Shefi Ben-Hutta
Editor at Coverager
NN

NN Group Reports Q1 2019 Results

  • Operating result increased to EUR 468 million from EUR 313 million in 1Q18, which reflected the negative impact of a storm in January 2018, while the current quarter benefited from a dividend from an indirect stake in the former ING Life Korea
  • Net result of EUR 512 million, up from EUR 399 million in 1Q18
  • Further cost reductions of EUR 20 million in 1Q19; total cost reductions achieved to date of EUR 310 million versus the full-year 2016 administrative expense base
  • Total new sales (APE) of EUR 945 million, up 72% from 1Q18 at constant currencies, reflecting higher sales in Japan and a higher volume of group pension contracts in the Netherlands
  • Solvency II ratio of 213% reflects unfavourable movements in credit spreads and interest rates, the deduction of the EUR 500 million share buyback as well as a reduction of the UFR, partly offset by operating capital generation and positive equity revaluations
  • Holding company cash capital at EUR 2,048 million

Statement of Lard Friese, CEO

‘The year 2019 started off well with NN Group reporting an operating result for the first quarter of EUR 468 million. Netherlands Life, Netherlands Non-life and Japan Life posted solid results, while we saw some pressure on the results of Insurance Europe, Asset Management and Banking. We continued to make progress towards our expense reduction target of EUR 400 million by the end of 2020. This quarter we reduced administrative expenses by EUR 20 million through further realisation of efficiencies bringing our total expense reduction to EUR 310 million by the end of the first quarter of 2019.

Our commercial momentum was strong as demonstrated by a 72% increase in new sales versus the same quarter last year. All segments contributed to this increase, especially in Japan where higher sales were the result of strong sales efforts as well as customer expectations of a revision of tax rules for COLI (corporate-owned life insurance) products. In addition, NN Investment Partners reported positive net flows, in total as well as in third party business.

We operate in a heavily regulated environment and often have to navigate changes in local markets. In April, the Japanese National Tax Agency published a proposal for a revision of the tax treatment of certain COLI products, and changes are anticipated for the pension systems in Romania and Poland. We are experienced in coping with such developments given our in-depth knowledge of the local markets and by differentiating ourselves with continuous product innovation, sales support and high-quality training programmes for distribution partners.

Our capital position remains strong with a Solvency II ratio of 213% and a cash capital position of EUR 2,048 million at the end of the first quarter.

We continued to integrate ESG (environmental, social, and governance) factors into our investment decisions, and actively engage with a variety of companies in our portfolios. To strengthen our engagement efforts with palm oil companies, we joined forces with other asset managers in the Netherlands and became a member of the Roundtable on Sustainable Palm Oil in the first quarter. NN Investment Partners continued to actively raise the issue of climate change with various parties, including oil and gas companies.

Going forward, our focus remains on the integration process of the various Delta Lloyd and NN businesses in the Netherlands and Belgium, as well as on further driving growth and improving the customer experience through innovation and our client centric approach. We plan to organise a capital markets update for NN Group in the Netherlands on 4 December 2019.’

(download the full Press Release)

Business highlights

Our businesses are built on a solid foundation of purpose, values and brand attributes, which, combined with a strong focus on our strategic priorities, enables us to create long-term value. This is how we deliver on our ambition to be a company that truly matters in the lives of our stakeholders.

Netherlands

NN Life managed to maintain its strong position in the market and as a result of proactive engagement, NN Life’s customer (NPS) and broker satisfaction scores increased. For example the IG&H broker satisfaction score improved to 7.7 in the first quarter of 2019, from 7.2 on average in 2018. Compared to the same quarter last year, BeFrank increased its portfolio by more than 20% in terms of recurring premiums following commercial success and autonomous growth. Furthermore 95% of customers whose pension contract would expire at the end of 2018, renewed their contract with us.

Sparklab, the innovation lab of Nationale-Nederlanden, launched two new solutions; Hello Mobility and MMOX Smart. Hello Mobility uses an online dashboard to record and analyse driving behaviour, fuel consumption, repairs and maintenance costs of professional drivers. With the dashboard, a coach can propose improvements and training opportunities for drivers. This allows entrepreneurs and professional drivers to save costs and operate a more sustainable car fleet. MMOX Smart, a cooperation between Sparklab and MMOX, is the first all-in-one cyber protection product for SMEs, combining smart software with a repair service and insurance.

NN Bank issued its fourth EUR 500 million benchmark covered bond in February at an attractive rate. The issuance was well received in the market, underlining the reliable nature of this funding instrument for NN Bank.

NN saw strong origination of new mortgages in the first quarter on the back of a competitive proposition and the introduction of new mortgage solutions at the end of 2018.

International Insurance

The core of the business model of International Insurance is to take on the risks that people cannot bear alone providing them protection for what matters most to them. For example, NN in Romania launched a series of new protection products, designed as flexible and modular riders. These products offer financial protection for critical illness or the incapacity to work due to permanent disability, helping customers to overcome financial distress, cover medical expenses and benefit from support for treatment and recovery. A new unit linked product has been launched for ING in Belgium. The solution targets different segments, ranging from private banking to private individuals. It offers a different tax regime than mutual funds, and it allows for inheritance planning. NN Bulgaria and Eurobank Bulgaria AD (Postbank) expanded their partnership as Postbank has involved its whole branch network in the distribution of NN Bulgaria’s pension products to provide more savings to Bulgarian people.

The international business continues to roll out digital tools and products to support customers. In February, NN Belgium introduced NN Connect, an app (retail) customers can use to view the status of their assets and insurance contracts. NN in Hungary was awarded the iF Design Award, a prestigious international design award, for protect.me, an innovative product which offers ‘pay-as-you-go’ life and accident insurance through a mobile app. In addition to this, NN in Hungary introduced their agile way of working throughout the organisation, aiming to be faster and offer more flexibility to customers. For example, the risk assessment process has been shortened from approximately 13 days to just several minutes.

As part of the efforts to improve agility and efficiency within the organisation, the NN global IT Hub officially opened in the heart of Prague, Czech Republic. The NN Hub delivers IT services to all NN Group business units, from the Netherlands to Japan. The IT Hub employs over 130 IT specialists from around the world, and focuses on IT services such as security monitoring, ethical hacking, user access management, data centre management, development and the administration of global applications, support for agile teams with automation, development, and testing.

Asset Management

NN Investment Partners (NN IP) continued its focus on responsible investing. In March 2019, it published its 2018 Responsible Investment Report that elaborates on the 2018 engagement and voting results. In the same month the asset manager announced it will jointly manage a range of sustainable enhanced equity index strategies with Irish Life Investment Managers (ILIM). These strategies combine NN IP’s long history of ESG investing with ILIM’s expertise as a global indexation manager, offering clients attractively priced sustainable solutions and rewarding companies for good governance and effective climate change policies.

Furthermore, the company recently partnered with Yale University (the Yale Initiative on Sustainable Finance, YISF), on a new research stream called ‘Delivering value to investors from sustainability’. This academic research programme explores whether and how integration of ESG aspects in the investment process may improve risk/return of investment portfolios, supporting NN IP in the development of tools to achieve both financial and sustainable goals.

At the end of the first quarter, the merger of the Luxembourg management company with the Dutch licensed entity NN Investment Partners B.V., became effective after the receipt of all regulatory approvals. This step increases NN IP’s efficiency, helping to better leverage existing capabilities and accelerating decision-making.

NN IP funds achieved recognition in several markets in the first quarter of 2019. At the 2019 Morningstar Awards ceremony in Singapore, the NN (L) Asian Debt (Hard Currency) P Cap USD fund was named Best Asian Bond Fund 2019. The award is a testimony to the fund’s consistent outperformance in both strong and weak markets over the past 10 years. Furthermore, NN IP’s NN (L) European Sustainable Equity fund was given one of the ten highest scores among Climetrics’ 5-leaf rated funds at the CDP Europe Awards in Brussels. A five-leaf rating also indicates that NN IP’s monitoring and oversight of climate issues is among the best in the Climetrics universe of analysed funds.

Other events

NN Group values the role of art and culture in society, as we believe art inspires and connects people. Therefore NN contributes to making art more accessible to a wider audience, and invests in cultural partnerships with Dutch museums and artists. Recent art and culture activities include sponsoring the exhibition of one of the most famous Dutch photographers, Erwin Olaf, at the Gemeentemuseum in The Hague that attracted more than 200,000 visitors. Furthermore, at the Art Rotterdam Fair earlier this year, the NN Group Art Award was presented for the third time. This incentive prize for exceptionally talented artists was awarded to Katja Mater.

It was also announced that the corporate partnership between NN Group and the Mauritshuis Museum in The Hague will be extended until 2021, with the attraction of new audiences to the museum as one of the main shared goals.

(download the full Press Release)

Analyst and investor call

Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 1Q19 results at 10.30 am CET onThursday 16 May 2019. Members of the investment community can join the conference call at +31 20 531 5865 (NL), +44 203 365 3210 (UK), +1 866 349 6093(US) or follow the webcast on www.nn-group.com.

Press call

Lard Friese and Delfin Rueda will host a press call to discuss the 1Q19 results, which will be held at 07.45 am CET on Thursday 16 May 2019. Journalists can join the press call at +31 20 531 5863 (NL).

Financial calendar

  • Annual General Meeting: 29 May 2019
  • Publication 2Q19 results: 15 August 2019
  • Publication 3Q19 results: 14 November 2019
  • Capital markets update: 4 December 2019

Additional information

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