NN Group reports 2Q17 results

Strong operating and commercial performance of the combined group; Solvency II ratio at 196%

• Operating result ongoing business was up from EUR 321 million in 2Q16 to EUR 404 million, of which Delta Lloyd contributed EUR 49 million. The operating result excluding Delta Lloyd increased by EUR 33 million
• Net result was down 28.2% from 2Q16 to EUR 240 million, of which Delta Lloyd contributed EUR 21 million. The net result excluding Delta Lloyd decreased by EUR 115 million, reflecting a provision related to ING Australia Holdings partly compensated by higher non-operating items
• Strong commercial momentum: APE was up 43.1% from 2Q16 at constant currencies to EUR 400 million, of which Delta Lloyd contributed EUR 66 million. VNB for 6M17 was up 69.4% to EUR 170 million driven by Japan Life and Insurance Europe
• Solvency II ratio of NN Group was 196% reflecting the acquisition of Delta Lloyd, positive market impacts, operating return and the deduction of the 2017 interim dividend
• Holding company cash capital was EUR 1,731 million; including EUR 820 million dividends received from subsidiaries and EUR 500 million capital injection into Delta Lloyd Life
• Interim dividend 2017 of EUR 0.62 per ordinary share or approximately EUR 209 million

Statement of Lard Friese, CEO

‘Today we are reporting our first fully consolidated set of quarterly results for NN Group and Delta Lloyd, and I am pleased with the strong overall performance of the combined group in the second quarter of 2017. We have seen a healthy contribution from Delta Lloyd, and almost all our segments reported improved results compared with a year earlier, most notably in Japan Life and Insurance Europe. The results of our Netherlands Non-life business were impacted this quarter by a EUR 40 million strengthening in the Property & Casualty insurance liabilities. We continued to deliver cost efficiencies across our businesses, leading to a further reduction of our cost base. The Solvency II ratio was 196%, providing a solid foundation for the combined group going forward. The commercial momentum we saw earlier has been sustained, as both sales and the value of our new business increased significantly, and NN Investment Partners again attracted robust Third Party net inflows.

We have made steady progress in our first quarter together with Delta Lloyd, and a start has been made to integrate our businesses, with the aim of taking the combined group into the next phase of our journey. Integrating two organisations and business cultures requires effort and focus. Throughout this process, our employees remain committed to deliver an excellent customerservice, further innovate our businesses and to contribute to the societies in which we operate.

We are excited to start this new chapter as a combined group, reporting a first strong set of results. While we bring together the best of our businesses and cultures to integrate NN and Delta Lloyd in the Netherlands and Belgium, our focus remains on disciplined capital management, a strong balance sheet, and on driving ahead with full energy to further improve the customer experience across our 18 markets.’

(download the full Press Release)

Quarterly Business Update

NN Group´s robust 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.

Capturing growth

With the acquisition of DeltaLloyd, NN’s proposition in the Dutch pension market was further strengthened, especially in the area of Defined Contribution (DC) pensions. Delta Lloyd brings significant additional DC business to the existing NN portfolio, leading to a combined #1 market position in DC. The first half of 2017 also showed a steady inflow of new contracts at AZL, NN Life’s pension administrator, for a number of industry pension funds. These new contracts will significantly increase the total number of participants from almost 900,000 to 1,250,000 as from 1 January 2018.

Our general pension fund ‘De Nationale APF’ signed a contract with a new client, McCain. De Nationale APF is an independent entity which provides an attractive solution for pension funds and employers to comply with increasingly complex pension regulations and to benefit from economies of scale.

In the second quarter of 2017, the sale of protection products of Insurance Europe grew by 47.8% across the region compared with the same quarter in 2016. Several of our business units in Europe developed health products. For example, our Spanish business expanded the ‘For You’ proposition to tiedagents. This product provides specific coverage for the diagnoses of breastcancer and offers specific services such as a second medical opinion, homecare and childcare services. A campaign raising awareness for cancer prevention, supported the marketing of the product.

NN Hellas in Greece introduced a new health insurance programme, ‘NN Orange Health’. This is specifically designed to meet the needs of young families, as it covers up to six insured people in the same policy. NN Orange Health provides access to more than 40 private hospitals in Greece at an affordable price. It includes coverage abroad, medical expenses in the event of an accident, surgical allowance, and urgent transportation within Greece.

The NN Accident Insurancepackages of NN Hungary have proven to be successful, with more than 10,000 policies sold to date, since its launch in the second quarter of 2016. Offered online, the packages provide specific coverage in the event of an accident, including coverage for daily hospital costs and loss of income, plus a rider covering the costs of physiotherapy, assistance service and help at home. The demand for this product shows that customers are becoming more conscious about preparing for the loss of income due to an accident. In addition to this, new riders were added to Motiva, NN Hungary’s easy-to-understand pension insurance product.

NN Investment Partners saw positive net flows for Third Party assets for the fourth consecutive quarter amounting to EUR 3.1 billion in the second quarter. And our banking businesses- NN Bank and Delta Lloyd Bank - grew their combined mortgage portfolio by EUR0.5 billion to EUR 17.4 billion in the second quarter of 2017. During that same period, their customer savings grew by EUR 0.2 billion to EUR 13.7 billion.

Multi-access distribution

NN Group serves its customers through multiple channels, comprising tied agents, bancassurance partners, brokers and direct channels.

Following the acquisition of Delta Lloyd, the distribution capabilities of NN Group have been expanded with the inclusion of its direct channel OHRA and bank distribution channel ABN AMRO Insurance in the Netherlands. ABN AMRO Insurance provides ABN AMRO customers with life and non-life insurance product and service solutions in the Retail and SME segments. With over a million customers serviced through call centres, internet and branches, ABN AMRO Insurance is an attractive bancassurance platform in the Netherlands. In Belgium, the distribution scope has been broadened with the brokers and direct channels of Delta Lloyd Life Belgium.

In the second quarter of 2017, our businesses in Europe added new banks to the bancassurance platform, through which life and non-life products are offered. NN Bulgaria added three new banks, and in the Czech Republic the cooperation with Moneta Money Bank is showing positive results with a significant increase in sales of life insurance policies and pensions. Nationale-Nederlanden in Poland started offering health insurance packages to customers through its strategic partnership with ING BankŚląski, using their online banking channel.

NN Hayat ve Emeklilik launched a new partnership with Abank, a player in the Turkish and international market. This partnership enables customers to have access to NN Hayat ve Emeklilik’s product portfolio through Abank’s 53 branches across Turkey, over the next 5 years.

Bancassurance COLI sales for Japan Life increased by 26.4% at constant currencies, compared with the second quarter of 2016, despite increasing competition. Higher sales were driven by the higher bank activation and the expansion of the bank distribution network to 68 partners as of end of June 2017, compared with 57 partners a year earlier. Furthermore, Sumitomo Life started offering NN Life Japan’s COLI products from the beginning of April 2017, contributing over 10% of Japan Life’s total sales this quarter.

Effective and efficient operations

NN Group is committed to making its processes as efficient and effective as possible. The businesses in the Netherlands are working on the integration process with Delta Lloyd, but at the same time continue to implement efficiency initiatives. For example, NN Life is separating its pension business into Pension Services and Pensions NewBusiness to further improve the customer experience for both segments.

Furthermore, NN Life has successfully migrated around 140,000 policies to a new platform. This system creates a flexible cost structure and enables our customers and tied agents to see their product details online.

Innovation

NN’s innovation lab, Sparklab, in Hungary is developing several health initiatives, including a mobile application connected to a smart device to help those living with diabetes. The aim of the project is to use technology to help people to take care of their health and make it easier to follow their health status and results. Sparklab in the Netherlands launched ‘Bundelz’, the first prepaid car insurance. It allows customers to buy a 1,000-kilometre bundle of car insurance, instead of paying a monthly premium. This user based service is ideal for drivers who only drive occasionally, or short distances. The Dutch Cyber Collective, an NN initiative supporting SMEs to reduce cybercrime, launched the ‘Cyberwacht’, an emergency service for hacked companies. The Cyberwacht limits damage, investigates causes and removes malicious software.

We offer our agents and employees digital tools to simplify and improve the experience of our customers. For example, we are deploying new digital illustration tools for our agents to help customers select the right products and services. Paperless application processes, including electronic underwriting and biometric signatures, enable our customers to access our products and services effortlessly.

Movir, which offers individual disability insurance to self-employed workers in the Netherlands, joined forces with Totem Open Health, an innovative start-up in the mobile health sector, aimed at detecting and addressing people’s high stress levels. Based on data from ECG sensors using Totem, a person’s stress level can be monitored, which, if needed, prompts the user to seek timely help in order to prevent potential burnout.

Other events

As part of our commitment to society, NN Group endorsed the final recommendations of the Financial Stability Board (FSB) Task Force on Climate-related Financial Disclosures. A consistent disclosure framework helps us as an investor and insurer, to more effectively measure the financial implications of climate change. To demonstrate that climate change warrants specific attention, NN Group has published the carbon footprint of a large part of its proprietary assets, and joined the Institutional Investors Group on Climate Change (IIGCC). These steps help us to engage with investee companies to encourage them to reduce greenhouse gas emissions and support the Paris Agreement.

OHRA, Delta Lloyd’s direct distribution channel for healthcare and non-life protection products won a SAN Accent Award for its health insurance campaign in the Netherlands.

(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 2Q17 results at 10.00 am CET on Thursday 17 August 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 2Q17 results, which will be held at 12.00 pm CET on Thursday 17 August 2017. Journalists can join the press call at +31 (0)20 531 5863.

Financial calendar          

• Publication 3Q17 results: 16 November 2017
• Capital Markets Day: 30 November 2017
• Publication 4Q17 results: 15 February 2018
  

Additional information

• NN Group 2Q17 Financial Supplement, NN Group 2Q17 Analyst Presentation, NN Group 2Q17 Condensed consolidated interim financial information
  

• Photos of NN Group executives, buildings and events are available for download at Flickr