Good day, and welcome to the Aegon Second Half Year 2019 Results Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Mr. Jan Willem Weidema. Please go ahead sir.

Thank very you much. Good morning, everyone and thank you for joining this conference call on Aegon's second half 2019 results. We would appreciate it, if you could take a moment to read our disclaimer on forward-looking statements which you can find at the back of the presentation. We will start today with our CEO, Alex Wynaendts who will give an overview of where we stand with regards to delivery of our strategy and what we have achieved in the first half – second half of this year. After that, our CFO, Matt Rider will walk you through the financial highlights on the second half of 2019. At the end of the presentation, we will of course leave plenty of time for your questions. I will now hand it over to Alex.

Thank you, Jan Willem, and good morning everyone. Thank you all for continued interest in Aegon and for joining us on today's call. So let me begin on slide 2. By giving you a summary of how I look back at the last six months. In this period, we continue to operate in what is for Aegon a challenging environment with persistent low interest rates in combination with declining bond spreads. This had a negative impact on our underlying earnings in particular in our U.S. business, where we've also seen outflows in our retirement and annuity businesses. And as a result, we have unfortunately not been able to meet our return on equity target of 10%. However on the positive side we are seeing that our commercial momentum is improving with increases in Life and Accident & Health sales as well as in gross deposits. At the same time, we have strongly increased our capital generation and we have taken the necessary management actions to increase our capital position in the Netherlands. And on the back of our strong capital position and capital generation, we are announcing an increase in our dividend of 7% compared to last year. This takes me to slide 3, where we will discuss our medium-term financial targets in more detail. As you can see, we had normalized capital generation of €1.6 billion last year, which supports our cumulative three-year target of €4.1 billion. Gross remittances were slightly below our 2019 target. However when you include proceeds from the sale of our stake in the joint ventures in Japan, which we announced in May 2019, and which we closed in January of this year, gross remittances total €1.5 billion in line with our target. We did however fall short of our return on equity target in…

Thanks, Alex, and good morning, everyone. Let me start in the usual way by taking you through some of the key numbers on slide 13. Underlying earnings before tax were slightly lower than in the second half of 2018, mainly as a result of one-time items in the Americas. On the back of strong capital generation and management actions, the group's Solvency II ratio has moved back to being above the target range. Normalized capital generation has been strong in 2019, with a 12% increase over last year. Holding excess cash has ended the year in the middle of the target range, while the gross financial leverage ratio has improved to 28.5%. These factors allow us to raise our final dividend to €0.16 per share or €0.31 for the full year 2019, which is an increase of 7% over the full year 2018 dividend. I will discuss underlying earnings in more detail, on the following slide. As you can see on slide 14, our underlying earnings have decreased by 5%, compared with the same period last year, this can be largely attributed to one-time items in the U.S. Life business. The main reason for this is the negative impact on intangibles, from lower interest rates, tighter credit spreads. And investment portfolio updates. Next to that, a large block of business that reached the end of its 20-year level term period exhibited worse than expected persistency, although its persistency in general was in line with expectations. You will see that the expenses for holding showed an increase mainly as a result of a change in the recognition of interest expenses in our financial statements. Interest expenses for the Tier 2 securities issued in October 2019, are reported through income statement, while interest expenses for the grandfathered Tier 1 perpetual capital securities…

Thank you very much. [Operator Instructions] We'll take our first question from Mr. Farooq Hanif, Credit Suisse. Please go ahead, sir. Your line is open.

Hi, everybody. Good morning. Firstly on capital generation. So the slide where you show the pluses and minuses. Can you just give a clearer message on where that €1.6 billion of capital generation goes in 2020 and onwards? And could you also give an indication of how much you consider to be sort of a one-off in that let's say from – for example from the positive experience variances? Second question, in the Netherlands, you've taken some actions through longevity reinsurance. But you also signaled that there were other levers that you could pull. And I was wondering in light of uncertainty of the Solvency II review, what further levers you are likely to use to manage that and to improve capital. And last question is, so the U.S. retirement services business has not been a good story so far. And I remember you did signal that it would be stabilizing by now but it seems not to be in terms of outflows and RFPs. So I was just wondering, how quickly you think that will change. I noticed for example that your sales, the deposits haven't really grown either. So I was kind of wondering more medium term where you think this is going. Thank you very much.

Good morning, Farooq. This is Matt. Maybe on the capital generation guidance I think we're going to stick with our three-year guidance, which we're basically reaffirming today. We were in fact pleased of course with the 2019 normalized capital generation but we are going to stay with that guidance. And then just to remind you that we have talked about the gross remittance target for 2020 for the business units of €1.4 billion. In terms of future actions that the Netherlands could take. I think – you're right. We have the Solvency II review coming up. But there are management actions that they can do. For example, another type of longevity reinsurance transaction could happen. And as we've talked about before as with all of our Manage for Value books, we are looking to accelerate the capital return to shareholders and that could be done in a variety of means. Alex?

Yes, Farooq, let me talk you a little bit through the – where we are in the retirement business and give you a little bit more of a context. First of all, you're absolutely right that we are disappointed to see that we've had contract discontinuances. We've mentioned that we have in particular three main – three large contracts that form the bulk of the €27 billion contract discontinuances. I should add here that these are contracts with very low margins and that's why we said that we do not expect this to have much impact on our earnings. In terms of what we're doing in our retirement business and what will be impacting the future. There's a couple of things that I would like to share here. First of all, we are retaking management actions and we have brought the team organization together into one unit, and that's the Workplace Solutions unit. That was since the beginning of last year. And it allows us to better address services, services challenges. And as you're probably also aware, we have obtained the unqualified SOC 1 report in December 2019. Clearly that has had an impact on sales and on retention. But having had the received unqualified SOC 1 report by December should actually be very positive going forward. What we're also doing is rebuilding our large market sales team. And that means that we're hiring people. We are hiring people that attract new customers, but we're also hiring people that service existing customers. And we do this at the same time by putting -- implementing more strategy. So, what are we seeing right now that is an early indicator for the future? A couple of positive things. First of all, what we see is that the average number of RFPs on…

Can I just return on one thing? On the capital actions in the Netherlands, do you actually have something underway at the moment to look at longevity, or is this just a theoretical lever for now?

No, we're always looking at management actions, always looking at them.

Thank you very much.

Thank you very much. We have our next question from Mr. Ashik Musaddi of JPMorgan. Please go ahead, sir.

Yeah. Thank you. Hi, good morning. Good morning, Matt. Just a few questions. So first of all, in terms of capital generation for the Netherlands, I mean if I remember correctly in 2016 this number used to be about €250 million and now it's €470 million. At the same time, interest rates have gone down quite a lot. So I think -- I thought that would be negative for this €250 million in 2016, but now it has doubled. So what is going on there? That would be the first one. Secondly is can we get some color on how should we think about Dutch capital at the moment given that interest rates have come down. And given that you have released some capital from Netherlands as well. I know it's not ideal to look on a daily basis for any business on capital, but still like year-to-date drop in interest rates have been relevant. And the last question would be on changes in U.S. capital. I mean some of your peers are now talking about new U.S. capital regime there. Some of them have started to adopt it as well from full year 2019 results or at least talking about it. What are your plans for that? What should be the impact? If you can just remind us on that would be great. Thank you.

Good morning. So first maybe back in 2016, as you said we were looking at €250 million normalized capital generation in the Netherlands, but frankly as a consequence of some of the management actions that we had previously taken in fact to re-risk a bit the portfolio then you start to see that come through. And you're also seeing in the quarter or in the second half you're seeing some positive experience variances, which contributed something over €70 million to normalized capital generation. Now just to sort of refresh your memory I think in December or so we had guided to about €350 million of normalized capital generation. And now we see the impact of lower interest rates that, I think we've previously disclosed that, it's basically for every one basis point of interest rate reduction you would get €1 million lower capital generation. That will become biting. But I think looking at the – I would say, part of the experience variances that we saw in the second half of the year would be – part of it could be repeated. Part of it could not. We don't really know on that one. We did see positive mortality and morbidity experience. We saw some contract boundary effects on let's say pension contract renewals. So that was positive. We also saw some positive impact on the valuation of Dutch residential mortgages as contracts hit their interest rate reset periods. And then normally, we wouldn't value it only up to the interest rate reset date but when they do reset and we retain it then we get some positive value out of that. So the €350 million again was that – was shown in I think in December.

Yes. Thank you.

Okay. Looking at Dutch capital and how – and interest rates being down. I think that we've demonstrated in the Dutch book that we've been pretty resilient to interest rate movements on the capital position itself. Yes, it does affect ongoing normalized capital generation but on the ratio itself we've done a pretty good job in managing that. And I think you see that in some of the sensitivities that we provide on Dutch capital. So that's not a particular concern on the let's say on the ratio itself although like I said it does to the extent that we have lower interest rates it does meet lower capital generation. You mentioned the changes and some other companies have announced changes to the U.S. capital regime. You're probably referring to the VA framework in the U.S. which indeed our U.S. business has early adopted as from 2019. So those are fully reflected in our – say the impact of that is fully reflected in our figures. But to be blunt about it we had already been mimicking the new framework for some time by holding voluntary reserves. So the impact on our capital ratios in the U.S. were really kind of small as a consequence of doing that early adoption.

So just to be clear on that last U.S. capital things. So is it fair to say that there is no more regulatory changes expected or non-regulatory changes which are expected at the moment?

There is this – the idea that they could ultimately increase the risk-based capital charges on some lower-rated assets. If you were to ask me that question a year ago, I would say that that is going to be coming and it would have a small impact something in a 20-percentage-point-on-the-RBC-ratio-in-the-U.S. range. But at this point, it seems like that is pushed off and it may never happen. So I would say cautiously optimistic that we don't see any changes on the horizon in the capital framework there.

That's very good. Thank you.

Our next question is from Mr. Johnny Vo from Goldman Sachs.

Yeah. Good morning. Just a couple of questions. Just the first question, I know that you've moved the dividend up by 7%. But I guess the question is really do you think that is prudent to do given the fact that if I look at your gross remittances there's a number of one-offs in there. If you strip out the one-offs and you minus your holding company then the dividend given where the Netherlands is as well in terms of solvency ratio and the mark-to-market of that it doesn't look like the coverage is going to be great. So can you sort of give us a view of how you came to a decision of the 7% growth in dividend? Also, it's apparent – and related to that I guess is that the group continues to support a number of businesses the Spanish business and growth in update scale-up businesses. Again, coming back to that is the group in a position to really continue to do that given issues in a number of its subsidiaries? And I thought, you've sort of touched on this but could you give us a mark-to-market of what you think? Because the volatility of the Dutch business itself is as you said very volatile. So could you give us a view of where that solvency is mark-to-market? Thank you.

Yes. So maybe on the dividend really the discussion was more around for the 2019 normalized capital generation you saw that we really outperformed where we thought we were going to be. So the question was sort of we generated the capital. So let's maintain the €0.01 share increase as frankly we had planned to do in light of the capital that we have that we can safely return to shareholders. But as I had mentioned in my presentation, the counter side of that is, do you see headwinds on the horizon. And we see lower interest rates. So if they're -- as I think I mentioned in my presentation to the extent that you have kind of a lower-for-longer scenario that would start to be biting. So we not only look at the solvency ratio, the normalized capital generation, but we do look at the sort of the outlook for capital generation going forward. So for the final year 2019 dividend, we settled on increasing the full year dividend by €0.02 a share. But I would remind you that we look at all of these things at the half year and at the full year and we take into account a variety of metrics. So I'm going to -- I think I'll just leave it there. You mentioned that the group has been supporting some businesses and are we in a position to do so. The short answer is, yes. I mean we do get enough remittances so that we can support both the dividends to shareholders holding expenses and interest on debt and so on. But also we've built some financial flexibility. And we do employ that in kind of a rigorous way. So for example in the Spanish business where we are no longer applying transitional measures…

Okay. Thank you.

Thank you very much. Next question is from Mr. Fulin Liang from Morgan Stanley.

Hello. Thank you for taking my questions. I have two questions actually both of them on the commercial side because obviously you've done a lot to fix the balance sheet and the solvency issue. But I think I'd like to hear a bit more on the -- what we've done on the commercial side. Two particular questions. So the first one is on slide 16 you mentioned that you will invest in new business a bit more. I just wonder could you give us more color what exactly the investment because compared to the peers your investment into the new business is actually already very high. So I wonder actually what incremental kind of investment could bring you kind of more benefits in the future. What I meant is for example are you thinking of, for example increase the compensation to the broker to launch new product, to launch new promotion or anything like that. More color would be good. So that's the first question. And then the second one is I need kind of your help on understanding because in one hand on the same slide 16 you said expense savings will increase your normalized capital generation. However on the other hand, we saw that you revised your expense assumption which is a negative impact to your solvency. So I actually wonder whether on the expense front -- are you actually saving the expense, or are you actually -- you found out your expense assumption is actually lower than what's happening? Some clarification on that would be good. Thank you.

Let me take this question. So what we're saying is that we want to rebuild the commercial momentum. And I will assure you it's not about paying higher commissions or higher fees, it's about selling more business. So when we sell more business, we need to allocate the amount of new business strain. And in particular it's visible in the U.S., in the U.S. Variable Annuities, IUL and Fixed Index Annuities, our old product that require new business strain. So if you are selling more new business, which is what we're aiming to do so, you will have a new business strain in the first year. But then you will recover that amount four to five times over the lifetime of the product. So it is a very good investment of our capital. It is actually the best way we could invest our capital because it has by far the highest return to leverage our own franchise, our product capability and it's about getting more scale. So it's really about new business strain in terms of holding capital for the product in particular in the U.S. and keep in mind you get a multiplier of four to five over a period of time. That is somewhere between 10 and 50 years depending on the products. I think that answers your question hopefully on…

Sorry, can I have a follow-up question? When you say you sell more new business, how did you -- how do you plan to achieve that? Did you actually -- do you imply that actually in the past few months or year the reason that your commercial momentum decrease is because you intentionally control the sales? Now you intend not to control the sales? Just a bit more color with -- how do you sell more new business?

Sure. I will assure you that we did not intentionally control the sales. So we invest in more wholesalers, for example, more people that are wholesaling our products to our distributors. That's a good example. So we invest in more wholesalers. We have invested in more people. I mentioned that earlier in a workplace, more people that are focusing on sales on the large case team. I mentioned that more people that are going to service these customers. So what we invest in is the capability to sell more and that's why we expect to sell more. As you know we have a good franchise in the IUL with our WFG brokers. And what we try to do is to get a higher participation. Now we are in the 55%. So 55% of the WFG broker network of around 40,000 salespeople in the U.S. are Transamerica products. Now we hope we can get that to 60%. So there's a lot of ways that we can try and we've been working hard on that on improving our sales capability. And in this context, one important item also is that we have -- are going -- we'll be replacing because the person has left, we'll be replacing the head of our Individual Solutions business, because we think that we need to be more successful in sales. So the biggest part of the capital that is being used -- by far the biggest part is to hold more capital for the products that we sell. And in terms of expenses, I think the way of looking at it we are looking on an ongoing basis at expense reductions at increasing efficiency. As you know we've done a big project in the U.S. by looking at outsourcing a big chunk of our back offices and legacy systems in the U.S. to PCS. We've announced a similar transaction in the U.K. and we will also be looking at all our other businesses including the Netherlands at similar actions that allow us not only to reduce expenses, but more importantly for our -- for capital generation these variabilized expenses. Because if you have businesses, which are effectively in runoff like in Netherlands, our pension business and our individual life business, which is the old unit-linked business, which are in runoff the number of policies decline and it is of big importance that you not only reduce expenses but that you're able to variabilize these expenses. So you'll see a lot of management actions. And these actions all have positive impact on capital generation, of course, but also on the overall capital position.

Sorry, just a follow-up on that one. If you're looking forward on ongoing basis and decreasing like say unit expense. And why would you actually revise your model, which actually seems to have a negative impact?

When you reduce expenses that has a positive impact on capital generation and on the capital position because you reduce expenses, and therefore, you have more revenues and you have to variabilize expenses, which is also very important for us post the modeling.

Maybe I answer your question directly here. So what we had seen with changes to expense assumptions in both the U.S., the U.K. and the Netherlands is an annual expense study that we do to ascertain how much expenses are allocated, for example, to in-force business, which goes through a lot of the solvency type models, as well as new business. What we talk about in terms of capital generation and the effects of expense savings these are things that we can do in the future. So for right now for the year-end, we reported negatives on the assumption changes on expenses, because of the way that we have reviewed and allocate basically maintenance expense assumptions. But in the future expense savings is an important part of growing capital generation going forward.

Okay. Thank you.

Thank you very much. Next question is from Mike Holmes from Societe Generale. Please go ahead, sir.

Nick Holmes actually. Thank you, very much. A couple of questions. Looking at the geographies you cover. I wondered, is there room for some more disposals. I was thinking maybe Eastern Europe. One of your peers has disposed there. Is there something that you might think of there? Then secondly with Asia, you're a little bit underweight. And I wondered, I mean China is going quite well, but is there opportunity to add more there. Thank you, very much.

Nick, I'll take the question, but I do think it's probably a question that you should be asking again to my successor. But let me say my perspective here is that in Central and Eastern Europe, we have a couple of key countries. Hungary, as you know has been a very consistent, stable and reliable provider of dividends. Turkey actually doing extremely well despite what you could see from the outside. And it's true that if you look at our business in Poland, in particular, that's a business where I believe a strategic review will be looked at because the market has changed a lot and the conditions there have changed. In terms of Asia, what I would like to say is more about where we are today. Yes, we're not present in every country, but we have market leadership positions in those business in which we are in. Our High-Net-Worth individual business is very clearly a market leader, a successful business. As you know, it pays dividends. So, it generates a dividend to the holding. It actually paid a dividend two years ago, a significant dividend too. And that's a leading position. We are very happy with our joint venture in China. We have actually two, one on the asset management side paying a dividend also very successful. And the joint venture on the Life side equally successful. It's the joint venture that does require very limited capital as Matt just mentioned one capital injection, so that we could qualify for a broadening of scope of our business, but it's a business that is self-sufficient growing very well. So we are focused in very specific areas. And where we couldn't make our business grow to the extent we wanted it to grow like Japan, we have taken decision to get out. Now, I think India is the remaining country where we are. And India is a place where we have taken a number of steps to be ahead of the curve in terms of digital. It's a company that's entirely digital. It's a company that sells through a number of e-commerce players and very similar to what we have seen in China, we hope that the same is actually going to happen in India where actually we jump the -- I would say the curve and engage ourselves in digital-only business and the market therefore is large enough. But I would say that is to be reviewed in a couple of years by -- certainly by my successor and the management team.

Okay, very clear. Thank you, very much.

Thank you, very much. The next question we have is from Mr. David Motemaden from Evercore. Please go ahead, sir. Your line is open.

Hi, thanks. Good morning. Just a question on portfolio optimization in the U.S. So there have been a few recent deals. Most recently Voya disposed of its universe -- UL book, individual life book in the United States at a pretty decent price and it seems like there's increasing activity around just runoff block deals in the U.S. I know you guys have already done a decent amount of optimization in the past, but I guess just wondering your thoughts about the developments in the market and if you guys see an opportunity to unlock value there? Second, just a question on the retirement business in the U.S., so just looking at the earnings per head of about $40, that's I think below the -- 5% to 10% below the $52 per head target or outlook you guys have given previously. Just wondering, should we be thinking about that $40 per head as a good baseline level? And then just relatedly, just wondering why that has been -- why that has fallen so much given the solid performance in markets. Is it more just investments have ramped up, or has the competitive environment picked up materially that have caused that weakness?

Right. On portfolio optimization, I think you are well aware that we have -- and we continue to look at all the opportunities that we have to optimize capital and returns of in-force. We have different parts of the portfolio that could be subject to this review. I can assure you that, we engage with a lot of parties and we make sure that we do this in a way that we always look after the interest of our shareholders here. We've done quite a number of transactions. So I think that we are able and prepared to make these transactions. And our focus of course is to move towards a capital-light strategy that we want to further strengthen, which gets us to our retirement business. So, continue to look at it, but I'm not sure that all conditions are always as positive because you see some transactions, but it's always important to look at each individual book of business that are all very, very different. In terms of the margin on -- so per participant, you're right, it is $40. It is below the guidance we have given of $52 at the end of 2018. Well, there are two things that you really have seen. In the meantime, competition and competitive pressures on margins continues. This is an area where we see that, actually, for very large cases, margins are pretty close to zero. You also see that a number of competitors in the market are actually actively driving margins down on the accumulation phase and are expecting to see the profitability come back at the base accumulation phase, which is very much a strategy that we follow also. It's – for us it's important that we get the customers in, so we get the plans. We get the…

Got it. Thanks. And maybe if I can just sneak one in for Matt. Just on the low rates in the U.S., it didn't look like there was really any material impact on cash flow testing on a stat basis at year-end 2019. But just wondering, if you could just give me a sense for the puts and takes and also how you think -- how the business is positioned for cash flow testing for the next year or two, if rates remain at these levels.

So, maybe, just on cash flow testing results, so cash flow testing passed all the legal entities within the U.S. at year-end. So, despite the low interest rates, we're not seeing it biting there. Rates would have to go down significantly more before anything would be biting on the cash flow testing side. Where it does start to get you a little bit is on capital generation going forward and that's where you see that we reinvest about $4 billion to $5 billion per year in reinvestment yields. So to the extent that you get low interest rates, then you see those impacts coming through on capital generation side.

Got it. Thanks for the answers.

Thank you. Our next question is from Robin van den Broek from Mediobanca. Please go ahead, sir.

Yes. Good morning, everybody. My first question is mostly about the timing of these model changes, because especially in the Netherlands, this is the second time in a row where there's basically adversity for model changes and now we get the story that on LAC-DT you moved to 65% from 75%, which is increasing prudency in the model, but to what extent is this an own choice? Because it feels a little bit like the regulator's not fully comfortable with your capital position and that's why these surprises basically keep on hitting the market. That's the first question. Second question is, a little bit related to Johnny's question on free cash flow and the dividend sustainability. I mean, I think, last year you were trying to convey a message where the dividend should go up €0.02 to €0.03 a year, which obviously puts your yields up considerably over time. For 2019, you are not sticking to your payout ratio guidance of 45% to 55%. Should we read, yes, potential disappointment compared to the read-through on dividends, we basically got last year on the back of that? Thirdly, on U.S. I think there was some news flow that your Transamerica Pyramid tower's close to a full sale. I guess, on IFRS, we shouldn't expect anything, but maybe there is some relief coming on the capital side, because your statutory capital position is probably more at a level when you acquired that building in 1999. So, probably, a sizable RBC ratio tailwind may be coming from that side to offset the low rate dynamics in the U.S. And lastly, on EIOPA, we've noticed that it seems that they're considering actively lowering the risk margin as an offset to implement changes to the UFR. I think my read on that would be that, it could be particularly positive for the Dutch insurance companies, given the sizable risk margin there versus other geographies in Europe. Could you comment a little bit on how that part of the regulatory puzzle has changed over the last few months and how you feel about that? Thank you.

Good morning, Rob. Let me take your items in turn here. So for the impact and the, let's say, the timing of model changes, I think you probably know that in the U.S., we typically do our model updates in the first half of the year, so the second quarter. And those updates have already been rolled through the first half of the year. Although, there was some residual work that needed to be done on expense assumptions. And that is reflected in the second half of the year results. Now for the rest of the world, primarily in Solvency II countries, we do reflect these things in the last half of the year. And we do this as a normal routine process, looking through expense assumptions, looking through mortality, all of our experience assumption. And we just -- we do this very routinely and rigorously. The change to the LAC-DT percentage from 75% to 65%, I want to make this very clear. This was our own choice. And this is part of the consequence of mainly the low interest rate environment we thought that it would be prudent to do there. And yes it does increase the SCR. Yes, it does by the way increase the release of SCR going forward. But we thought that, that was the prudent thing to do. With respect to free cash flow and dividend sustainability, you are right. So what we are telegraphing here is that we are not changing our 3-year normalized capital generation guidance, nor are we changing our 45% to 55% payout ratio. Yes, we were a little bit low on that this year. But I wouldn't increase the dividend to get it into the range as a consequence of that. We look at a variety of metrics here. In…

Okay. Thank you. And maybe on the capital generation, I mean the fact that, you keep your target range stable. Should we assume that the 2019 delivery is a buffer? And basically yes lower that for future years to get to your target range that the most sensible thing to do, or is it just -- should we just see the outperformance on 2019 as a sort of a one-off basically?

Well, we've seen normalized capital generation go a bit up and down. So we're just going to stay with the 3-year guidance at this point, based on what we see now. Also recognizing that there could be pluses and minus as a consequence of rate movements or additional or -- investments in new business and the like.

Okay. And then the Pyramid sale, no indication of what the RBC ratio could see from that?

No. We're not going to talk about that, on the call.

Okay. Thanks.

Thank you very much. We'll take our next question from Mr. Albert Ploegh from ING Bank.

Yes. Good morning. Two sets of questions. One is to come back to also Robin's question on the EIOPA review but more in context of the Dutch mortgages, which is the key driver of the volatility on the Dutch ratio obviously. Based on the industry response and also the response from the Dutch regulator, did you have any more conviction or hope that maybe the Dutch mortgages will be treated potentially a bit more favorably under the post your whole review? That was the first question. The second question is to come back to the expense assumption updates. And in relation to that of course the prolonged low rate environment. How should I see the upcoming review of the main macro assumptions? And obviously, just always wondered if – particularly what comes to mind is the 4.25% 10-year treasury. I'm very well aware of the longer grade-in period that Aegon is using. But can you maybe frame it or give some color on sensitivity in case you would load it back by 50 basis points because I think the impact overall should not be material but I think that discussion might come as well in light of where the 10-year treasury currently is. Thank you.

Good morning, Albert. So first maybe on the EIOPA review. The thing that would help the Dutch mortgage situation in the Solvency II context would be basically a relaxation around the rules for applying a matching adjustment. And I think that that is frankly unlikely. Really there's – I think the people that like the matching adjustment to the people in the U.K. and in Spain, don't want it to be touched and I don't think it will be touched even though that would benefit us. The other thing that could potentially help is a change to the volatility adjuster where you would be able to recognize your own company assets or even it would help on a national basis to be able to recognize them. But that's not a complete solution to the problem. I think that the Dutch Central Bank has been open to how do we tame the volatility. It's going to be very difficult to do it I think on the required capital side. There might be some kind of an opportunity on the valuation side of the mortgages where state or the individual country regulators have more control over that. But that's still under discussion. It's been an important point in the Verbond, the Dutch insurance association here. But that's early – that's very much early days. With regard to interest rate assumption updates. Right now, so we're talking first of all about the U.S. and the – and basically the ultimate rate, the long-term ultimate rate which currently stands at 4.25%, which we decided to sit – keep as it was in the – when we do our normal assumption review in the first half of the year. Thereafter you saw U.S. competitors start to drop their long-term rates usually by about 50 basis points. And it is – if we had a let's say lower-for-longer scenario then it's something that we can look at for next year. You rightfully pointed out that we are using a longer grade-in period than many let's say most of our peers. And that's an important one. But again these are only – we talk about IFRS impacts and not anything to do with capital. We do have estimates for what if we for example, what if we were to move the long-term rate from 4.25%, down to 50 – down 50 basis points where many of our competitors have gone. And we come up with a number of about €100 million on the let's say the general account portfolio, pre-tax if we were to drop it by 50 basis points and to keep the 10-year grade-in period. And then if we went another step and reduce the – basically the assumed return on separate account bond funds that would be an additional €50 million to €100 million pre-tax.

Okay. Thank you. That’s very helpful.

Thank you very much, ladies and gentlemen. That concludes today's question-and-answer session. I will turn the conference back to the speakers for any additional or closing remarks.

Well, I have no more concluding remarks other than to say thank you for listening in. Thank you for your continued interest in Aegon. And I hope to see some of you perhaps in a different situation but I enjoyed the interactions with you. Thank you. Bye-bye.