NN Group reports 4Q15 and 2015 results

2015 operating result up 32%; Solvency II ratio at 239%

• 4Q15 operating result ongoing business of EUR 250 million, down 3.6% from 4Q14. Full-year 2015 operating result ongoing business of EUR 1,435 million, up 32.2%, with almost all segments reporting improved results

• Net result of EUR 360 million, up 82.2% from 4Q14. Full-year 2015 net result up to EUR 1,565 million from EUR 588 million in 2014

• Cost savings in the Netherlands of EUR 15 million in 4Q15 bringing the expense base down to EUR 803 million

• Strong capital position: Solvency II ratio at 239% at 4Q15 based on the Partial Internal Model, after deduction of the proposed final 2015 dividend of EUR 341 million

• Holding company cash capital higher at EUR 1,953 million, reflecting free cash flow at the holding company for full-year 2015 of EUR 1,366 million and EUR 849 million returned to shareholders in the form of dividends and share buybacks

• Final 2015 dividend proposal of EUR 1.05 per ordinary share, or EUR 341 million in total, bringing the full-year 2015 dividend to EUR 1.51 per ordinary share

• Full-year 2015 value of new business (VNB) at EUR 202 million, up 13.1%. New sales (APE) EUR 258 million, down 4.3% from 4Q14, at constant currencies, reflecting focus on profitable growth. Full-year 2015 sales down 3.1% to EUR 1,295 million, at constant currencies

• AuM at Asset Management EUR 187 billion, down 1.5% from 3Q15

Statement of Lard Friese, CEO

‘We are pleased with the strong set of results for the fourth quarter and full-year 2015, as this demonstrates our steady progress in achieving our objectives to improve earnings and generate capital.

With around 11,500 employees, we aim to offer our customers value for money, with an approach that is committed, straightforward and personal. The process of rebranding our company to NN and our brand promise “You Matter” provides us with a clear and recognisable identity in all of the markets where we operate and unites our businesses and colleagues. The progress we have made on these fronts is reflected in higher employee engagement and Net Promotor Scores. Our continued focus on delivering excellent service to our customers, innovating our products and improving our business mix is reflected in a 13.1% increase of the value of new business to EUR 202 million in 2015.

As we continue to deliver on our medium-term objectives, there are areas where additional focus is needed. We are taking measures to improve the results of the Non-life business through better underwriting performance and a further reduction of expenses. We have already made progress by improving the claims handling processes and fine-tuning premium rates but there is still more to do. The challenging market environment has prompted us to sharpen the strategic focus of our asset management business for which we have taken a restructuring provision of EUR 13 million in the fourth quarter of 2015.

The capital generation of our businesses remains solid and our NN Group Solvency II ratio was a strong 239% at the end of 2015, based on our Partial Internal Model which was approved by the Dutch regulator in December 2015. We will propose a final 2015 dividend of EUR 1.05 per ordinary share at our Annual General Meeting of Shareholders on 2 June 2016. Together with the interim dividend paid in September 2015, this represents a pay-out ratio of 41% of the 2015 full-year net operating result of the ongoing business, and an increase of 32% compared with the annualised 2014 dividend per ordinary share.

In January 2016, we completed a EUR 250 million share buyback when ING Group sold down part of its shareholding in NN Group. Furthermore ING exchanged the final tranche of mandatory exchangeable subordinated notes of the three anchor investors into ordinary shares in NN Group and cash, bringing ING’s stake in NN Group to 14.1% of outstanding shares.

In 2016 we will build on our track record as we continue to focus on our financial targets while delivering an excellent customer experience, and achieve our ambition to be a company that truly matters in the lives of our stakeholders.’

(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 our 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

Netherlands Life aims to benefit from its strong position in the pension market and selectively capture growth opportunities in the Dutch market, driven by the shift from defined benefit (DB) to defined contribution (DC) pension schemes. As part of the pension services, a social media campaign featuring retirees was recently launched in the Netherlands, with the aim of increasing pension awareness and encouraging people to think about pension planning. Furthermore AZL, NN Life’s pension administrator, and NN Investment Partners launched a General Pension Fund (Algemeen Pensioenfonds or ‘APF’) in December 2015 ahead of the changes in regulations which became effective in January 2016. To realise its financial targets, Netherlands Life focuses on reducing expenses and gradually shifting to higher-yielding assets, such as mortgages and loans, in order to offset the negative impact of lower interest rates on the investment margin.

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 continuing focus of the Non-life business on customer centricity and transparent customer communication has been rewarded by higher customer loyalty as measured by its gradually increasing Net Promotor Scores (NPS). An example of good communication is the policy conditions of the Home Insurance Product, which took second place in the National Writing Contest. Non-life not only focuses on exceeding customers’ expectations, it also puts great effort into further improving its relationships with intermediaries, resulting in high satisfaction scores for the products and services of Movir, according to Kien (a market research company). Adfiz, another external benchmark, confirmed this success, with Movir receiving the award for ‘The best performing D&A insurer’ for the fifth year in a row and NN Non-life climbing in the rankings as the second best all-round intermediary insurer.

Insurance Europe

Insurance Europe aims to grow profitably through disciplined capital allocation and by leveraging its significant distribution platform. It continues to shift its business mix towards capital-light products and reposition its savings and retirement products in response to the low interest rate environment, changing regulations and customer behaviour. Spain recently launched Growing Guarantee savings products, which respond to the needs of our customers by guaranteeing their investment and offering upside potential, while at the same time being capital-light products that are less sensitive to interest rates. Poland adapted its flagship savings product to changing regulation while simultaneously improving the customer proposition with extensive protection cover and added services such as medical assistance. The Insurance Europe businesses will continue to enhance the customer experience, supported by new products and further digitalisation.

Japan Life

Japan Life continues to drive value through product innovation and expanding its distribution. In the fourth quarter of 2015, corporate-owned life insurance (COLI) protection sales increased by 56% at constant currencies compared with the fourth quarter of 2014, driven by new product launches, such as a new term product addressing death and severe disability needs of SME owners up to age 90, new training programmes and new sales tools. Bancassurance-COLI sales increased by 39% in the quarter, driven by the continuing expansion of the bank distribution network. In December 2015, Japan Life received the highest rating for its after-sales call centre from the Help Desk Institute-Japan for the third consecutive year. The call centre was awarded for its ability to provide appropriate solutions to businesses and for the extensive knowledge of its staff leading to an excellent customer experience.

Asset Management

Assets under Management decreased from EUR 190 billion to EUR 187 billion in the quarter as the market environment remained challenging. Asset Management aims to grow its Third-Party business by following a tailored approach for each client segment. It plans to protect and further expand its leading position and continues to develop a more distinct range of products. As part of its strategy enhancement, Asset Management is rationalising and creating scale in its product range and building on its areas of expertise. Examples are the Dutch Residential Mortgage Fund, jointly launched by NN Investment Partners (NN IP) and NN Bank with a first tranche of EUR 165 million of mortgage loans sold to the fund. NN IP also complemented its successful multi-asset range with the Multi-Asset High Income fund. The asset manager aims to create investment awareness among retail clients in its home markets, and has recently implemented several initiatives in partnership with the Dutch Association of Stockholders (VEB) and with Nibud (the independent institute for financial advice and planning).

NN Bank

NN Bank continued to expand its mortgage and customer savings activities. In line with its strategy, NN Bank’s mortgage portfolio increased to EUR 10.5 billion from EUR 10.0 billion at the end of the third quarter of 2015. The bank also expanded its product offering by introducing a personal loan proposition. Customer deposits slightly decreased to EUR 8.0 billion at the end of the fourth quarter. NN Bank further diversified its funding mix by completing a second public RMBS transaction in the fourth quarter, raising an amount of EUR 550 million in funding from institutional investors. On 20 January 2016 Standard & Poor’s (S&P) assigned single A/ A-1 long and short-term credit ratings to NN Bank with a stable outlook.

(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 4Q15 results at 10.00 am CET on Thursday 25 February 2016. 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 briefing

Lard Friese and Delfin Rueda will host a press briefing to discuss the 4Q15 results, which will be held at 12.00 pm CET on Thursday 25 February 2016 at NN Group’s head office, Schenkkade 65, The Hague.

Financial calendar

• Publication 1Q16 results: 26 May 2016      
  

• Annual General Meeting: 2 June 2016

• Publication 2Q16 results: 18 August 2016

• Publication 3Q16 results: 17 November 2016