NN Group posts strong 1Q15 results

Net result and capital position further improved

• 1Q15 operating result ongoing business of EUR 304 million, up 3.1% from 1Q14, supported by the expense reduction programme in the Netherlands and lower debt funding costs

• Net result improved to EUR 485 million versus net loss of EUR 215 million in 1Q14, supported by a capital gain on an equity investment, whereas 1Q14 included a EUR 541 million charge related to the company’s employee pension plan in the Netherlands

• Cumulative costs savings in the Netherlands of EUR 164 million compared with 2013; EUR 22 million realised in 1Q15

• Strong capital position: IGD ratio up at 335% supported by market movements; holding company cash capital stable at EUR 1.4 billion

• New sales (APE) EUR 498 million, up 10.9% from 1Q14 at constant currencies, driven by a pension buy-out in the Netherlands

• AuM at Investment Management increased to EUR 203 billion, driven by market appreciation

• Rebranding from ING to NN started in 1Q15

Statement of Lard Friese, CEO

“We are pleased with the strong performance that we are presenting today, which underscores our focus on delivering on our strategic objectives. The operating result from the ongoing business for the first quarter increased 3% to EUR 304 million. We are well on track with our expense reduction programme in the Netherlands, having already realised EUR 164 million of savings compared with our target of an absolute EUR 200 million cost reduction by the end of 2016. At the same time, lower funding costs also contributed to the improved results. Overall, new sales were up almost 11% this quarter. We completed a pension buy-out in the Netherlands, which substantially increased our new sales. Bancassurance sales in Japan grew further in line with our channel diversification strategy.

All in all, it was a good start of the year. However, there are areas where we want to further improve. In our Non-life business in the Netherlands, we are continuing with our management actions in order to bring down the combined ratio from slightly above 100% in order to achieve our target of 97% or lower by 2018. Growth in Insurance Europe has been held back by headwinds in the region, and therefore we are shifting our focus to promising growth areas such as protection products. Our asset manager had good inflows of assets in third-party mandates this quarter. We will continue our investments aimed at strengthening our capabilities in order to attract third-party assets going forward. It goes without saying that we remain focused on achieving our targets for all our operating segments.

We continue our journey as a standalone company. In February, ING Group further reduced its stake in NN Group to 54.6%. As part of this transaction, we took the opportunity to complete a EUR 200 million share buy-back. Another important milestone was NN Group’s inclusion in the AEX index. Furthermore, the rebranding of our businesses from ING to NN is underway, creating a recognisable identity for our customers and other stakeholders, supported by a clear promise: ‘You matter’.

In April we celebrated our 170th anniversary. Building on our strong heritage we will continue to keep a sharp eye on our strategic direction and a clear focus on executing our strategy.”

(download the full Press Release)

Strategy and business highlights

NN Group’s strategy is to deliver an excellent customer experience, based on great service and long-term relationships. We aim to achieve this by offering transparent products and services that serve customers’ lifetime needs. We do this by making our multi-access distribution network available to customers wherever and whenever they want, and by maintaining effective operations that deliver excellent customer service.

Netherlands Life

In the Netherlands Life segment, the focus is on reducing expenses and gradually shifting to higher-yielding assets, such as mortgages and loans, in order to compensate the negative impact of lower interest rates on the investment margin. Furthermore, NN Life aims to benefit from its strong position in the pension market and to capture growth opportunities especially in the area of defined contribution pension plans, as well as selectively participating in pension fund buy-outs. In the first quarter of 2015, a large company pension fund transferred its accumulated pension benefits to NN Life, which contributed to the increased new sales (APE) in this segment. In the first quarter a new pension application, ‘Mijn Pensioencoach’ was successfully introduced. This application allows customers to get real-time information about their pension on their smartphone.

Netherlands Non-life

Netherlands Non-life aims to improve underwriting performance and to expand in specific market segments where there are clear opportunities for profitable growth. The operating result increased, mainly driven by positive recovery experience in Disability & Accident (D&A) and improved underwriting results in Motor. The combined ratio remained stable at 100.2%. Nationale-Nederlanden expanded its prevention programme by initiating a pilot called ‘Rij Wijzer’ for professional drivers. This programme uses smart technology to help professional drivers improve their driving behaviour and as a result reduce the risk of damages. In the first quarter, Movir (which offers individual disability insurance to medical and business professionals) was awarded the title of ‘Best income insurer’ by the association of independent financial advisors. Movir scored higher than other insurers on all aspects, including customer focused claims handling and the expertise of employees. In the first quarter of 2015, Movir launched a new D&A insurance product, called Flexible&Certain (‘Soepel&Zeker’), which complements its current D&A offering and is tailored to a new target group, the independent professionals.

Insurance Europe

Insurance Europe is moving its business mix towards protection products and repositioning its savings and retirement products for the low interest rate environment. New sales (APE) were stable compared with the first quarter of 2014, excluding currency effects. Lower pension sales in Turkey were compensated by higher life protection sales, mainly in Spain (protection sales were up 40.0% driven by a large group contract and 11.3% excluding this contract). In Spain, the pension fund Nationale-Nederlanden Europa was awarded for its good and consistent financial performance by “Expansión”, one of the country’s leading financial newspapers. NN Insurance Hungary launched a new modular protection and health insurance product. This product offers value added medical assistance services and can be easily adapted to customer’s individual needs.

Japan Life

In the first quarter of 2015, Japan Life continued to execute its channel diversification strategy. Three new banks started distributing COLI products, bringing the total number of bancassurance partners in Japan to 43 as of 31 March 2015. Bancassurance COLI sales increased by 15% compared with the same period a year ago. The productivity of independent agents remained strong, supported by the continuous enhancement of internal capabilities such as stronger training and sales tools. New sales (APE) were broadly at the same level as in the first quarter of 2014, excluding currency effects.

Investment Management

Assets under Management increased to EUR 203 billion driven by strong market performance in the first quarter of 2015. Investment Management aims to grow its third-party business by following a tailored approach for each client segment. For the retail business, Investment Management plans to protect and further expand its leading position and continues to develop a more distinct range of equity products. Investment Management continues to invest in building and broadening its capabilities, for instance by enhancing the processes supporting higher-margin products. Investment Management has received two Lipper Fund Awards 2015 for its real estate equity funds in the Netherlands. The Lipper Fund Awards programme by Thomson Reuters recognises funds that have excelled in delivering consistently strong risk-adjusted performance over several years.

NN Bank

NN Bank’s mortgage portfolio increased to EUR 8.6 billion from EUR 7.9 billion at the beginning of the year. This increase is the result of further growth of new production and the transfer of ING Bank mortgages, partly offset by the sale of mortgages to NN Life and NN Non-life. In March, the comparison site Independer awarded Nationale-Nederlanden the title of best mortgage advisor (‘Beste thuisadviseur 2015’). The award was based on the highest customer satisfaction score, which was measured between 1 March 2014 and 1 March 2015. Customer deposits (internet savings and bank annuities) also continued to grow steadily, totalling EUR 7.7 billion at the end of the first quarter. Furthermore, NN Bank completed its first public Residential Mortgage Backed Securitisation transaction, raising EUR 650 million in funding from investors. With this transaction, NN Bank has attracted new long-term funding, leading to a further diversification of its funding profile. 

Rebranding from ING to NN

In the first quarter, we started to rebrand our businesses from ING to the NN brand. The majority of our international insurance businesses have been rebranded from ING to NN or Nationale-Nederlanden. ING Investment Management changed its name to NN Investment Partners in April, and at the same time rebranded all investment funds to NN. Across Insurance Europe and Japan local brand campaigns were launched highlighting the name change and the new brand promise ‘You matter’. Our life and pension business in Turkey was the first to start with the rebranding to NN in February. In the Netherlands, our insurance business will keep the Nationale-Nederlanden name while the logo has been updated to align with the new NN brand. In 2015 and 2016, NN Group expects to incur total rebranding expenses of approximately EUR 135 million, which will be reported as special items and of which EUR 20 million was recorded in the first quarter of 2015.

NN started its running sponsorship

In the first quarter, NN Group officially started its running sponsorship with two major running events in the Netherlands, including the 35th edition of the NN Marathon Rotterdam. This marathon is well known for its fast times, professional organisation and almost 1 million enthusiastic supporters along the route. This running sponsorship will help NN Group to enhance awareness of the newly launched NN brand. In the years to come, NN’s objective is to support more running activities in some of its other key markets.

Solvency II

NN Group intends to apply for the usage of a Partial Internal Model for NN Group and the insurance entities in the Netherlands. The outcome of the application process remains subject to significant uncertainties, including the final interpretations of the Solvency II regulations and the regulatory approval process.

Share repurchase to neutralise stock dividend

NN Group has proposed a dividend of EUR 0.57 per ordinary share over the second half of 2014 subject to approval of the Annual General Meeting on 28 May 2015. The final dividend will be paid in cash or ordinary shares at the election of the shareholder. In order to neutralise the dilutive effect of the stock dividend on earnings per ordinary share, NN Group has reached an agreement with ING Group, subject to certain conditions, to repurchase ordinary shares from ING Group equal to the number of shares that NN Group will issue as stock dividend at a price similar to the price used to calculate the stock fraction for the stock dividend. NN Group and ING Group have also agreed to enter into similar transactions to neutralise the dilutive effect of future stock dividends by NN Group, subject to certain conditions and as long as ING Group holds shares in NN Group.

Unit-linked products in the Netherlands

Nationale-Nederlanden continues to reach out to customers to encourage them to carefully assess their unit-linked products in order to find an appropriate solution on an individual basis. On 29 April the European Court of Justice issued its ruling on a principal legal question with respect to information provision requirements related to unit-linked products. The European Court affirmed the position of Nationale-Nederlanden that the information requirements prescribed by the European Directive may be extended by additional information requirements included in national law, provided that these requirements are necessary for the policyholder to understand the essential characteristics of the commitment and are clear, accurate and foreseeable. Nationale-Nederlanden is of the opinion that general principles of Dutch law that are used as a legal basis in Dutch proceedings do not meet these criteria and that additional information requirements cannot be imposed retroactively. The Dutch courts must take the European Court’s ruling into account in individual Dutch legal proceedings. The ruling does not change earlier statements and conclusions disclosed by NN Group in relation to unit-linked products.

(download the full Press Release)

Press call

Lard Friese and Delfin Rueda will host a press call to discuss the 1Q15 results at 09.30am CET on Thursday 7 May 2015. Journalists can join the press call via +31 20 531 5863.

Investor conference call and webcast

Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 1Q15 results at 10:30am CET on Thursday 7 May 2015. 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.

Financial calender

• Annual General Meeting: Thursday, 28 May 2015

• Publication 2Q15 results: Wednesday 5 August 2015 (provisional)

• Publication 3Q15 results: Wednesday 4 November 2015 (provisional)

• Capital Markets Event: Thursday 19 November 2015 (provisional)