NN Group reports 1Q17 results

Strong operating performance; Solvency II ratio at 238%

• Operating result ongoing business of EUR 406million, up 33.3% from 1Q16, driven by higher results in all segments
• Net result of EUR 435 million, up 61.0% from1Q16, reflecting the higher operating result, higher non-operating items and a lower hedge-related loss for Japan Closed Block VA
• Further cost savings in the Netherlands bringing the expense base down to EUR 748 million
• Strong commercial momentum: APE of EUR 620million, up 28.3% from 1Q16 at constant currencies, driven by higher sales at Netherlands Life, Insurance Europe and Japan Life; net third party inflows of EUR 2.1 billion at Asset Management; EUR 1.1 billion of mortgage production at NN Bank
• Solvency II ratio of NN Group decreased to 238% from 241% at the end of 4Q16 primarily due to market impacts
• Holding company cash capital higher at EUR 2,977million, reflecting the EUR 500 million senior notes issued in January and dividends received from subsidiaries, partly offset by the acquisition of shares in Delta Lloyd in February 2017

Statement of Lard Friese, CEO

‘NN Group showed a strong performance in the first quarter of 2017, with all segments contributing to the increase in the Group's operating result compared with the first quarter of 2016. We continue to improve efficiency, with cost savings in the Netherlands bringing the expense base down further. And our balance sheet remains robust, with NN Group´s Solvency II ratio at 238%.

Every day, we strive to deliver excellent service to our customers, innovate our products, and improve our business mix, which is reflected in increased sales this quarter. Insurance Europe presented higher life sales of 29.4% across the region, and in Japan the COLI critical illness product, introduced in July 2016, contributed to a sales increase of 31.3%.

It was a memorable start of 2017. Over the past months, we took a next step to strategically prepare our company for the future, and strengthen our leading position in the Netherlands and Belgium. In April, the acquisition of 93.3% of Delta Lloyd was complete. We announced the senior management appointments for the combined company and launched the integration process. Preparations for the legal merger continue. We believe the combination of Delta Lloyd with the Dutch and Belgian activities of NN will benefit customers, by expanding our product offering and further broadening our distribution network. It will also generate a materially higher free cash flow available to shareholders over time through the benefits of scale.

Our policy has always been to return excess cash to shareholders unless we can use it for value creating opportunities. The acquisition of Delta Lloyd was an opportunity to deploy excess cash at an expected attractive return on investment. Our approach of disciplined capital management has not changed and we will continue to prioritise a strong balance sheet and maintaining a robust capital position. The pro-forma Solvency II ratio of NN Group including Delta Lloyd is estimated at approximately 180% at the end of the first quarter. In August we will publish the full consolidated results for the combined group for the second quarter of the year. And we will provide a more detailed strategic update at our Capital Markets Day on 30 November 2017.

Going forward, our focus will be onensuring a smooth transition process and on driving further improvement in customer experience through innovation and our client centric approach: helping our customers to secure their financial future.’

(download the full Press Release)

Quarterly Business Update

NN Group´s robust financial position reflects the resilience of its businesses in an environment which continues to be characterised by low interest rates and market volatility. Our financial position provides a solid foundation for executing the company’s strategy, which is to deliver an excellent customer experience based on transparent products and services and long-term relationships. NN Group aims to help people secure their financial futures, and is committed to delivering products and services that are easy to understand and meet customers’ lifetime needs.

Transparent products and services

NN Life’s pension business reached a milestone with the PPI (Premiepensioeninstelling) accumulating EUR 1 billion of assets under management. This is the result of a partnership between NN Investment Partners, AZL, and NN Life. NN Life’s competitive position in the pension market remains strong. The first months of 2017 showed a steady inflow of new contracts, specifically in the area of Defined Contribution. In addition, NN Life became the pension provider for Nutreco’s employees in the Netherlands. Furthermore, on 1 September 2016, the Enhanced Premium Scheme Act (Wet verbeterde premieregeling) came into force in the Netherlands, which makes it possible to invest accumulated pension capital after the retirement date. NN Life launched a new product in the first quarter of 2017, a variable annuity variant of its pension pay-out product ‘Active Pension (DIP)’, in order to capture the opportunities created by this new legislation.

Movir, which offers individual disability insurance to self-employed workers in the Netherlands, was awarded the title of ´Best income insurer´ of 2016 by Adfiz, the association of independent financial advisors, for the sixth time in a row. Movir scored higher than other insurers on all aspects, including customer focus, timely claims handling and expertise of employees. Winning the award this year was particularly encouraging, as Movir has been responsible for the management and administration of the individual disability (AOV) portfolio of Nationale-Nederlanden since the beginning of 2017, which required extra effort by all involved.

Capturing growth

The fundamental need for people to protect themselves against uncertainties will continue to drive growth in the insurance industry over the long term. NN Group continually adapts its businesses to capture this growth potential. In the first quarter of 2017, the sale of protection products grew 49% across Europe compared with the same quarter in 2016, with Poland and Romania as the largest contributors.

In the Netherlands, NN Bank grew its mortgage portfolio by EUR 0.3 billion to EUR 13.1 billion in the first quarter of 2017. During that same period, its customer savings grew by EUR 0.4 billion to EUR 10.6 billion. NN Bank introduced Brickler, an application which provides better insights in the different steps a customer has to take when buying a house. This app offers customers the possibility to search for new homes, calculate the spending limit, and compare different mortgage suppliers.

Multi-access distribution

NN Group serves its customers through multiple channels, comprising tied agents, bancassurance partners, brokers and direct channels. It is our aim to achieve profitable growth through multi-access distribution. Inline with strategy, the international businesses made further headway in the first quarter to increase partnerships in the area of bancassurance. Nationale-Nederlanden in Poland has built a modern and innovative IT platform for banks, which differentiates by allowing products to be introduced within weeks. It also offers full flexibility in tailoring stand–alone protection products, which can be adapted to the specific needs of the banks’ customers. As part of their bancassurance strategy, Nationale-Nederlanden Spain launched a protection product in cooperation with ING Direct Spain. The product, which is offered to individuals when digitally contracting a consumer loan at ING, provides payment protection in cases of unemployment, permanent disability or death. From a customer perspective, the newly designed insurance will have a differentiated positioning in the Spanish market by offering full protection to consumers, automated underwriting and easy access as the process is fully digitalised.

In the first quarter 2017, bancassurance COLI sales in Japan increased by 48%, at constant currencies, compared with the same quarter of 2016. This was driven by the higher bank activation and the expansion of the bank distribution network, bringing the total to 63 banking partners at the end of the first quarter of 2017. On 3 April 2017, Sumitomo Life Insurance Company started offering NN Life Japan’s corporate-owned life insurance (COLI) products through Sumitomo Life’s sales network of approximately 30,000 agents.

The creation of dedicated teams and sharing of best practices between NN Hellas and Piraeus Bank have intensified their collaboration. This has led to significant sales increases through the bancassurance channel in Greece.

Effective and efficient operations

NN Group aims to make its processes as efficient and effective as possible. The businesses in the Netherlands continue to implement efficiency initiatives, for example the implementation of Robotic Process Automation (RPA) in our central Finance departments, as well as in our Non-life business. Building on this experience, further roll-out in the Life business will take place to replace repetitive, labour intensive, administrative processes. NN Life Japan also implemented RPA for handling part of its processes in the Customer Service Department, resulting in operation optimisation and simplification, operational time reductions, and error reduction, along with contributing to creating a paperless environment.

Innovation

Following the successful innovation labs in the Netherlands, NN opened two international innovation labs ‘Sparklab’, the first one in Hungary and the second one in Turkey. At least six other labs will be launched shortly. In the Netherlands, ‘Sparklab’ started a test with ‘Gappie’, an app which enables customers to buy on-demand car insurance when borrowing a car from family or friends.

NN Group joined the National Blockchain Coalition (Nationale Blockchain Coalitie) in the Netherlands as a founding partner. The coalition brings together over twenty companies and organisations from the financial, logistics, and energy sectors, as well as government and knowledge institutions. The aim of the coalition is to make the Netherlands an international front runner in the application of blockchain technology.

In addition to continuously innovating its own productportfolio, NN Group also invests in fintech partnerships with third parties, for example the fast-growing Berlin-based fintech company OptioPay GmbH. OptioPay has developed an innovative business model that allows consumers to convert incoming payments— from insurers, energy companies and even employers—into higher value products, services or vouchers with a broad range of merchants and service providers. NN is keen to support OptioPay as it expands in its home market and in new geographies.

Other events

In April 2017, NN Group and Global Sports Communication presented the NN Running Team, the first professional running team in the world, adding a new dimension to running. The NN Running Team brings together the world's top long-distance runners in a partnership with the world's best athletes, recently in Hamburg and London.

NN Investment Partners (NN IP) expanded its Responsible Investment team, adding significant weight to the team’s primary goal to drive the further development of responsible investing at NN IP, and to support all investment teams in their ESG integration strategy. NN IP also developed a tagging approach that allows for assessing the Sustainable Development Goals (SDG) exposure of companies. This approach offers investors the opportunity to choose stronger exposure to SDGs and easier opportunities for impact investing along with company engagement on impact.

(download the full Press release)

Investor conference call and webcast

Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 1Q17 results at 10.00 am CET on Thursday 18 May 2017. 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 1Q17 results, which will be held at 12.00 pm CET on Thursday 18 May 2017. Journalists can join the press call at +31 (0)20 531 5863.

Financial calendar          

• Annual General Meeting: 1 June 2017
• Publication 2Q17 results: 17 August 2017
• Publication 3Q17 results: 16 November 2017
• Capital Markets Day: 30 November 2017