that we now can remove the bank from a solvency 2 ratio.
It just creates a better level playing field. So we're happy that that was a final conclusion. Now, on the 200% that we set out there, that's still a relevant number. We didn't really change the capital framework when we had to, at some point, consolidate the bank there. We're not going to change it now either when we take the bank out. And it basically means there is a bit more buffer, right? So it's a good thing there. on the Japanese reinsurance to transaction and to give a bit of the bit of background there obviously with the move to ICS that would have had if we wouldn't have taken any action a roughly met single-digit negative impact on a solvency ratio so we really took two actions there we brought Japan onto a partial internal model and we did the reinsurance transaction now the latter really reduced lapse risk so it also reduced sensitivity for interest rates it's a good transaction and an increased local equity as you pointed out too and which is good that means that there is fungible capital and that gives us great comfort that we can actually deliver our guidance to grow free cash flow out of japan in line with ocg our long-term shareholder long-term investor in the business we like stable and predictable remittance patterns It's a bit similar, like we also promised to our shareholders. So over time, we would expect free cash flow to increase in line with OCG out of Japan. Okay, very good. Thank you very much.
Operator
Thank you. Your next question today comes from the line of Farouk Hanif from JPMorgan. Please go ahead.
Hi, everybody. I hope you can hear me because I've got a bit of a dodgy connection. But just two questions. So firstly, on Japan, you noted and you commented on the impact from a lower CSM release on Japanese earnings. It was quite material. I just wanted to understand what's going on there and how we should forecast that going forward. But, yeah, I realize that has no necessarily any kind of mustoji. um uh and the second question um is um around the defined contribution in netherlands life um i mean it's been very impressive growth when you talk about the 15 to 20 bits margin are you there yet or are you building to it and is there an equal impact also in operating earnings um i note that if you look at the the breakdown of ifrest profit it's still the other line is or negative just want to understand how that line will grow and when we'll see the impact of those 15 to 20 bits thanks okay thanks Farouk we it's indeed a bit
dodgy but we could hear you so that's good on the meek on the CSM release yeah on Japan true and we have seen a lower CSM release there it's a minus 55 it's also in the back of the endless presentation, and that was really driven by the line other movements. So at the end of 25, we already saw some higher lapse rate, so we had to adjust adjustments there. You then saw that coming through in the other movements, which basically lowers the CSM base, so you also have a bit of a lower release coming in there. Now in H1 this year, we also have other movements there, also related to assumptions on lapse risk, but there is a variety of items in there. a bit of a reinsurance transaction last year we also had effects coming in there if you see that that means that the csm the csm release will likely go down a bit further now on the total organic csm contribution from japan it also obviously depends on the new business out so and if we recover sales there and if we progress towards improving that business obviously that will be a mitigating factor there so that's how that flows through our csm business Can I just quickly ask on that point before we talk about D.C., how quickly you can move
and so when I follow up to the window.
Sorry, Farouk, you're not that well hearable.
Okay. I think the question was on recap market share in Japan. I think, Farouk, we're going to assume you asked about market share in Japan. and uh hopefully um that was your question um yeah i think i mean the if you look at what's been happening in the uh in the corporate life market we've seen that um since 21 uh as for the last four or five years the the long-term corporate life market has significantly grown and we repositioned also our business uh in that direction um now you you might remember last year our VNB grew around 30% versus 24% on a constant currency basis. And this was really on the momentum of the long-term Coley product. So in 2026, we saw a reemergence of short-term Coley products. And this has weighed down on our sales growth there. VNB is now down 5% versus a much higher level from last year on a constant currency basis. Now, as I was saying, we remain very well positioned in the corporate life market. I mean, we have a complete SME focus, and it brings us quite a bit of advantages. So we have dedicated products and services there, specialized sales support, customer service. And, you know, our time to market is faster because there's a limited amount of product approval windows in Japan, and we can use all these slots for corporate life. So as such, we continue to believe that we can recapture market share independent of, you know, how the market is going to move over time. Now, it is fair that if the current shift to more short term products is ultimately more sustainable and aligned also with regulatory expectations, then we will also adapt our offering and we will reenter this market. You know, we used to have a leading position in that market so we can leverage our existing strength and capabilities there. yeah so overall we're a long-term investor and we feel that irrespective of how the market develops we feel that we're well positioned and that also means that we remain optimistic that we will achieve our OCG target obviously FX has deteriorated since we sent the target at the same time interest rates have gone up so we remain optimistic that we will deliver on our OCG target and Anamika already spoke about the free cash flow or the reinsurance transaction and clearly that has you know increased capital fungibility and and and therefore we're also very comfortable that free cash flow can grow in line with uh with ocg um i think on you also had a question on uh on dc yeah just a couple comments on dc yeah so dc indeed has been growing uh in a very good way i mean we saw a 1.7 net inflow and so above 2 billion gross uh inflow uh but net 1.7 billion inflow which is a which is a record inflow so we have been increasing and increasing their help with markets we now are 48 billion so it means that we're well on track and to get to the 55 billion margins indeed in terms of OCG are 15 to 20 basis points it is a scalable business
but so in long term you know there should be some upside to this number but for now 50 to 20 basis points is the margin that we that we focus on I think there was also a question on the operating a bit of a question on how do we see these margins from DC feeding through and I think we always said there that on OCD was roughly 45 million OCD in 25 and we would expect that to gradually grow with the targets that we have for DC both in the accumulation decumulation to roughly 90 million of OCG in 28 and obviously we don't give any forecasts on the operating results but for the DC accumulation business it's roughly similar and then for the decumulation it works a bit different than OCG versus operating results but probably good to take that offline with IR later.
Operator
Your next question today comes from the line of Nazeeb Ahmed from UBS. Please go ahead.
Morning. Thanks for taking my questions. Firstly, on this M&A, kind of any update on the landscape, I'm particularly interested in maybe talking a little bit about the German MGA, how that's progressing. And also, you removed the bank from the solvency ratio. Can you just remind us how integrated the bank is? I remember from CMD, you talked about how the bank app is integrated into kind of the different products and also kind of the the cost base and economies of scale around AI investment that you get from having the bank non-life life life altogether second question was on the Tesla service driving in the Netherlands I think we're going to be the first one in Europe to adopt it so what does that mean for your business are you going to go into kind of commercial insurance and if I can kind of sneak another one in it's like full year 27 guidance and OCG you've given the 26, but given the European comments on Greece and Czech, what would you expect for a full year 27?
Sorry, Nadib, I missed your question on, you said the first in Europe to adopt what exactly?
The Tesla self-service driving, self-driving.
Ah, okay. Okay, all right. Let me start with the first couple of questions. And yeah, I think the M&A landscape, you know, not much news to say. I mean, obviously, we continue to be interested in acquisitions, assuming that they are a good strategic fit and they meet our financial criteria. So far, we've always delivered on a double digit return. We have a strong track record in M&A, which, you know, we're very attached to. So, you know, if and when an opportunity is there, we will certainly look at it. reality is also that currently in the market there's probably more insurance companies interested in buying than selling so we haven't seen also many cross-border activity but it is something that we continue to to be interested in but if not we're also more than fine i think we have a very good growth trajectory the kegers for ocg growth excluding mna are looking good targets are not based on mna they're all based on organic growth so overall if mna doesn't come are also very comfortable with that on Germany yeah so we have about a hundred million in in Germany now and we distribute this via MGA so my mandated agents we focus more on building insurance because that's in the area of expertise for us and also where we are you know we have a lot of expertise to be honest it's not that difficult to grow rapidly as you know in PNC but that's usually it's creating problems down the down the road so we're looking at a controlled growth but we're pleased with the the progress so far in in Germany then on your question on the bank how integrated is it yes it's very integrated it's you shouldn't compare it as easily to for example in an IP here so the bank you wouldn't see the bank in the Netherlands if you're a customer in the Netherlands all you see is my channel made london and you will have one app and whether they're short-term products in there like internet savings longer-term products like for example bank annuity products that we you know you don't really see endowments or unit linked anymore so third pillar savings actually go via the bank it's an important market for us or pension products or you know car motor it's all integrated into the NN platform and customers don't really notice whether it's a bank or a pension company or the non-life company. Overall, the bank has about a million customers, 25% of the retail customers, and it continues to be, for us, attracting attractive mortgages, and like I said, play an important part in also the, let's say, the bank annuity growth market where we have historically around a 20 percent uh 20 market share um so uh yeah so overall i think uh on your question on uh mortgages and ai and scaling yeah that has has some clear advantages for example we're rolling out the underwriting mortgages mortgages has always been a too complex process to do in a straight through processing way but now with ai we're already reduced the time basically to one day to issue a mortgage and we also said that next year you know this should be done in 30 minutes and with all the documentation the external checks 30 minutes actually pretty quickly the reason why the bank is doing that quickly is because they have a relatively clean landscape but also because there's a lot of group experience in in AI so the future ready program helps to deploy uh ai a lot quicker than and then they otherwise would have been um so um uh so that's on the bank i think on self-driving yeah that's still a very small uh market so there is some uh self-driving allowed but the driver is still fully liable so that hasn't really changed the market we would closely monitor motor claims on uh electric vehicles because they're, you know, they're heavier, they can be quite fast. So, you know, we monitor closely. But I think overall the cell drive is still very small. Happy to see, by the way, how the motor book has been developing. Clearly the trend is downward on the combined ratio after all the measures that we've taken. So that book is in general developing in a good way. And then let me give it to Annemiek.
Yeah, on your question on OCD, obviously, we just said that we see some upside for the previous guidance of OCD for 26, which is largely driven by the strong performance, business performance of Europe and non-life. And we also flag that for next year within Europe, due to the bank assurance situation in Greece and the check pension reform, we would see some headwinds there. and quite frankly, it's just great to see that the underlying profit as we're getting out of Europe now is really giving us a lot of comfort that we can absorb those headwinds for Europe next year, which probably means that for Europe, we'll have a bit of a rebase next year.
Operator
Thank you. We will now go to our next question. And the next question today comes from the line of Andrew Baker from Goldman Sachs. Please go ahead.
Hi, thank you for taking my questions. First one, just on Japan, are you expecting any FSA action on the new short-term savings competition that you're seeing? And I guess just more broadly, can you just remind me the strategic rationale for only participating in Koli products and not looking at a broader product suite in Japan? And then secondly, in Greece, are you able just to give us a sense of how much of your Greece APE is from the Bank Assure partner that you're flagging is going to end. And then thirdly, just a very technical point, but why did the disability provisions hit the OCG in the first half of 26, but it didn't hit the OCG last year? And I think that would be helpful. Thank you.
Yes. Thank you, Andrew. Let me start with the question on FSA and on Coley and some some words on Greece and on the meat can cover the rest yeah on FSA yeah I mean that's that's really a good question for the year for the regulator obviously we are monitoring the situation and you know a lot has happened business improvement have happened quite frequently in the Japanese market so we will just monitor the situation and see how it will evolve And like we said, if the market is structurally changing that way and it's also in line with regulatory expectations from the FSA, then we will then we will also adapt. But currently, you know, we continue to focus on protection products and long term savings, long term savings products.
Now, why only in corporate life?
Yeah, corporate life. i mean it is a you know it is a market where we ensure sme owners uh it is a very large market first of all i mean i think we said before simply that market of ensuring sme owners is larger than the full belgium market so it is a um it is a significant market um it's quite specialized uh it's not that easy to get sales forces and we work with third-party distribution so security houses brokers sumitomo banks it's not that easy to get these channels to actually sell corporate life because they're complex products there's tax involved you know you need to be talking about uncomfortable things like what happens if you become disabled what happens if you die so we have a very specialized sales force that the focus is on that I think that's what sets us apart also from the competition and why we've always been at a very high high market shares in this market we've looked many times in retail so far we always concluded retail is lower margin first of all and second there's not that much energy there's not that much energy between corporate life and retail so in terms of operating synergies it's not that we miss out on a lot by by not having a retail business so so those have been the reasons for us to to continue to to be in the corporate life space big enough attractive margins and specialized setup for it of course yeah if opportunities would emerge in retail then we would we would take a look at it I think your question on Greece yeah so like we said we do expect that the the sales will come down significantly in in Greece after the Piraeus deal in 27. I think we disclosed earlier, we said around 55% of the VNB in Greece is bank assurance. 45% obviously is tight agents. Tide agent has been growing significantly as we talked about. 30% last year 25% up in the first half. We continue to see good opportunities in Greece. in terms of OCG I think fair to say that it would have a negative have some negative impact on it in in 27 but we're still very comfortable to that we will achieve our target in in 28 taking into account what is happening in Greece as well.
I think we also had a question on on disability where we took if you look at the additional provisioning that we took for the disability inflows only a small part actually went through a CG which was roughly 20 million obviously the rest goes through solvency and last year we also had a bit of a hit the small part on the OCG however that was on a full year basis relatively small or any other moving parts were just more relevant to mention.
Really clear. Thank you both.
Operator
Thank you. We will now go to our next question. And our next question today comes from the line of Michael Hutner from Barenberg. Please go ahead.
Fantastic. Thank you very much. And just like Cor said at the beginning, really well done. I had two questions. One is on AI, whether you're tempted to invest more, given it clearly is – it feels to me like way, way, way ahead of plan. And the second one is – I know you sounded a bit dismissive on deals and stuff, but just could you give us an idea of how big is your wall chest? So I can work out, I think, the cash. So we're at $1.7 billion now. You do $300 million to $400 million a year, So maybe 200 million to come next half year and another 400 next year. So that gets up to 2.3 billion. You pay 600 million of debt. So we're back to 1.7 billion. And in my mind, I don't think you have a guidance for this anymore. But you've got a minimum of a billion and you'd probably run with slightly lower even. But I don't know the debt side. That's it.
Yeah, thank you. Thank you, Michael. Well, on AI, attempting to invest more, yes. But the reality is there's also the amount of change that an organization can handle is also not unlimited. We're only halfway in the program. But you're right. I mean, if you're halfway in the program and you invested 70% and you already have 65% of the benefits, it's clearly doing well. um but we should also be complacent i mean we still have quite a bit to prove um so we uh still have some way to go to the 200 million benefits that we want to achieve and of course over time the question will come after this program which is by the end of uh 2027 you know how will we proceed but in general it's fair to say that if you look at the organization we're scaling now a lot of the ai use cases we have expanded from claim handling also more into underwriting propositions. So we do see more opportunities, but we need to see how we deal with that long term. For us, the Future Ready program remains a clear area of attention and certainly a possibility also long term where we see more opportunities. Yeah, I think on M&A, I mean, we've never given a war chest, but it depends on the target. It's clear that we have financial flexibility if you look at our leverage ratio and our cash ratio and our sovereignty ratio there is some flexibility but it will depend on the target we've been very disciplined in both financial and strategic criteria and you can count on us that we will continue to be very disciplined also on let's say on M&A in general with that next question please thank you Your final question for today comes from the line of Jason Kalambasas from ING.
Operator
Please go ahead.
Yes, good morning. I had three questions.
The first one is on Japan.
You have approval windows that are around March and around September and October. I think that you're very optimistic of getting approved products approved back in august september last year so can you just remind me what you got if you had approvals uh back in september and october and if you had now approvals for new products in march um and also uh looking at the market i mean it looks like you are in the long term uh the market has shifted to the short term is there any chance for you to come back into it or you are still a bit you know held up by the regulator and do you find that you know it's worth it if it is a total uneven playing field that is uh driven by the regulator the second thing is on greece clearly the all the banking partners are taken so do you find that you know a strategy going along with only agents would still deliver you good growth or do you find that you know at end of the day it's going to be a decent market but your focus just will shift in other areas and also i didn't understood what would make up for greece and the czech pension reform i think you mentioned poland and something else but if you could say which countries and why uh they will be making up for these two and the third question is on the bank it's good to hear that you remain totally committed uh to it uh so just a couple of things mortgages you said you are down to one day to issue one how does that compare to the market and also Annamie if I could have the the bank is about 10 percentage points you know positive uh or thereabouts then we get the other that is plus five so excuse you could give me the elements that are bringing the 10 back to five so only five percent insolvency to ratio that would be great thank you yeah uh thank you Jason.
A lot of questions. Let's start with Japan. They're not set specific windows of product approval. What is limited is the amount of products that you can introduce in a year. Depends a bit on the situation, but the two is probably roughly the right number. They're not set in specific dates. The regulator has a limited amount of time to approve or not approve these these products but it is as a company you cannot go to the regulator be five six products in a in a year so what have we introduced so we have introduced two long-term products one more of a unit link version and one of a traditional one and we introduced also a improved a protection product so that has been our focus yes we feel that we can compete very well in the corporate life market like I already mentioned let's say the added is the quality that we have in this business the folks that we have and what sets us apart versus competition so we feel we can compete well in this market and yeah your question on will you also sell these products if this is a structural change and in line with regulatory expectation then indeed we will also we will also adapt on Greece yeah this is life of bank assurance you you you every now and then you get new partners in I mean we had some new partner at some point there in in check you can we have a bank on you in in Spain but every now and then you also lose a bank assurance partner so likely we will lose or to a large extent lose a Pia's bank but there's more banks in Greece and I have no doubt that we will continue to see some changes in bank assurance landscape as well so we have the strongest track record we're the most successful cooperation with Piraeus and by far we have a good reputation so we'll see if other banking partners will emerge but like we said we're also very pleased to see that the tight agent channel is picking up significantly and you know let me and and that means that also for 28 as we said or we're well on track to deliver on the OCG and it clearly means that some of the other countries are compensating freeze keep in mind it also when we set the target we already were aware that there could be some some changes in terms of markets yeah Poland Romania there's quite a few markets that actually do do well and they will and I guess that's the also the advantage of a diversified platform you always have some that that something will happen others will do a bit better and so like we said we're we're very optimistic that we will achieve the 600 million for for your that's your question on mortgages yeah in detail so the goal is now that we do it in one day it also depends on how well customers have been delivering all the information it's not just a throughput time what we also really like is that AI does the analysis and if it doesn't really fit it will also automatically suggest what alternatives or what could work for a customer so I think it adds to speed and creativity as well is it unique probably not we know a couple of other ones are you know a couple of the large banks are also working on this same with claim handling or underwriting none of this is unique but if you do it quicker and faster and you scale it more it can still be a competitive advantage but but I assume that everybody will in the market will be looking at deploying AI so this is not about that it's unique that we do it I think our competitive advantage should be that we do it quicker and better and we scale it better across across units and then the last question I think was
for Annemiek I almost feel insulted that you think I cannot answer this but I'll give this to Annemiek then there were many questions but I think your last question was why is removing the bank from the solvency at ten percent why is the bucket other than only up five percent uh there are a couple of items in there indeed exclusion of the bank is plus ten percent um we also had a pension transfer at nn life which is minus two percent and then we had some model and assumption changes which was another minus four percent and those include the provisioning for the for the disability claims and also some smaller model and assumption changes related to real estate okay right yeah thank you
very much Jason and with that we're also at the end of the line of questioning so thank you very much for everybody in the call thank you for taking the time in the middle of August to to have an interesting discussion with us obviously we look forward to continue to engage with you to you know there's road shows and conferences coming so we'll look forward to meeting you also in person and have a great summer.
