Serving
customers
in times
of change
Annual Report 2021
NN Group N.V.
2021 Annual Report
The 2021 Annual Report provides an integrated review of the performanceof NN Group.
The Annual Report aligns relevant information about our strategy, performance, governance, and future prospects in a way
that reflects the economic, environmental and social contexts in which we operate. It is prepared in accordance with Dutch law,
relevant EU disclosure regulations and reporting standards.
Together with this report, NN Group publishes a Solvency and Financial Condition Report and a Total Tax Contribution Report. Next to
that, NN Investment Partners launches a Responsible Investing Report. All these reports are published on NNGroup’s corporate website
in the Investors/Financial Report section. Read more in ‘Approach to reporting’.
Visit our website for further information
www.nn-group.com
You
matter
We believe that people want to live
life to the fullest. We empower them
to do just that – through all stages
of their lives – by providing sound
financial products and services, and
by being a trusted advisor. We are
steadfast in our commitment to help
people care for what matters most
to them.
What matters to you, matters to us.
1
NN Group N.V.
2021 Annual Report
About NN
Who we are .............................................................................. 2
CEO viewpoint ...................................................................... 4
Our operating
environment
The world around us ......................................................... 6
Determining material topics ...................................... 9
Risks and opportunities ............................................. 10
Our strategy and
performance
NN Group’s strategic priorities ................................ 11
Our performance ............................................................... 16
Netherlands Life ......................................................... 18
Netherlands Non-life ............................................... 20
Banking ............................................................................. 22
Insurance Europe ...................................................... 24
Japan Life ........................................................................ 26
Asset Management ................................................ 28
Other .................................................................................... 30
Creating value for
our stakeholders
How we create value .................................................... 32
Adding value for customers .................................... 34
Empowering our people to be their best ....... 37
Creating value for investors .................................... 40
Creating a positive impact on society ............ 44
Contributing to the SDGs ......................................... 50
Safeguarding
value creation
Our values .............................................................................. 53
Our Code of Conduct and other policies.......56
Stakeholder engagement and
international commitments ..................................... 59
Managing our risks .......................................................... 61
Our response to the Task Force on
Climate-related Financial Disclosures ........... 66
Corporate governance
Our Management Board ........................................... 80
Our Supervisory Board ................................................ 81
Introduction by the
Supervisory Board Chair ........................................... 82
Report of the Supervisory Board ........................ 83
Corporate governance ................................................ 97
Remuneration Report ................................................ 109
Statements Dutch Financial
Supervision Act and Dutch
Corporate Governance Code .............................. 124
Facts and figures
Key financial and
non-financial indicators ........................................... 126
Responsible investment indicators .................. 127
Human capital indicators ......................................... 128
Community investment indicators ................... 129
Environmental indicators ......................................... 130
Carbon footprint proprietary assets ................ 131
EU Taxonomy disclosures ....................................... 135
Assurance report of the independent
auditors (non-financial information) ............. 138
Annual accounts
Consolidated annual accounts
Consolidated annual accounts ........................... 142
Consolidated balance sheet ................................ 144
Consolidated profit and loss account .......... 145
Consolidated statement of
comprehensive income ............................................. 147
Consolidated statement of cash flows ........ 148
Consolidated statement of
changes in equity ........................................................... 150
Notes to the Consolidated
annual accounts .............................................................. 152
Risk management (Note 52).................................. 241
Capital and liquidity management
(Note 53) ............................................................................... 278
Authorisation of the Consolidated
annual accounts ............................................................. 287
Parent company annual accounts
Parent company balance sheet ....................... 288
Parent company profit and loss account.. 289
Parent company statement of
changes in equity .......................................................... 290
Notes to the Parent company
annual accounts ............................................................ 292
Authorisation of the Parent
company annual accounts .................................. 298
Other
Independent Auditor’s Report ............................ 299
Appropriation of result .............................................. 316
Other information
Our approach to reporting .................................... 318
Material topics index .................................................. 319
Glossary ................................................................................ 321
Contact and legal information ........................... 323
PDF/printed version
This document is the PDF/printed version of the 2021 Annual Report of NN Group N.V. and has been prepared
for ease of use and does not contain ESEF information as specified in the Regulatory Technical Standards on
ESEF (Delegated Regulation (EU) 2019/815).
The 2021 Annual Report was made publicly available pursuant to section 5:25c of the Dutch Financial
Supervision Act (Wet op het financieel toezicht) and was filed with the Netherlands Authority for the Financial
Markets (Autoriteit Financiële Markten) in European single electronic reporting format (the ESEF package).
The ESEF package is available on the company’s website and includes a human readable XHTML version
of the 2021 Annual Report. In any case of discrepancies between this PDF/printed version and the ESEF
package, the latter prevails.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Contents
2
NN Group N.V.
2021 Annual Report
Japan
Insurance, Asset Management and Banking
Insurance and Asset Management
Insurance
1
Asset Management
2,3
We operate in 19 countries
Our year in review
January February March April May June
Who we are
1 In July 2021, the sale of our Bulgarian Pension and Life businesses to KBC’s Bulgarian insurance business DZI was completed.
2 In August 2021, we announced the agreement to sell NN Investment Partners to Goldman Sachs Group, Inc. The transaction is expected to be finalised in 2022.
3 Outside of Europe and Japan, NN Investment Partners has offices in Montevideo, New York and Singapore.
our company has merged, grown and changed, but the core of
who we are has remained the same. At NN we are committed
to creating long-term value for all our stakeholders.
The Dutch Central
Bank (DNB)
approved the legal
merger of VIVAT
Non-life into NN
Non-life
NN announced
an agreement to
sell our Bulgarian
operations, which
were established
in 2001
NN supported the
development of the
Net-Zero Investment
Framework, a road-
map for investors
launched by IIGCC
Inga Beale, Cecilia
Reyes and Rob
Lelieveld were
nominated to NN’s
Supervisory Board
As part of
European Diversity
Month, NN
signed the Dutch
Diversity Charter
The first Your
Community Matters:
NN Volunteer week
took place with
colleagues from all
our business units
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
About NN – Who we are
3
NN Group N.V.
2021 Annual Report
July August September October November December
Our main brands
Verzekeringen
Ratings
Included in sustainability indices Recognised by ESG ratings Credit ratings
Fitch
AA-
Financial strength
Stable
A+
Credit rating
Stable
S&P
A
Financial strength
Stable
BBB+
Credit rating
Stable
NN announced
the acquisition of
MetLife’s businesses
in Poland and Greece
and a majority stake
in Heinenoord
NN announced it
will sell its asset
manager NN
Investment Partners
(NN IP) to Goldman
Sachs Group, Inc
NN was proud to
again sponsor
Rotterdam Pride
and handed out
inclusion flags
NN and the
Mauritshuis
extended their
collaboration,
which started
in 2016
NN defined interim
targets to transition
our corporate
investment
portfolio to achieve
net-zero emissions
NN and the
Amsterdam School
of Economics
(UvA) opened the
Research Centre for
Longevity Risk
Life insurance Non-life Banking Asset Management
• Group income
• Group pensions
• Individual pensions
• Protection
• Japan: Corporate Life (COLI)
• Employee benefits
• Fire insurance
• Health insurance
• Individual disability
• Liability insurance
• Motor insurance
• Property and casualty
• Transport insurance
• Consumer lending, savings
and investment products
• Mortgage origination and
servicing for NN Group
companies and third parties
• Alternative credit
• Automated investing
strategies
• Multi-asset and fixed income
solutions
• Specialised equity
• Specialised fixed income
Our products and services
Our values
15,417
Employees
18m
Customers
1845
Year NN founded
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
About NN – Who we are continued
About NN – CEO viewpoint
4
NN Group N.V.
2021 Annual Report
CEO viewpoint 2021
How would you characterise 2021,
the second year of the pandemic?
2021 was again an unprecedented year.
As a company, we made good progress,
despite the pandemic which continued
to impact people’s health and livelihoods,
businesses and the global economy. In the
beginning of the year, we all hoped life would
quickly go back to normal. Unfortunately,
with new variants of the virus spreading,
many parts of the world remained in some
form of lockdown. On a positive note, due
to this shock to the system, many of the
old ways of doing things will likely not be
the ways of the future. There’s increased
attention for risk around health and climate
change and the acceleration of digitalisation
is creating new opportunities.
NN Group performed strongly in
2021. What were the main drivers?
Our commercial and financial performance
was strong, with all business segments
performing better than last year. But a
company’s success is not mapped by its
financial performance alone. In times like
these, it is also defined by the speed and
agility with which we align ourselves to
our environment. Our company has been
around for more than 175 years in which it
weathered a number of disruptive events.
In the past two years, the resilience and
collaborative spirit of our colleagues, the
majority of them working from home, have
played a crucial role in responding to the
current circumstances and achieving
these good results. Another performance
driver has been the increased customer
demand for protection products in 2021.
The pandemic has prompted people to
reflect on the risks in their lives: what
happens if I cannot work, or if somebody
in my family falls ill? This increased risk
awareness has led to a growth in new
business. We were able to welcome new
customers, and we also saw higher retention
rates among existing customers.
NN Group’s new strategy entered its
second year. Can you tell us about
the progress made in 2021?
Society’s expectations are changing and
increasing rapidly, so we stay fully focused
on serving our customers and creating long-
term value for our stakeholders. In 2021, our
customer satisfaction scores increased, with
five business units scoring an above market
average Net Promotor Score, and three in
line with the market. This shows we are on
the right track, but as we aim to have eleven
of our business units score above market
average in 2023, there is more work to do.
For our people, we prioritised health and
well-being, and provided space for balancing
personal life with work during the pandemic.
We have seen our employee engagement
remaining stable at a high level. And while
we experience the benefits of remote
working, we look forward to welcoming
people back in the office, as there is nothing
quite like meeting each other and building
relationships in person.
As part of our wider commitment to society,
we set targets with regard to lowering
our carbon footprint, in line with the Paris
Agreement. By 2025, we aim to reduce the
emissions of our corporate investments
by 25% and of our own operations by
35%, compared with 2019. We focus on
investing in companies considered to be
We stay fully focused on
serving our customers
and creating long-term
value for our stakeholders
David Knibbe
Chief Executive Officer
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
About NN – CEO viewpoint continued
5
NN Group N.V.
2021 Annual Report
frontrunners in the transition to a low-carbon
economy, and aim to more than double
our investments in climate solutions by
2030. To support our customers, we are
increasingly embedding sustainability into
our products and services. This ranges from
sustainable pension products, to products
in the field of burnout prevention. And our
bank’s sustainable mortgage label, Woonnu,
assists our customers in making their houses
more energy efficient.
You say you are well on track in
implementing the strategy – where
do you see room for improvement?
It is our ambition to be an industry leader
known for our customer engagement,
talented people and contribution to society.
So it is key to further accelerate progress
in these areas. For example, with regard to
gender diversity, we are at 34% women in
senior management positions, below our
target of 40% by 2023. To close this gap,
we are investing in talent management and
succession planning, awareness training and
extended paternity leave policies across our
markets. Furthermore, in this tight labour
market, it remains a priority to identify
employee needs and invest in the right mix of
talent, technologies and employment models
in order to be able to achieve our future
goals. And, creating and preserving an open,
safe and inclusive working environment and
culture remains a priority. The competition
for talent is heating up, so we are making
extra efforts around talent management.
Growth is one of the long-term
objectives for NN, how is this going
to be achieved?
With our strong market positions, we believe
we can achieve mid single-digit annual
growth of operating capital generation over
time. All business segments can contribute
to this growth. We see additional growth
potential in protection products. Across our
markets, governments and employers are
reducing coverage, which is expected to
result in increased demand for such products.
We also see growth opportunities in the
pension market in the Netherlands, with the
ongoing shift to Defined Contribution pension
plans. And across NN, our investments in
digital support for our agents and strong
banking partnerships offer further room for
growth. Our customer engagement platforms
and increased focus on sustainable solutions
will also enable us to create value. We have
actually grown faster than our mid-single digit
target in 2021, so we are on track to deliver on
our growth ambition.
In 2021, NN announced several
acquisitions and divestments.
How does this contribute to the
overall strategy?
Our targets and growth plans are based on
organic growth of our business segments.
We regularly assess our portfolio of
businesses, and any mergers or acquisitions
we pursue should further support our organic
growth profile. The acquisition of MetLife in
Poland and Greece, where we already have a
strong presence, gives us additional scale and
distribution benefits. In addition, we acquired
a 70% stake in Heinenoord in the Netherlands,
in order to strengthen our distribution
capabilities and reinforce our position in
the Dutch non-life market. Furthermore, we
divested our Bulgarian business and took the
decision to sell the closed book life portfolio
of NN Belgium. The sale of our asset manager,
NN Investment Partners, to Goldman Sachs
Group, is in line with this approach. As part
of the partnership with Goldman Sachs
Asset Management, the combined company
will continue to provide selected asset
management services to NN. The transaction
will provide us the optionality to develop
a broader range of asset management
propositions for our customers.
Climate change is considered to
be one of the most pressing issues
of our time. How can NN make
a difference?
Natural disasters caused by extreme weather
struck many of our markets during the
summer of 2021, underscoring the real-life
impact of climate change. Across Europe,
floods from heavy rainfall impacted our
customers in Belgium and the Netherlands,
and in Greece and Turkey, a severe heatwave
led to multiple wildfires. These developments
impact insurers, since we are exposed to
climate risk on both sides of our balance
sheet: through our investments on the asset
side and our underwriting on the liability side.
Therefore, climate risk has been a focal point
for NN for several years, and it was one of the
key risks that we looked at during 2021.
Climate change is a challenge that requires
us all to join forces. Therefore, we joined
the Net-Zero Insurance Alliance in 2021 to
pool our knowledge and goals with other
participants, and we have committed
to transition to a net-zero insurance
underwriting portfolio by 2050. We are doing
the same on the investment side, where we
have joined several networks to learn from
each other on how to deal with the transition
to a low-carbon economy. And, even though
our own carbon footprint as a company is
limited, we aim to reduce emissions caused by
our own business operations by 70% by 2030,
principally our office buildings and travel.
What are the plans for 2022?
In our view, the financial sector has an
important role to play in society, and we
remain committed to contributing to a
fast, fair and sustainable recovery, aligned
with our values and our purpose of helping
people care for what matters most to them.
As we move into 2022, we have been deeply
concerned by the developing situation in
Ukraine, and the threat that it poses to
our democracy and safety. Our thoughts
are with everyone affected by the war,
and we will continue to do our best to help
them. We do not have business activities
in Ukraine or Russia, and our direct
financial exposure to these countries is
limited, but we will continue to monitor the
developments closely.
Our company is in good shape, and we
have laid the groundwork for long-term,
sustainable growth. We will continue to
execute our strategy, focusing on our
customers, our people and our contribution
to society. I would like to thank our
colleagues around the world for their
truly extraordinary efforts this year, and
especially express my deep appreciation for
our CFO, Delfin Rueda, who will leave NN
in July 2022. Delfin has, during his ten years
with our company, played an instrumental
role in transforming NN into the strong
international player that it is today.
At NN, with our talented people, our strong
financial foundation and the trust of our
customers, we are looking toward the future
with continued confidence. We remain
committed to creating long-term value
for our stakeholders, and we would like
to thank all we work with and for, for their
continued support.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
6
NN Group N.V.
2021 Annual Report
Covid-19 pandemic
The pandemic entered its second year and
continued to dominate daily life. While mass
vaccination campaigns offered some much-
needed relief, the spread of new variants
resulted in further increases in infections
and people falling ill. As a result, healthcare
systems remain under pressure and by
year-end 2021 some countries, including the
Netherlands, had reimposed full or partial
lockdowns. Experts predict the virus will
continue to pose challenges for years to
come. For consumers, the pandemic has
underscored the relevance of life protection
and health insurance, leading to increased
demand for these products.
Economic outlook
The global economy rebounded strongly
from a severe contraction in 2020, fuelled
by the loosening of lockdown restrictions,
government support programmes and
monetary easing by central banks.
Financial markets had another turbulent
year, with equity markets reaching record
highs and a continued rise in real estate
valuations. Nevertheless, the recovery has
been uneven, due to a variety of factors
including differences in vaccination rates
between countries, supply shortages and a
sharp rise in energy prices. Economic growth
is forecast to continue, albeit at a slower
pace and amid ongoing uncertainties
caused by the pandemic and the war in
Ukraine. Inflation has risen in many parts
of the world, ending a prolonged period of
low inflation. Central banks are responding
by announcing interest-rate increases and
unveiling plans to start phasing out stimulus
programmes. It is still unclear whether the
high inflation is structural and whether or not
interest rate rises will be temporary.
The world around us
As an international financial services company, we are part of and impacted
by a wide range of longer-term economic, geopolitical, social, regulatory
and technological developments. We monitor these developments
closely, and take them into account as we shape our business model and
strategic priorities.
Our operating
environment
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
7
NN Group N.V.
2021 Annual Report
Natural disasters caused by extreme weather struck many of our
markets during the summer of 2021, underscoring the real-life
impact of climate change. Across Europe, floods from heavy
rainfall hit many countries, resulting in significant damage and
impacting thousands of our customers across Belgium and the
Netherlands, read more on page 20. In Greece and Turkey, a
severe heatwave led to multiple wildfires, destroying swathes of
forest and causing mass evacuations. Scientists and authorities
attribute these events to climate change and expect the number
of extreme weather-related disasters to increase in the coming
years, posing a major challenge to the planet and our customers.
It could also have a significant impact on insurers, since we
are exposed to climate risk on both sides of our balance sheet:
through our investments on the asset side and our underwriting on
the liability side.
For this reason, climate risk has been a focal point for NN for
several years, and it was one of the key risks that we looked at
during 2021. While it is still difficult to fully assess or quantify
these risks, climate change could affect our business model, our
balance sheet and even our own business operations in the future.
We are therefore working on climate scenario analyses to further
understand the short- and long-term impact of both physical
and transitional risks. In the meantime, through our strategic
commitments we aim to support the transition to a low-carbon
economy across our business activities and operations (read more
on page 61).
The impact of climate change – NN’s response
For our investments, we announced that we aim to transition our
portfolio to net-zero greenhouse gas (GHG) emissions by 2050,
and we have defined intermediate steps for 2025 and 2030
to achieve this goal. Among these steps is our aim to increase
investments in climate solutions by at least EUR6 billion by
2030 (read more on page 44).
In addition, we are developing more sustainable customer
products and services, such as environmental, social and
governance (ESG) pension products and mortgages aimed
at making homes more sustainable. We joined the Net-Zero
Insurance Alliance in 2021 to pool our knowledge and goals with
other participants. As part of this alliance, we have committed to
transition to a net-zero insurance underwriting portfolio by 2050.
Finally, while as a financial services provider our own carbon
footprint is limited, we have nevertheless set ourselves targets to
significantly reduce emissions in the coming years caused by our
own business operations, principally our office buildings and travel.
For more on how we manage climate risks see:
– ‘Managing our risks’ for the risks we see as most material to
our business (page 61)
– ‘Our response to the Task Force on Climate-related Financial
Disclosures’ (page 66)
– For our approach to responsible investing, see ‘Creating
apositive impact on society’ (page 44)
Our operating environment – The world around us continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
8
NN Group N.V.
2021 Annual Report
Geopolitical developments
Rising instability caused by Russia’s invasion
of Ukraine in February 2022 is expected to
have a significant impact on our operating
environment. At the time of writing, Russian
troops continued to invade Ukraine and
hundreds of thousands of Ukrainians
had fled their homes. The war has fuelled
international tensions, resulting in market
volatily, an increase in energy prices, and
impacting capital flows and global supply
chains. NN does not have business activities
in Ukraine or Russia, and our direct financial
exposure to these countries is limited.
We will continue to closely monitor the
developments, as a growing number of
people seek refuge in countries where we
operate. Together with our colleagues, we
are supporting charitable organisations
helping Ukrainian refugees.
Labour markets
Labour markets continue to be strongly
affected by the pandemic. Lockdowns have
had a major impact on business activity,
resulting in job losses and companies in
some sectors introducing recruitment
freezes. The pandemic has also driven
employers to further embrace technology,
resulting in a shortage of digital and IT skills
at a moment when some European countries
have full employment.
For NN, this is an important area of focus
when shaping our human resources policies
(read more on page 37). With rapidly
changing customer behaviour and ongoing
technological developments, we continue to
invest in relevant training and development
for colleagues, for example in the areas of
IT and data analytics. We are also recruiting
people with new skills, and thinking
strategically about the well-being and needs
of our workforce over the long term.
Transition to a sustainable economy
A series of extreme weather events in
2021 underscored the increasing threat
climate change poses to our planet.
The UN Intergovernmental Panel on
Climate Change (IPCC) warned in August
that climate change is ‘widespread, rapid
and intensifying’ and that some trends are
‘now irreversible’.
The risks this brings for the financial
industry are growing, as illustrated by the
summer’s floods in Western Europe (read
more on page 20). Our industry is working
hard to be part of the solution. Together,
we can contribute to the transition to a
more sustainable economy through our
investments, underwriting activities, and
products and services, as well as our own
operations (read more on page 44).
The regulations stemming from the EU
Sustainable Finance Strategy (continuing
the Action Plan on Sustainable Finance)
came into force to support the transition to a
more sustainable economy. By meeting the
Sustainable Finance Disclosure Regulation,
which came into effect in March 2021 and
has ongoing milestones, NN will strive for
greater transparency of the sustainability
risks and opportunities of our products
and services. In addition, NN has said it will
consider the principal adverse impact of
our investment decisions. Furthermore, we
have adopted the EU Taxonomy to strive
for greater transparency in our products,
investment portfolio and our underwriting
portfolio (read more on page 135). NN has
and will continue to support these and
other initiatives.
Regulatory developments
In September, the European Commission
published its proposal regarding the
Solvency II review, as a follow-up to the
Opinion of the European Insurance and
Occupational Pensions Authority (EIOPA).
The proposals were broadly in line with
expectations, though there were some
noteworthy changes compared to the
EIOPA Opinion. This was generally seen as
a positive development, as it would better
reflect our business model and the related
risks. The proposals will be discussed in
2022 by the European Council and European
Parliament, with the final regulation
expected to be implemented at the earliest
in 2024.
In December, EIOPA published the results
of its 2021 Insurance Stress Test, where
it assessed the industry’s resilience to a
prolonged Covid-19 pandemic combined
with a ‘lower-for-longer’ interest rate
environment. Overall, EIOPA felt the
European insurance industry entered
the stress test with ‘a strong level of
capitalisation’, which will allow insurers to
‘absorb the shock of the adverse scenario’.
Moreover, the stress test shows that
participating Dutch insurers, including NN
Group, are well positioned to navigate a
scenario where Covid-19 remains present
for a longer period. This is also the result of
NN Group’s disciplined asset and liability
management (ALM) and investment risk
management practices.
Meanwhile, in the Netherlands, the new
pension agreement is expected to be
finalised in 2022 and become effective as
of 2023. The planned reforms would change
the Dutch pension landscape and potentially
create growth opportunities for our pension
business in the Netherlands.
Digitalisation
Covid-19 has accelerated the already
existing digitalisation trend. The growing
amount of data available to companies
gives them all sorts of opportunities to
improve the customer experience, internal
processes and operational efficiency.
Whether it is groceries, clothing or financial
services, consumers increasingly expect
businesses to offer an omnichannel
experience. That means our customers and
intermediaries also expect us to be able
to provide a relevant, anytime, anywhere
personalised offering. However, rapid
advances in digitalisation also bring risks:
the threat of data breaches is growing, as
became evident at the end of the year, when
a flaw was detected in the widely-used Log4j
internet software. These growing cyber risks
are creating a greater need for appropriate
cybersecurity policies. (read more on page
58 and 65).
Our operating environment – The world around us continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
9
NN Group N.V.
2021 Annual Report
We use this process as valuable input for the
advancement of our strategy and our risk
management. It also helps us identify focus
areas for our reporting efforts.
A long list of topics was compiled, based on
an analysis of internal and external sources.
From this long list, a shortlist of 12 topics
was created, using the following criteria: the
impact on NN Group (the ‘outside-in impact’
e.g. impact on business results, employee
engagement, or reputation) and the topic’s
related risks and opportunities.
As a next step, the impact of NN on the
topic (‘inside-out impact’), shown on the
x-axis, was assessed through interviews
with stakeholders in which they were
asked to reflect on the related risks and
opportunities of the topics and to consider
how NN’s operations could have an impact
on society (economically, environmentally
and/or socially).
During an online stakeholder dialogue,
involving internal and external stakeholders
(including customers, investors, regulators
and societal organisations), we discussed
the relevance (low, medium, high) our
stakeholders (y-axis) attach to these topics.
‘Responsible investing’ was mentioned
as important, but this is a broad topic
containing various ESG aspects, such as
biodiversity and human rights. It was also
stressed that ‘Diversity and inclusion’ is an
area of importance. Compared to 2020,
we saw that topics directly related to
the pandemic, such as ‘Operating during
lockdown’, are becoming embedded in
regular daily business.
The results presented in the matrix below
show that the topics considered most
important (upper right) are ‘Customer
experience’, ‘Business ethics and
transparency’, ‘Responsible investing’,
‘Robust financial framework’ and ‘Climate
change’. Compared to 2020, we note that
‘Climate change’, ‘Diversity and inclusion’
and ‘Community investment’ have become
more top-of-mind.
The results of the assessment were
presented to the Management Board for
discussion and approval. The Supervisory
Board approved the materiality matrix as
part of the Annual Report approval process.
Read more on our material topics in the
‘Material topics index’.
Determining our material topics
NN conducts a regular review of its operating environment to identify
developments and topics that are considered to be material to our
company. That is, those developments or topics that potentially have
the most impact – be it a risk or an opportunity – on our business and
stakeholders, and where we could create the most value.
Materiality matrix 2021
Importance to Stakeholders
Business ImpactLow High
Low High
7
9
5
2
1
6
8
4
3
10
12
11
1
Customer experience
2
Climate change
3
Responsible investing
4
Products with societal added value
5
Business ethics and transparency
6
Robust financial framework
7
Data privacy and cybersecurity
8
People management
9
Digitalisation
10
Operational effectiveness and efficiency
11
Diversity and inclusion
12
Community investment
Our operating environment – Determining our material topics
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
10
NN Group N.V.
2021 Annual Report
Opportunities and risks
The environment that we operate in provides opportunities, which, together
with the material topics identified by our stakeholders, define our strategy and
strategic commitments. As the same time, the environment also creates risks
that can impact NN meeting its objectives towards stakeholders.
Customers and
distribution
We see our
customers as the
starting point of
everything we do
Products and
services
We develop and
provide attractive
products and
services
People and
organisation
We empower
our colleagues
to be their best
Financial strength
We are financially
strong and seek
solid long-term
returns for
shareholders
Society
We contribute
to the well-being
of people and
the planet
Strategic commitments
Material topics
1
Customer experience
2
Climate change
3
Responsible investing
4
Products with societal
added value
5
Business ethics and
transparency
6
Robust financial framework
7
Data privacy and
cybersecurity
8
People management
9
Digitalisation
10
Operational effectiveness and
efficiency
11
Diversity and inclusion
12
Community Investment
Opportunities
• Leverage increased levels of innovation
• Execute new ways of working
• Invest in training and development of talent
• Support communities in which we live and work
• Contribute to the transition to a more sustainable
economy through our investments, underwriting
processes, and products and services
• Optimise risk/return profile of the investment portfolio
• Seek additional returns on investments
• Engage in longevity transactions
• Leverage data and digital capabilities to improve
the customer experience, internal processes and
operational efficiency
• Leverage increased relevance of life protection and
health insurance
• Attract new customers
• Collaborate with partners (ecosystems, platforms)
• Shift to defined contribution pension products
Key risks
Strategic risks
• Regulatory and (geo)political environment
• Delivering on strategic commitments
• Sustainable cost levels
• Corporate social responsibility
• Change agility
• Data capabilities
Financial risks
• Longevity risk
• ALM and investment risk
Non-financial risks
• Product suitability
• IT and change risk
• Cyber risk
We are gradually shifting our investment
portfolio to higher-yielding assets, while
maintaining a well-balanced risk profile
Bernhard Kaufmann
Chief Risk Officer
Read more details about our risk management on pages 61-65.
Our operating environment – Opportunities and risks
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
11
NN Group N.V.
2021 Annual Report
We put our resources, expertise, and networks to use for
the well-being of our customers, the advancement of our
communities, the preservation of our planet, and for the
promotion of a stable, inclusive, and sustainable economy.
NNGroup’s strategic priorities
Our strategy and
performance
Strategic framework
At NN, our purpose is to help people care
for what matters most to them. Our purpose
reflects the kind of company we aspire to be:
a company that delivers long-term value for
all stakeholders by taking into account the
interests of our customers, our colleagues
and society at large. We do so guided by our
values care, clear, commit, and our brand
promise You matter.
Our ambition is to be an industry leader,
known for our customer engagement,
talented people and contribution to society.
This ambition is the future we envision for
our company, what we want to achieve in
the coming years. To realise our ambition,
we identified five strategic commitments,
with all parts of our business contributing.
To monitor and measure our progress
towards delivering on our commitments, we
have set financial and non-financial KPIs
and targets.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
12
NN Group N.V.
2021 Annual Report
Building on our solid foundation
The world around us is always changing.
Macroeconomic conditions remain volatile
and climate change is increasingly seen
as one of the most pressing challenges
of today. Technological developments,
digitalisation, the use of data, and the shift
to a platform economy continue to have a
growing impact on our everyday lives and
customer expectations.
As a consequence, the financial industry
is also evolving. At NN, we continue to
offer products and services that navigate
uncertainty and protect customers
against risks they cannot bear alone,
from pension products and fire insurance
to income protection and mortgages.
At the same time we are transforming our
company by optimising and simplifying
our business models and processes, and
investing in digital, underwriting and other
new capabilities.
We aim to realise more direct contact and
a stronger relationship with our customers
through innovative and tailored products
and services. As a responsible corporate
citizen, it also means making well-balanced
decisions, as we know that the choices we
make today impact our world of tomorrow.
Our robust balance sheet, diverse set of
businesses, and our strong market position
give us a solid foundation for today and
tomorrow, enabling us to invest in growth,
technology and our people.
Investing in growth and active
portfolio management
We see ample organic growth potential
across NN, particularly at our international
activities in Europe and Japan, which showed
healthy growth in 2021. Supported by
favourable underlying economic trends as
well as increasing awareness of the need
for protection, we expect further growth
in these segments (read more on page 24
and 26). In Netherlands Non-life, we are well
positioned to benefit from our scale and
underwriting performance to grow further
(read more on page 20). At NN Bank, we
see further opportunities for growth driven
by high-quality mortgage origination (read
more on page 22). Last, at Netherlands Life
we see growth opportunities in the pension
business driven by upcoming changes in
the Dutch pension market (read more on
page 18).
To support our growth ambition, we
constantly assess and optimise our portfolio
of businesses. If we see opportunities that
enable us to further grow and which meet
financial criteria, we are open to take them
into consideration. In 2021, this led to a
number of acquisitions and divestments.
We reached an agreement to acquire
MetLife’s business activities in Greece and
Poland, which will further strengthen our
leading positions in these growth markets.
In addition, we acquired a 70% stake in
Heinenoord in the Netherlands, in order to
strengthen our distribution capabilities and
reinforce our position in the Dutch non-
life market.
Progress towards delivering
on our strategy
In 2021, the first full year of our new
strategy, we made good progress on its
implementation and execution.
Our progress on customer engagement
was reflected in a growing number of
businesses scoring above market average
Net Promotor Scores (5 compared to 4 in
2020). Despite challenging circumstances,
our employee engagement remained stable
at a high level at 7.7 (2020: 7.9).
We reported a strong commercial and
financial performance across our business
units in 2021, driven by strong business
performance and commercial momentum.
Operating capital generation (OCG) was
EUR1,584 million versus EUR993 million in
2020. The value of new business rose 60.7%
to EUR428 million.
Our balance sheet remains strong, as
reflected by a Solvency II ratio of 213% by the
end of 2021, compared with 210% at the end
of 2020.
NN Investment Partners (NN IP) made
further advancements in responsible
investing: assets under management where
environmental, social and governance (ESG)
factors are integrated increased to 91% of
our Assets under Management.
Through our financial and non-financial
KPIs and targets we monitor and measure
progress towards delivering on our
strategic commitments.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – NN Group’s strategic priorities continued
You matter
Our purpose
Our ambition
Our brand promise
Our strategic commitments
Customers and distribution
We see our customers as the
starting point of everything
we do
Products and services
We develop and provide
attractive products and
services
People and organisation
We empower our colleagues
to be their best
Financial strength
We are financially strong and
seek solid long-term returns
for shareholders
Society
We contribute to the well-being
of people and the planet
We help people care for what matters most to them
We want to be an industry leader, known for our customer
engagement, talented people, and contribution to society
Our values
CommitClearCare
13
NN Group N.V.
2021 Annual Report
At the same time, there are situations in
which we conclude certain businesses are
better positioned for the future under a new
owner. This led to the divestment of our
Bulgarian business and the decision to sell
a closed book life portfolio by NN Belgium.
We also reached an agreement on the sale
of our asset manager, NN IP, to Goldman
Sachs Group, which is expected to be
completed in 2022. (Read more on page 28).
The OCG related to the divestment of NN IP
is expected to be partly compensated by the
acquisition of MetLife’s business activities in
Poland and Greece and Heinenoord in the
Netherlands, as well as a strong business
performance across the Group. As a result,
the NN Group OCG target of EUR1.5 billion
in 2023 remains unchanged in 2023.
Investing in technological capabilities
Data and technology are crucial to offer
the right solutions to our customers,
improve our process efficiency and
underwriting capabilities, and remain price
competitive. That is why we are investing
in technology, our digital capabilities, and
new propositions. To improve our processes
and services, become more efficient, and
optimise our customer experience, we
are increasingly making use of data and
data science. With an increasing number
of customers interacting primarily through
digital channels, it is more important than
ever to leverage data-driven insights and
use automated processes. To act upon
this, we are implementing innovations and
solutions designed to meet consumers’
evolving demands.
Investing in people
We have a strong and diverse workforce of
around 15,000 colleagues. Together, we are
well positioned to address our customers’
needs and deal with the rapid changes in our
operating environment. At the same time, in
light of the tightening labour market, we are
stepping up efforts to further develop our
people and attract and retain talent. We are
investing in skills and capabilities that we
will require for the future, for example in
the areas of data and artificial intelligence
(AI). We are also investing in knowledge
needed to increase our online relevance
and engagement by attracting and training
user experience designers and researchers,
data scientists, developers and engineers.
In addition, we are changing the way we
work by putting greater emphasis on flexible
work conditions and offering colleagues
opportunities for ‘hybrid’ ways of working.
And we aim to develop a more diverse
and inclusive workforce by building an
environment in which people feel welcome,
valued and respected.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – NN Group’s strategic priorities continued
14
NN Group N.V.
2021 Annual Report
Customers and distribution
We see our customers as the starting
point of everything we do.
We engage with our customers to meet
their real needs and to offer solutions
that create long-term value. We use our
digital capabilities and leverage our strong
distribution footprint to further enhance
our customer experience.
Key initiatives
• Build platforms to enhance
customer engagement
• Create customer experiences where
digital, broker and tied agent channels
reinforce each other
• Leverage local presence and partnerships
• Drive customer interaction through
NN Bank
• Maintain a strong and relevant brand
Measuring our progress
We aim for all our 11 insurance business
units to score an above market average
Net Promoter Score (NPS)
Target for 2023 Performance 2021
All above
market
average
5/11
Performance 2020
4/11
To increase our brand consideration
to 28%
Target for 2023 Performance 2021
28% 23%
Performance 2020
21%
Read more on pages 32-36
People and organisation
We empower our colleagues to be their best.
We nurture a culture aligned with our
purpose, values and ambitions, which
supports continuous learning, collaboration
and diversity of thinking. We consider all
colleagues to be talents, and invest in an
inclusive and inspiring environment, so we
are together best equipped to take our
business into the future.
Key initiatives
• Together shape the NN culture
• Embrace diversity and inclusion
• Invest in (future) skills and capabilities
• Streamline our operating model to
eliminate inefficiencies and remove
barriers
Measuring our progress
We strive for our employee engagement
to be at least 7.8
Target for 2023 Performance 2021
≥7.8 7.7
Performance 2020
7.9
To grow staff diversity, for example by
having at least 40% women in senior
management positions
Target for 2023 Performance 2021
≥40%
34%
Performance 2020
33%
Read more on pages 37-39
Products and services
We develop and provide attractive
products and services.
We excel in developing and providing
attractive products and services, and
operate with efficiency, agility and speed.
To continue to do so, we will make use of
digital and data capabilities.
Key initiatives
• Leverage and further build data and
digital capabilities to improve our offering
to customers
• Become the best product provider to
partners
• Develop products where we have
excellent capabilities
Measuring our progress
We have set various key performance
indicators for the different NN business
units:
• Netherlands Life: growth in Defined
Contribution AuM
• Netherlands Non-life: expand data and
underwriting capabilities, and leverage
on additional scale of VIVAT Non-life
• Insurance Europe: continue shift to
protection products and invest in main
banking partnerships
• Japan Life: continued focus on COLI
protection
• NN IP: top quartile investment
performance
• Banking: expand retail product offering
Read more on pages 32-36
Our strategic commitments and targets
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – Our strategic commitments and targets
15
NN Group N.V.
2021 Annual Report
Financial strength
We are financially strong and seek solid
long-term returns for shareholders.
We maintain a strong balance sheet
and create solid financial returns for
shareholders by using our financial strength,
scale and international footprint, and by
efficiently managing our customers’ assets
and our own insurance portfolios.
Key initiatives
• Maintain strong balance sheet and create
solid financial returns
• Realise further efficiencies
• Leverage scale benefits of Dutch life and
pensions business
• Reshape our existing insurance business
in Belgium
• Disciplined capital allocation
• Attractive capital returns for shareholders
Measuring our progress
We are committed to ensuring resilient and
growing long-term capital generation, with
a target for operating capital generation
(OCG) of EUR1.5 billion
Target for 2023 Performance 2021
EUR
1.5bn
EUR
1.6bn
Performance 2020
EUR
993m
We are also committed to grow free
cash flow (FCF) in a range around OCG
over time
Read more on pages 40-42
Society
We contribute to the well-being of people
and the planet.
We do business with the future in mind and
contribute to a world where people can
thrive for many generations to come.
Key initiatives
• Pursue long-term value creation for all our
stakeholders in our daily activities
• Support our customers with solutions that
help them address societal challenges
• Accelerate the transition to a low-carbon
economy through our investments
• Build better and stronger communities
• Reduce our direct CO
2
emissions
• Actively engage with our stakeholders
• Contribute to the Sustainable
Development Goals
Measuring our progress
We aim to increase ESG-integration in
our Assets under Management to 80%
Target for 2023 Performance 2021
80% 91%
Performance 2021
74%
We will accelerate the transition to a
low-carbon economy by targeting a
net-zero carbon proprietary investment
portfolio by 2050
We aim to allocate an additional EUR6bn
to investments in climate solutions by 2030
We have pledged to contribute 1% of our
(three-year average) operating result to our
communities, including cash donations and
hours of volunteering
Target for 2023 Performance 2021
1
1%
(0.4%)
2
EUR8m
Performance 2020
EUR4.7m
Read more on pages 32-36 and 44-52
1. Hours of volunteering, in-kind giving (both monetised) and
management costs have been included as of 2021, in line with
B4SI standards.
2. Based on our 2021 operating result before tax.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – Our strategic commitments and targets continued
16
NN Group N.V.
2021 Annual Report
Our performance
This section includes the analysis
of results and key figures of NN
Group and its reporting segments.
Where relevant, the results
presented in this section are derived
from the 2021 annual accounts.
In explaining the financial results, NN Group
uses Operating result, Administrative
expenses and Adjusted allocated equity (as
used in the calculation of Net operating ROE
for the Banking segment only). These are
alternative performance measures (APMs),
which are non-IFRS-EU measures that
have a relevant IFRS-EU equivalent from
which these are derived. For definitions of
the APMs and an explanation of their use
reference is made to Note 33 ‘Segments’
in the section ‘Alternative Performance
Measures (Non-GAAP measures)’ in the
annual accounts. This section also includes
a reconciliation between the APM and their
IFRS equivalent, as well as definitions of
other financial metrics used in this Financial
developments section, including operating
capital generation.
The Solvency II ratios presented in this
section are not final until filed with the
regulators. The Solvency II ratios for NN
Group and NN Life are based on the Partial
Internal Model.
NN Group Financial Results
Operating result
The full-year 2021 operating result
increased to EUR2,036 million from
EUR1,889 million in 2020, which included
a total of EUR24 million of non-recurring
benefits, versus a total of EUR76 million of
non-recurring benefits in 2021. The increase
mainly reflects the improved operating
results of Netherlands Non-life, Insurance
Europe, Asset Management and Japan
Life, partly offset by lower operating results
for Banking.
Result before tax
The full-year 2021 result before tax increased
to EUR4,010 million from EUR2,349 million
in 2020, reflecting higher non-operating
items, lower special items and the higher
operating result.
Net result
The full-year 2021 net result was
EUR3,278 million compared with
EUR1,904 million in 2020. The effective tax
rate for the full-year 2021 was 17.8%.
Sales and value of new business
The full-year 2021, total new sales (APE)
were EUR1,311 million, up 20.2% at constant
currencies, mainly reflecting the strong
market recovery from low sales in 2020 and
management actions at Japan Life as well as
management actions and market recovery
in sales from Covid-19 restrictions in 2020 at
Insurance Europe.
Value of new business (VNB) for full-year
2021 amounted to EUR428 million, up 60.7%
on 2020, reflecting strong market recovery
resulting in higher sales and an improved
margin as a result of management actions
including repricing at Japan Life, as well
as an increase at Insurance Europe as the
result of sales management actions on
volume and business mix and recovery in
sales from Covid-19 restrictions of 2020.
Operating capital generation
Full-year 2021 operating capital generation
increased to EUR1,584 million from
EUR993 million in 2020. The increase
mainly reflects higher Non-life underwriting
results, positive contribution from Banking,
the positive impact of higher rates and the
higher investment return driven by changes
in the asset portfolio and higher equity and
real estate valuations.
In 2021, we delivered a strong commercial and financial performance,
with improved results in most of our business segments.
We expect mid single-digit annual growth
of operating capital generation over time,
based on organic growth opportunities of our
businesses and supported by long-term market
trends and active portfolio management
Delfin Rueda
Chief Financial Officer
Our strategy and performance – Our performance
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
17
NN Group N.V.
2021 Annual Report
Performance
NN Group
Analysis of result
amounts in millions of euros 2021 2020
Netherlands Life 986 994
Netherlands Non-life 314 215
Insurance Europe 315 285
Japan Life 263 240
Asset Management 181 152
Banking 134 154
Other -157 -151
Operating result 2,036 1,889
Non-operating items: 2,051 662
– of which gains/losses and impairments 1,671 640
– of which revaluations 485 337
– of which market and other impacts -105 -315
Special items -103 -278
Acquisition intangibles and goodwill -28 -24
Result on divestments 54 100
Result before tax 4,010 2,349
Taxation 712 422
Minority interests 19 22
Net result 3,278 1,904
Key figures
amounts in millions of euros 2021 2020
New sales life insurance (APE) 1,311 1,127
Value of new business 428 266
Total administrative expenses 2,280 2,121
Operating capital generation 1,584 993
Solvency II ratio 213% 210%
7.7
Employee
engagement
score
213%
Solvency II ratio
8m
Contribution to our
communities
Our strategy and performance – Our performance continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
18
NN Group N.V.
2021 Annual Report
Leon van Riet
CEO Netherlands Life & Pensions
Our strong market position enables us to help
our customers navigate the rapidly changing
pension landscape in the Netherlands
Netherlands Life
Introduction
Netherlands Life offers term life insurance
as well as the full spectrum of pensions
solutions: insured defined benefit (DB) and
defined contribution (DC) via the NN-label;
Premium Pension Institution (PPI) via our
specialised label, BeFrank; an APF (general
pension fund) solution via De Nationale;
and pension fund administration services
via AZL.
Well positioned to benefit from changing
Dutch pension landscape
We are well positioned to benefit from
the changing pension landscape in the
Netherlands, with powerful customer
propositions and strong relationships with
distribution partners. We offer a wide range
of innovative ESG products and services,
such as CO
2
-neutral pension plans for
corporates as well as a range of life cycle
funds with impact investing.
We also aim to capture opportunities
in the changing Dutch pension market.
These changes may lead to further growth
of the DC market, and an acceleration in
buyout opportunities of small- and medium-
sized corporate pension funds.
In addition, Netherlands Life is actively
managing our in-force DB and individual life
insurance portfolios by reducing costs in line
with the run-off of the portfolio. These cost
reductions come partly from streamlining
products and systems, and migrating
old products and legacy systems into
new platforms.
• BeFrank celebrated its tenth anniversary having grown into the largest Premium
Pension Institution (PPI) in the Netherlands, with more than 1,000 clients and
270,000 pension participants and with total Assets under Management of around
EUR6.8 billion. BeFrank offers a CO
2
neutral pension scheme to customers.
• At the end of the year, NN Life completed a longevity reinsurance transaction to
transfer the full longevity risk associated with in total approximately EUR4 billion of
pension liabilities. This will reduce NN’s exposure to longevity risk, and consequently
reduce the required capital and further strengthen NN’s capital position.
• Nationale-Nederlanden launched the Human Capital Planner (HCP), an online
platform that offers employers and pension advisors relevant insights and tools to
encourage employees to take conscious decisions about their financial vitality and
future income.
2021 highlights
In recent decades, average life expectancy has risen across the globe. But the pace
at which life expectancy will continue to change is uncertain. This uncertainty creates
challenges, for example, around the affordability of pension provisions and the required
capacity of healthcare systems.
For this reason, in December, we announced that we are joining forces with the
Amsterdam School of Economics at the University of Amsterdam to open the Research
Centre for Longevity Risk. This new, independent centre will conduct research into
the financial and social consequences of changing life expectancies. It will also look
at demographic trends and medical developments, as well as the impact of local
socioeconomic circumstances and the quality of the living environment.
Research Centre for Longevity Risk
Our strategy and performance – Netherlands Life
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
19
NN Group N.V.
2021 Annual Report
Furthermore, on the investment side,
Netherlands Life is increasing allocations to
higher-yielding assets such as mortgages,
loans and real estate, while reducing
exposure to government bonds.
Financial result
The full-year 2021 operating result decreased
to EUR986 million from EUR994 million
in 2020. This decrease is due to a lower
technical margin and higher administrative
expenses, partly compensated by a higher
investment margin. The investment margin
in 2021 includes EUR78 million of private
equity and special dividends, whereas 2020
included EUR9 million of such dividends.
Excluding these items, the investment margin
increased as a result of changes in the asset
portfolio. Administrative expenses increased
to EUR473 million from EUR440 million
in 2020, reflecting a reclassification of
specific expenses from special items to
administrative expenses as from 2021.
On a comparable basis, administrative
expenses decreased compared with 2020,
mainly driven by lower staff expenses.
The full-year 2021 result before tax
increased to EUR2,915 million compared
with EUR1,597 million in 2020. The increase
mainly reflects higher gains/losses on the
sale of public equities and government
bonds as well as impairments and higher
markets and other impacts. New sales
(APE) for full-year 2021 increased to
EUR239 million from EUR219 million in
2020, mainly driven by a higher volume of
group pension contracts. The value of new
business for full-year 2021 increased to
EUR21 million from EUR8 million in 2020.
Assets under Management DC increased
to EUR29.9 billion at 31 December 2021,
from EUR24.6 billion at 31 December 2020.
The increase in Assets under Management
DC was driven by a combination of market
growth and net inflows.
Full-year 2021 operating capital generation
increased to EUR846 million from
EUR642 million in 2020. The increase was
mainly driven by the lower net negative
impact of the UFR drag and risk margin
release as a result of higher interest rates, and
a higher investment return reflecting changes
in the asset portfolio and higher equity and
real estate valuations, partly offset by the
negative impact of lower credit spreads.
Performance
Netherlands Life
Analysis of result
amounts in millions of euros 2021 2020
Investment margin 996 890
Fees and premium-based revenues 391 392
Technical margin 103 184
Operating income 1,490 1,467
Administrative expenses 473 440
DAC amortisation and trail commissions 31 33
Total expenses 504 473
Operating result 986 994
Non-operating items: 1,946 680
– of which gains/losses and impairments 1,618 620
– of which revaluations 379 371
– of which market and other impacts -51 -310
Special items -17 -77
Result before tax 2,915 1,597
Taxation 431 330
Minority interests -4 8
Net result 2,488 1,260
Key figures
amounts in millions of euros 2021 2020
New sales life insurance (APE) 239 219
Value of new business 21 8
Administrative expenses 473 440
Operating capital generation 846 642
NN Life Solvency II ratio 219% 220%
Assets under Management DC business total (billion) 29.9 24.6
~40%
Market share in
group pensions
#1
Position in
group pensions
Our strategy and performance – Netherlands Life continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
20
NN Group N.V.
2021 Annual Report
Impact of floods
Introduction
Netherlands Non-life offers a broad
array of non-life insurance, ranging from
motor, fire and liability to transport, travel,
disability and accident insurance products.
The customer base of Netherlands Non-
life includes retail, self-employed, SME
and corporate customers. The segment
comprises Nationale-Nederlanden Non-life;
the non-life results of our joint-venture ABN
AMRO Insurance; the labels Movir, OHRA
and HCS; and the broker results related
to health insurance products. Non-life has
a highly-diversified distribution platform
consisting of mandated and non-mandated
brokers, banks, and direct online channels
and engagement platforms.
Investing in a flawless customer journey
Netherlands Non-life aims to offer
an intuitive, flawless customer and
intermediary journey, and to standardise
product offerings while complementing
them with relevant services. Digitalisation is
a strategic priority: we want to offer our
customers personal, relevant products, and
increasingly provide our services digitally.
In 2021, we launched a claim portal for
intermediaries and implemented text-
recognition technology for customers,
which makes it easier for them to contact
us and provides us with more structured
information. This has a positive effect on
customer satisfaction while at the same
time lowering our operational costs for
those products.
Netherlands Non-life
2021 highlights
• The integration of VIVAT Non-life, which was acquired in 2020, reached a final stage
with the completion of the migration of 1.8 million policies to NN systems. We have
already achieved our EUR40 million cost savings target, a year earlier than planned,
and are working towards finalising the integration in the first half of 2022.
• We acquired a 70% stake in Heinenoord, one of the largest insurance brokers
and service providers in the Netherlands, The acquisition further strengthens our
distribution capabilities and reinforces our leading position in the Dutch non-life
market. Heinenoord’s services include policy administration, underwriting services and
claims handling.
• We started a partnership with Laka, an online bike insurer that enables customers to
pay a monthly variable contribution up to a predetermined maximum, based on the
collective claims. The fewer the claims, the less each cyclist pays.
In July, extreme rainfall caused heavy
floods in Western Europe, impacting
customers in our Belgian and Dutch
markets. Our colleagues quickly arrived in
the affected areas, supporting customers
where possible. We set up mobile offices
from where claims managers visited
customers in their homes. We also
arranged market stalls and food trucks
for shopkeepers, so they could keep
their businesses going. We received
more than 3,250 claims from both retail
and business customers. In October, we
amended our standard flood coverage
to provide customers with more clarity
on their coverage in the event of flood
damage and hopefully help limit the
financial consequences of climate change
for customers.
Tjeerd Bosklopper
CEO Netherlands Non-life, Banking & Technology
Our digital transformation is accelerating,
allowing us to work smarter and more
efficiently, and create a best-in-class
customer experience at competitive prices
Our strategy and performance – Netherlands Non-Life
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
21
NN Group N.V.
2021 Annual Report
Performance
Key figures
amounts in millions of euros 2021 2020
Gross premium income 3,798 3,521
Total administrative expenses
1
496 451
Combined ratio:
2
93.5% 95.3%
– of which Claims ratio
2
65.4% 67.0 %
– of which Expense ratio
2
28.1% 28.4%
Operating capital generation 325 76
1 Including non-insurance businesses (health business and broker business).
2 Excluding non-insurance businesses (health business and broker business).
Netherlands Non-life
Analysis of result
amounts in millions of euros 2021 2020
Earned premiums 3,617 3,418
Investment income 128 98
Other income -6 -1
Operating income 3,739 3,515
Claims incurred, net of reinsurance 2,424 2,350
Acquisition costs 660 630
Administrative expenses 357 340
Acquisition costs and administrative expenses 1,017 970
Expenditure 3,440 3,319
Operating result insurance businesses 299 196
Operating result non-insurance businesses 16 19
Total operating result 314 215
Non-operating items: 57 3
– of which gains/losses and impairments 33
– of which revaluations 24 -9
– of which market and other impacts 12
Special items -35 -79
Result before tax 336 138
Taxation 71 31
Minority interests 16 11
Net result 250 97
Additionally, we aim to increase effectiveness
by focusing on streamlining, automating
and digitalising processes. Pricing, which is
the cornerstone of a profitable insurance
business, requires accessible, accurate data.
Our aim is to have relevant data available in
a structured, automated and controlled way,
and wherever possible via an automated
development process. In addition, we will
significantly improve our pricing models and
techniques so we can optimally price risks.
Financial result
The full-year 2021 operating result
of Netherlands Non-life increased to
EUR314 million from EUR215 million in 2020.
The increase reflects higher underwriting
results in both Property & Casualty (P&C)
and Disability & Accident (D&A), and higher
investment income following changes in
the asset portfolio. The higher underwriting
results in P&C reflect a favourable claims
development, including a positive impact
from Covid-19. Higher underwriting results
in D&A include more favourable claims
development in the Group Income and
Accident & Travel portfolios, partly offset by
higher claims experienced in the Individual
Disability portfolio including a negative
impact from Covid-19.
The full-year 2021 result before tax increased
to EUR336 million from EUR138 million in
2020, reflecting the higher operating result,
higher non-operating items and lower special
items. Higher non-operating items include
realised gains on the sale of public equity and
government bonds, and positive revaluations
on real estate. Special items mainly reflect
integration expenses.
The combined ratio for 2021 was 93.5%
compared with 95.3% in 2020.
Full-year 2021 operating capital generation
increased to EUR325 million from
EUR76 million in 2020. The increase is
mainly driven by a favourable claims
development in P&C, including a positive
impact from Covid-19, while 2020 was
negatively impacted by a higher SCR
following the termination of an internal
reinsurance agreement in the Individual
Disability portfolio.
#1
Position in disability
and accident
24%
Market share in property
and casualty, #2 position
29%
Market share in
disability and accident
Our strategy and performance – Netherlands Non-Life continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
22
NN Group N.V.
2021 Annual Report
Introduction
NN Bank is the banking business of NN
Group. It is the Netherlands’ fourth-largest
mortgage provider, serving close to 1 million
customers. We help customers manage and
protect their assets and income through
mortgage loans, online savings accounts,
bank annuities, consumer lending and retail
investment products. In addition, NN Bank
provides administration and management
services to other NN Group entities and
institutional investors.
Broadening the business model
NN Bank has continued to broaden its
business model, for example, with the
introduction of mortgages from Woonnu.
In 2021, NN Bank and Woonnu originated
a record volume in new mortgages of
EUR9.9 billion. NN Bank is continuously
improving its services in order to become
more efficient, innovative and personal and
relevant. We have also taken major steps in
the field of digitalisation. In December, we
introduced a new mid-office system that
successfully processed the first mortgage
applications. The first results show
applications are processed automatically
with a very short lead time. We also
continued to improve our mobile app,
making our services even more accessible
to customers.
2021 highlights
• NN Bank’s label Woonnu, a mortgage provider that aims to help consumers make their
homes more sustainable, originated EUR1.4 billion of mortgages in 2021, achieving a
market share of approximately 1%.
• In June, NN Bank established its Green Bond Framework, enabling the bank and its
subsidiaries to issue green bonds to finance and/or refinance mortgages for energy-
efficient residential properties in the Netherlands. In September, NN Bank issued its
first green bond, raising EUR500 million.
• In December, NN Bank said it will introduce a compensation scheme for customers
who paid variable interest in excess of market rates on their revolving consumer credit
loans. Current customers who are eligible for compensation will be notified when
the arrangement is ready. Former customers will have an opportunity to register for
the scheme.
Transitioning towards green homes
Making our homes more sustainable is
not only good for the planet, it can also
result in a lower energy bill and it may
even increase a home’s value. In recent
years, NN Bank has launched several
initiatives to support homeowners looking
to make their home more energy-efficient
and sustainable.
Through the bank’s Woonnu label,
customers will be financially rewarded
for steps taken to improve the energy
efficiency of their home, thereby reducing
the property’s carbon footprint.
With Powerly, a web-based platform,
the bank also provides customers with
tailored advice on how to make their
homes more eco-friendly, with practical
tips on everything from solar panels and
isolation to heat pumps and green roofs.
In addition, In 2021, NN Bank launched
the platform Gezond Wonen (Healthy
Living), which provides customers with
more insight into the air quality inside
their home, as good ventilation is one of
the most important considerations when
making homes more sustainable.
By encouraging sustainable housing,
NN aims to contribute to the realisation
of the objectives of the Dutch
Climate Agreement.
Our strategy and performance – Banking
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
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information
Banking
Performance
23
NN Group N.V.
2021 Annual Report
Financial result
The full-year 2021 operating result decreased
to EUR134 million from EUR154 million
in 2020, mainly due to higher operating
expenses reflecting an increase in mortgage
origination and higher project expenses.
The full-year 2021 result before tax decreased
to EUR106 million from EUR167 million in
2020, mainly due to lower non-operating
items and the lower operating result, partly
offset by lower special items.
The full-year 2021 net operating RoE of
Banking decreased to 11.0% compared
with 13.8% for 2020, reflecting a lower net
operating result and higher average equity.
Full-year 2021 operating capital generation
was EUR104 million, mainly reflecting the
statutory net result adjusted for non-recurring
items, partly offset by the increase of the
RWA. Operating capital generation in 2020
was nil under the former methodology
based on dividends remitted to the holding.
Under the new methodology operating
capital generation in 2020 would have been
EUR101 million.
Key figures
amounts in millions of euros 2021 2020
Total administrative expenses
1
247 216
Cost/income ratio
2
59.0% 52.4%
Net operating RoE 11.0% 13.8%
Operating capital generation 104
amounts in billions of euros 2021 2020
Total assets 24 25
Mortgages 21 20
1 Operating expenses plus regulatory levies.
2 Cost/income ratio is calculated as Operating expenses divided by Operating income.
Banking
Analysis of result
amounts in millions of euros 2021 2020
Interest result 280 280
Commission income 59 48
Total investment and other income 33 45
Operating income 372 373
Operating expenses 219 195
Regulatory levies 27 20
Addition to loan loss provision -8 3
Total expenses 239 219
Operating result 134 154
Non-operating items: -27 27
– of which gains/losses and impairments 2 11
– of which revaluations
– of which market and other impacts -28 17
Special items -14
Result before tax 106 167
Taxation 25 35
Net result 82 132
9.9bn
Mortgage origination
#4
Position in Dutch
mortgage market
Our strategy and performance – Banking continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Fabian Rupprecht
CEO International Insurance
24
NN Group N.V.
2021 Annual Report
Introduction
In Europe, we are active in nine countries
outside the Netherlands. In all of them apart
from Turkey, we have built our businesses
from the start and developed them into
leading players in their local markets.
Investing in our growth markets
Our European businesses are primarily
focused on protection. We are well
positioned to benefit from increased
customer demand for health and protection
products, resulting from positive underlying
economic trends, relatively low insurance
penetration rates and higher awareness
of risk and vulnerability caused by the
Covid-19 pandemic.
We have a diversified distribution footprint
across Europe through our tied agents,
bancassurance partners, brokers and
direct channels. We aim to leverage and
build our large customer base by making
better use of data, and optimising and fully
digitalising processes for lead generation.
We also develop integrated customer
journeys that combine digital processes with
personal advice.
We are looking to expand distribution of
third-party products in Europe, such as
non-life, banking and health products
and services. Our goal is to enhance our
customer engagement and execution
quality. Attracting tech talent is a priority in
this respect and closely related to the need
to create an inspirational work environment
for all employees.
2021 highlights
• In 2021, we strengthened our position in Europe through active portfolio management.
We announced the acquisition of MetLife’s business activities in Poland and Greece,
bolstering our leading positions in these two attractive growth markets by adding strong
and profitable businesses and creating synergies. We sold our Bulgarian business to KBC
and reached an agreement to sell a closed book portfolio of NN Belgium. The proposed
transaction, which is expected to close by mid-2022, will enable NN Belgium to fully
focus on the execution of its successful strategy to further grow its protection and
pension business.
• Across Europe, we are stepping up our digital transformation efforts to improve the
customer experience, optimise our processes and create new customer propositions:
– Our Net Promoter Score is now above market average in five markets and on par
with market average in three markets, thanks to our efforts to improve the customer
experience. We also invest in customer digital journeys and combine personal advice
where needed.
– We have increased the number of digitally-sourced leads, and this has become
a significant source for Next Best Actions and new customer growth. Next Best
Actions are customer-centric engines that consider the different actions that can be
taken for a specific customer and decide on the best one.
– During 2021, we launched over 20 new or upgraded protection covers to fit
customer needs.
– We launched three customer engagement platforms: Self-care platforms in Turkey
(nniyihayat.com) and Poland (welbi.pl), and a Carefree Retirement platform in Spain
(weli.es).
• We invest in extending our product offering to increase our relevance to our customers.
For this reason, we are building reciprocal relationships with our banking partners.
In some countries, such as Spain and Romania, our tied agents act as distributors of our
partners’ mortgages, providing our customers with relevant products as well as making
us an essential distributor for banking partners. During the year, we also strengthened
and expanded our strategic relationships with key bank partners. For example, in Belgium
and Spain we extended our strategic partnership with ING, accelerating our digital
propositions in these markets.
Insurance Europe
The Covid-19 pandemic has underscored
the vital role of insurance in society and we
are committed to continue supporting our
customers in times of change
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
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information
Our strategy and performance – Insurance Europe
Performance
25
NN Group N.V.
2021 Annual Report
Financial result
The full-year 2021 operating capital
generation increased to EUR318 million
from EUR253 million in 2020, mainly driven
by higher pension fees in Romania, Slovakia
and Poland, as well as a higher new business
contribution across the region, partly offset
by a non-recurring item in Greece.
The full-year 2021 operating result increased
to EUR315 million from EUR285 million in
2020, reflecting higher life and pension fees
across the region, partly offset by higher
administrative expenses.
The result before tax for the full-year
2021 increased to EUR396 million from
EUR234 million in 2020, mainly driven by the
result on the sale of the Bulgarian business,
positive real estate revaluations and a higher
operating result.
Full-year 2021 new sales (APE) increased
to EUR727 million, up 16.4% on a constant
currency basis from 2020, reflecting
management actions and market recovery
in sales from Covid-19 restrictions in 2020.
Value of new business for full-year 2021
increased to EUR250 million, up 36.7%
from EUR183 million in 2020, driven by
sales management actions on volume and
business mix, and recovery in sales from
Covid-19 restrictions in 2020.
Meeting a growing need
Insurance is more relevant to people than ever before.
Global challenges such as Covid-19 and climate change
have shown us just how vulnerable we are, at a time when
the protection previously provided through social security
is diminishing.
This creates a role for insurers to step in and help people with what
matters most to them. So it is unsurprising that in recent years
we have seen a significant increase in the sales of protection
products, and we are trying to meet this growing demand through
new and ever more relevant offerings.
Insurance Europe
Analysis of result
amounts in millions of euros 2021 2020
Investment margin 116 110
Fees and premium-based revenues 811 730
Technical margin 235 252
Operating income non-modelled business 1 1
Operating income Life Insurance 1,163 1,093
Administrative expenses 446 417
DAC amortisation and trail commissions 401 389
Expenses Life Insurance 847 806
Operating result Life Insurance 316 287
Operating result Non-life -1 -3
Operating result 315 285
Non-operating items: 48 -11
– of which gains/losses and impairments 2 4
– of which revaluations 46 -12
– of which market and other impacts -4
Special items -14 -29
Acquisition intangibles and goodwill -7
Result on divestments 54 -11
Results before tax 396 234
Taxation 80 63
Net result 316 171
Key figures
amounts in millions of euros 2021 2020
New sales life insurance (APE) 727 644
Value of new business 250 183
Total administrative expenses (Life and Non-life) 458 432
Operating capital generation 318 253
At the same time, we continue to support our communities.
In 2021, NN Insurance Europe business units donated around
EUR1.8 million to support initiatives around self-care, carefree
retirement and financial well-being through Future Matters.
We also contributed 5,500 volunteer hours that are having a
positive impact in our communities through projects such as the
buddy programme in Greece, which matches NN volunteers with
elderly people.
In the beginning of 2022, we are also responding to the evolving
situation in Ukraine with numerous initiatives. Our support ranges
from humanitarian and psychological help to refugees, financial
and in-kind donations to local and international organisations.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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Our strategy and performance – Insurance Europe continued
26
NN Group N.V.
2021 Annual Report
Introduction
Since 1986, NN has had a strong presence
in Japan, offering corporate-owned life
insurance (COLI) products to small-
and medium-sized enterprises (SMEs).
We support Japanese SMEs in two ways:
by offering financial solutions as a vehicle
to combine protection and savings, and by
growing the protection business to protect
SME owners and their families in the event
of death or illness. We are considered a
dominant SME insurer in the COLI market,
with a focus on agent education and
innovative products, and with the ability
to adapt quickly. In 2021, we passed the
milestone of 100,000 SME customers for the
first time in our 35-year presence in Japan.
Building on our strong position
in the SMEmarket
Like Europe, in Japan we are investing in
building and leveraging our customer base.
We intend to develop further through new
protection products and services.
In addition, we are investing in technology
and data skills, by growing our engineering
base and upskilling all other employees
in technical domains. In 2021, we held
several initiatives, such as a Campus event,
covering a range of topics with which to
upskill employees from leadership skills to
artificial intelligence.
Since the tax rule change in Japan at the
beginning of 2019, sales volumes have
recovered substantially as a result of our
teams achieving quick time-to-market
for our adjusted products and by training
agents to deal with the greater complexity of
the new tax systems.
Japan Life
2021 highlights
• We made progress on expanding our Kagyo-aid platform, which enables SME owners’
children to connect and assist each other in preparing for a successful business
takeover from their parents. By the end of 2021, it had around 6,000 users, making it
one of the most utilised SME platforms in the market.
• We launched an income protection insurance that safeguards SME CEOs and their
employees against the risk of being unable to work due to a sudden illness or accident,
and supports business continuity. The group insurance scheme is available for this
product, allowing policies covering SME employees to be issued in one go, which
makes the product more attractive for customers.
• We partnered with DataRobot, a company involved in machine learning systems.
Three years from now, 30% of all our insurance policies will be processed without
human involvement, as artificial intelligence will be used to analyse the results of
executives’ health and medical check-ups. Whereas previously it took two or three
business days to interview an insured executive, with the unmanned system the
process can be completed in just three minutes.
Understanding SME
succession issue
Japan Life has been investing in better
understanding the issue of succession in
Japanese SMEs by conducting a series
of surveys. Within 2021, we conducted
a survey of over 400 SME owners
(including ex-SME owners) who had to
leave their management position due
to sudden illness or injury to understand
their experience, their concerns and
lessons learned to better prepare for such
an event.
We ran another survey asking SME
owners about their preparation for
business succession, whether they have
decided on a successor and how well
prepared the successors are to take
over - for example, their knowledge on
the business’s amount of debt. We also
conducted research to evaluate how
much knowledge SME owners’ spouses
have of the business and how much time
they spend talking about business-related
matters with SME owners.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
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information
Our strategy and performance – Japan Life
Performance
100,000
SME customers
35 year
Presence in Japan
27
NN Group N.V.
2021 Annual Report
Financial result
Full-year 2021 value of new business
increased to EUR156 million from
EUR75 million in 2020. This reflects the
strong market recovery from low sales in
2020 and an improved margin as a result of
management actions including repricing.
Full-year 2021 operating capital generation
was broadly stable at EUR129 million,
reflecting the negative impact of a higher
new business strain as a result of higher
sales, compensated by a higher in-
force contribution.
The full-year 2021 operating result increased
to EUR263 million from EUR240 million in
2020, mainly reflecting a higher technical
margin and lower DAC amortisation and trail
commissions. Excluding currency effects, the
full-year operating result increased by 16.7%.
The result before tax for full-year 2021
increased to EUR262 million from
EUR210 million, reflecting the higher
operating result and higher non-
operating items.
Full-year 2021 new sales (APE) increased
to EUR345 million from EUR263 million in
2020, reflecting the strong market recovery
from low sales in 2020 and the result of
management actions. Excluding currency
effects, new sales increased by 39.5%.
Japan Life
Analysis of result
amounts in millions of euros 2021 2020
Investment margin -12 -14
Fees and premium-based revenues 610 639
Technical margin 30 17
Operating income 628 642
Administrative expenses 135 144
DAC amortisation and trail commissions 230 258
Total expenses 365 402
Operating result 263 240
Non-operating items: 2 -27
– of which gains/losses and impairments 4 -7
– of which revaluations -2 -20
Special items -3 -3
Result before tax 262 210
Taxation 74 57
Net result 188 152
Key figures
amounts in millions of euros 2021 2020
New sales life insurance (APE) 345 263
Value of new business 156 75
Administrative expenses 135 144
Operating capital generation 129 133
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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Our strategy and performance – Japan Life continued
28
NN Group N.V.
2021 Annual Report
Asset Management
2021 highlights
• NN IP continued to make progress as a leader in responsible investing. The percentage
of our Assets under Management (AuM) where environmental, social and governance
(ESG) factors are integrated into the investment process increased to 91%. NN IP
also continued to actively engage with investee companies, leading to 35,985 votes
at shareholder meetings. And as a member of the Net Zero Asset Managers Initiative,
NN IP announced the initial scope of asset classes that will be managed with a view to
reaching net-zero greenhouse gas (GHG) emissions by 2050 or sooner. By the end of
2021, this includes equity, corporate fixed income and sovereign bond portfolios.
• NN IP saw further growth in its alternative credit capability, reflected by its higher
ranking in the Top 100 Global Private Debt Fund Raisers compared to 2020, where
it remains the only Dutch-based asset manager. A number of new products were
launched onto the market, including a Sovereign Green Bond Fund and two new Dutch
Residential Mortgage funds.
Satish Bapat
CEO NN Investment Partners
In 2021 we have continued
our journey to be aleader
in responsible investing,
while bringing a strong
investment performance
and high quality service
toour clients
Introduction
NN Investment Partners (NN IP) is the asset
manager of NN Group. It manages the
assets of the group’s insurance businesses
and offers retail and institutional customers
a wide variety of actively managed
investment products. It also provides
advisory services in all major asset classes
and investment styles. NN IP offers products
and services globally through offices across
Europe, the United States and Asia, with the
Netherlands as its main investment hub.
Planned sale of NN IP
On 19 August, we announced that we had
reached an agreement to sell NN IP to
Goldman Sachs Group, Inc. As part of the
agreement, NN and Goldman Sachs Asset
Management will enter into a strategic
partnership, under which the combined
company will continue to provide asset
management services to NN.
The combination of the complementary
investment capabilities of NN IP and
Goldman Sachs will create a full suite of
asset management products that can be
offered to clients through the distribution
networks of both parties. At the same time,
NN IP’s leading position in responsible
investing will strengthen Goldman
Sachs Asset Management’s sustainable
investment strategy, product offerings and
client solutions.
The transaction will allow us to continue
our successful cooperation with NN IP
and to benefit from the strengths and
complementary product propositions of
Goldman Sachs. The transaction will also
give us greater optionality to develop
a broader range of asset management
propositions for our customers.
our approach and ambitions around
environment, social and governance (ESG)
will remain unchanged, and Goldman
Sachs shares our commitment to
responsible investing.
As a leader in responsible investing, we have continued to engage with a broad range of
stakeholders to support the transition to a more sustainable world.
To stay closely connected with our clients, we launched the Headlight Series: a series
of digital events and content, exploring perspectives on issues that matter most to
our clients. Our further investments in a digital client experience were also recognised
externally, with an increased ranking to #6 in the Living Ratings report on digital
intelligence of global asset managers. Our investment performance continued to be
strong across our capabilities.
In August we announced the intended acquisition by Goldman Sachs, which is expected
to be closed in 2022. The combination with Goldman Sachs will give NN IP a broader
platform to accelerate its growth and further improve our offering and service to our
clients. And in our new set-up, we are looking forward to continuing our long-term
relationship with NN with a strategic partnership.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – Asset Management
Performance
29
NN Group N.V.
2021 Annual Report
Key figures
amounts in millions of euros 2021 2020
Administrative expenses 300 286
Operating capital generation 135 103
amounts in billions of euros 2021 2020
Assets under Management 301 300
Asset Management
Analysis of result
amounts in millions of euros 2021 2020
Investment income -1 -3
Fees 482 440
Operating income 481 438
Administrative expenses 300 286
Operating result 181 152
Special items -4
Result before tax 178 152
Taxation 43 37
Minority interests 7 4
Net result 127 111
Financial result
The full-year 2021 operating result
increased to EUR181 million compared with
EUR152 million in 2020 driven by higher
fees reflecting higher average Assets
under Management (AuM) and a more
favourable asset mix, partly offset by higher
administrative expenses.
The result before tax in 2021 increased
to EUR178 million compared with
EUR152 million in 2020 mainly driven by the
higher operating result.
Full-year 2021 operating capital generation
was EUR135 million compared with
EUR103 million in 2020, mainly reflecting the
higher net result.
As of 2021, NN Group’s asset management
activities executed by NN IP are classified as
discontinued operations in the Consolidated
profit and loss account in the Annual
Accounts. Reference is made to Note 46
‘Companies and businesses acquired and
divested’ in the Annual Accounts.
91%
ESG-integrated AuM
35,985
Votes cast
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – Asset Management continued
Performance
30
NN Group N.V.
2021 Annual Report
Other
Other
Analysis of result
amounts in millions of euros 2021 2020
Interest on hybrids and debt
1
-108 -108
Investment income and fees 103 107
Holding expenses -161 -142
Amortisation of intangible assets
Holding result -166 -143
Operating result reinsurance business 11 -8
Other results -3
Operating result -157 -151
Non-operating items: 25 -10
– of which gains/losses and impairments 12 12
– of which revaluations 39 7
– of which market and other impacts -26 -29
Special items -30 -75
Acquisition intangibles and goodwill -21 -24
Result on divestments 111
Result before tax -184 -149
Taxation -11 -131
Net result -172 -18
1 Does not include interest costs on subordinated debt treated as equity.
Key figures
amounts in millions of euros 2021 2020
Total administrative expenses: 172 153
– of which reinsurance business 8 8
– of which corporate/holding 163 144
Operating capital generation -272 -214
Other results in 2021 were EUR-3 million
compared with nil in 2020, which included
a net release of provisions of EUR7 million
related to a legacy entity.
The full-year 2021 result before tax of
the segment Other was EUR-184 million
compared with EUR-149 million in 2020,
which included a result on divestments
relating to a provision release from a legacy
entity, while the current period reflects
lower special items and higher non-
operating items.
Full-year 2021 operating capital generation
was EUR-272 million compared with
EUR214 million in 2020. The decrease
mainly reflects the benefit of a release of
SCR following the termination of an internal
reinsurance agreement with Netherlands
Non-life in 2020.
Introduction
The segment Other comprises the
businesses of Japan Closed Block VA,
NN Re, the results of NN Group’s holding
company, and other results.
Japan Closed Block VA comprises NN
Group’s closed-block single premium
variable annuity (SPVA) individual life
insurance portfolio in Japan. These products
were predominantly sold from 2001 to
2009. The total portfolio is reinsured by
NN Re in the Netherlands. The portfolio
is actively managed and hedged on a
market-consistent basis and is expected
to release capital as the block runs off.
The exact timing and amount cannot be
predicted as it is influenced by the results
ofthe hedge programme.
NN Re is NN Group’s internal reinsurer.
It provides innovative reinsurance solutions
to manage risks, optimise capital, support
growth in business units, and safeguard
stable and efficient hedging.
The result of the holding includes the interest
paid on hybrids and debt, interest received
on loans provided to subsidiaries and on
cash and liquid assets held at the holding
company, and the head office expenses that
are not allocated to the business segments.
Financial result
The full-year 2021 operating result of
the segment Other was EUR-157 million
compared with EUR-151 million in 2020,
which included a provision release of
EUR7 million related to a legacy entity.
The lower holding result in 2021 was partly
offset by the improved operating result of
the reinsurance business.
The full-year 2021 holding result decreased
to EUR-166 million from EUR-143 million in
2020 mainly due to higher holding expenses.
The full-year 2021 operating result of the
reinsurance business was EUR11 million
compared with EUR-8 million in 2020.
The 2021 operating result includes a
EUR9 million claim from a legacy portfolio
and EUR8 million of claims related to the
floodsin July 2021, while 2020 included
EUR31 million of claims related to
Netherlands Non-life’s Disability portfolio.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Our strategy and performance – Other
31
NN Group N.V.
2021 Annual Report
Committed to creating long-term value
In the way we do business, we see customers as the starting point of everything
we do. We develop and appropriately price financial products and services
which meet the needs of our customers through each phase of their lives.
We aim to be where our customers want
us to be, and distribute our products and
services through many channels, including
intermediaries, brokers, tied agents,
banks and financial advisors, as well as
directly online.
We receive fees, premiums and deposits
from customers for the products and
services provided. We invest this money
prudently and responsibly. The returns
earned on these investments are used to
pay out pensions, claims, other benefits
and interest.
The remaining capital is deployed for
investments in growth initiatives, managing
debt and delivering capital returns to
our shareholders.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating
value for our
stakeholders
32
NN Group N.V.
2021 Annual Report
How we create value
We are committed to creating long-term value for our stakeholders.
This simplified version of our business model, based on the framework
developed by the Value Reporting Foundation, shows how we use the
resources (shown as capitals) in our organisation to create value as a result
ofour activities (shown as outputs and outcome).
Our key inputs
P
r
o
d
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c
t
d
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v
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l
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e
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t
a
n
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a
n
d
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o
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v
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s
t
m
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n
t
s
C
l
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n
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e
f
i
t
s
Our purpose
We help people
care for what
matters most
to them
Including debt, equity, revenue and
assets invested by clients
• Shareholders’ equity: EUR32.9bn
• Gross premium income: EUR14.3bn
• Assets under Management: EUR301bn
Employees’ skills, time and resources
• Total number of employees: 15,417
• Amount spent on training
and development: EUR14.7m
Internal processes,
systems and controls
Company’s products,
offices and other
physical assets
Manufactured
capital
Manufactured
capital
Use of natural resources
• Total energy used:
29,000 MWh (of which 67% of
the electricity used was renewable)
Natural
capital
Natural
capital
Relations with customers and
other stakeholders
• Customers: around 18m
• Business partners and suppliers
• Other key stakeholders
(e.g. regulators)
Social and
Relationship
capital
Social and
relationship
capital
Human
capital
Human
capital
Intellectual
capital
Intellectual
capital
Financial
capital
Financial
capital
Inputs
Creating value – Stakeholders
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
33
NN Group N.V.
2021 Annual Report
The value we created in 2021
Customers
To our customers, we offer
peace of mind; our products
help protect them, their families,
their health and their property.
We also safeguard their personal
data, provide mortgages and
a stable source of income
in retirement.
Employees
To employees, we provide wages
and other benefits. We also
contribute to their pensions.
In addition, we offer skills training
and opportunities for career
development. We provide an
inspiring and inclusive place
to work.
Investors
To our investors, we are
committed to deliver resilient
and growing long-term capital
generation. To do so, we maintain
a strong balance sheet and
create solid financial returns by
using our financial strength, scale
and international footprint.
Society
We contribute to the well-
being of people and the
planet. We take a long-term
and responsible approach to
investments, working to minimise
their impact on the environment.
We also support the economy
through taxes and payments
to intermediaries and other
business partners.
High-performing products & services
• Brand consideration: 23%
• Net Promoter Score: 5 out of 11
business units scoring above
market average
Environmental impact from own
operations
• Carbon emissions:
8 kilotonnes CO
2
– 100%
compensated by carbon credits
Environmental impact from
investments
• Carbon footprint relating to
proprietary investment portfolio:
55 tCO
2
e/EURm invested
Returns to customers
• Pension benefits and claims paid:
EUR13.3bn
Responsible tax
• Total tax contribution: EUR2,621m
Positive contribution to society
• % ESG-integrated strategies: 91%
• Investments in sustainable and
impact strategies: EUR37.9bn
• Total contributions to our
communities: EUR8m
• People reached through
NN Future Matters: 21,525
Disciplined capital deployment
• Total dividend and interest payments
to investors: EUR820m
• Share buyback programme:
EUR250m
• Investments in acquisitions:
EUR341m
• Solvency II ratio: 213%
Wages and benefits
• Total wages, benefits and pension
contributions: EUR1.6bn
Inclusive and inspiring working
environment
• % women in senior management
positions: 34%
• Employee engagement score: 7.7
Availability of services
• % growth of digital retail clients: 12%
Proper functioning of controls
• Incidents of fraud, conflicts of interest
and unethical behaviour: 41
Efficient operating model
• IT expenses: EUR310m
Outputs
Outcome for our
stakeholders
Contributing to
the Sustainable
Development Goals
Creating value – Stakeholders continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
34
NN Group N.V.
2021 Annual Report
Optical character reading
We introduced optical character reading
(OCR) on claim handling for an OHRA Pet
Insurance product. This led to significant
improvements in both customer satisfaction
metrics and operational costs.
In Japan, we piloted OCR/AI education to
automatically find and read key medical
data from paper-based health check reports
used in medical documents. We aim to
introduce the system in the first quarter
of 2022.
Being there where our
customers are: our platforms
Customer engagement means putting
our customers first and being where they
want us to be. This includes going beyond
our day-to-day interactions to find new
ways of engaging with customers, either by
building our own platforms or participating in
other ones.
Several of our markets are combining
digital and physical interactions to
establish richer customer experiences.
In Hungary, Poland, Romania and Spain,
we simplified and streamlined how
customers can reach us via a variety of
channels, hassle-free and within minutes.
They can, for example, renew policies
directly, or call, mail or chat with us if their
needs have changed.
Combining digital and physicalinteractions
Improving the customer experience
We are investing in digital capabilities
and data so we can identify faster and
more precisely what matters most to our
customers, and enable them to reach
us in the ways most convenient to them.
For this, we need to take into account the
full customer journey across all channels,
including brokers, intermediaries and agents,
who remain a highly relevant channel for us.
To achieve this, our entire product and
services portfolio must also be supported by
robust, futureproof technology and systems.
This will require simplifying our processes
and systems. And streamlining our portfolio
by phasing out old products and legacy
systems to focus on products and services
that are easy to use and understand.
We also invest in creating more cost-
efficient processes through digitalisation
and robotisation, and to improve our digital
capabilities in areas such as process
automation and data analytics, so we can
develop innovative new ways with which to
interact with our customers.
• Customer engagement (NPS):
All insurance business units scoring
above market average NPS by 2023
2021: 5 out of 11 business units
• Brand consideration¹: 28% by 2023
2021: 23%
1 Measured by GBHM (Global Brand Health Monitor).
Key performance indicators
Customers and distribution
Adding value for customers
Our customers are the starting point of everything we do. From students
and young professionals to business owners and pensioners, we support
our customers in the key moments in their lives and help them deal with
expected as well as unforeseen changes. With products and services that
are convenient and simple to use, anytime and anywhere, we help our
customers care for what matters most to them.
Using questions and supported by data
analytics and AI, the customer service
employee can advise the customer
on their options, which the customer
can if they wish then discuss with their
personal advisor.
When the customer receives their new
proposal, they can ‘sign’ it via their phone
using face or fingerprint ID. They are
insured immediately and in many cases
everything is arranged within one day.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Customers
35
NN Group N.V.
2021 Annual Report
Through digital platforms, we can meet
our customers where they are, and tailor
their experience. We see platforms as an
opportunity to engage directly with our
customers, building stronger relationships
and offering innovative solutions – ours and
partners’ – that closely meet customers needs
and requirements.
To achieve this, we broadly use platforms in
two ways:
Platform orchestration
This is where we own the customer interface,
such as our e-health proposition Veerkracht
and Carefree Retirement platform WYZ.
WYZ is a one-stop shop for customers
preparing for retirement or recently retired.
Our other Carefree Retirement-related
propositions Kw!ek and Zorggenoot are also
accessible through WYZ.
Platform participation
Through our presence on existing customer
engagement platforms, we can access
new customer groups. For example, we
sell NN insurance through e-bike dealers,
manufacturers and brokers such as Cowboy,
and peer-to-peer platform Indie Campers.
Such embedded financial products also
have a distribution advantage as customers
can purchase them where they are, through
brands they trust. This enables our products
to become part of an existing transaction
rather than something bought separately.
Helping customers address societal
and environmental challenges
We want our products and services to
contribute positively to the well-being of our
customers and the communities in which we
operate. A few examples from 2021:
Netherlands Life online platform the Human
Capital Planner (HCP) provides employers
and pension advisors with relevant insights
and tools. In 2021, we added insights on the
sustainability impact of invested premiums.
The HCP also provides customers with a
dashboard showing them the impact of
their life cycle investments in terms of CO
2
reduction, water savings and waste reduction.
This year we introduced ESG pension funds
in Spain and Slovakia. The Respect Fund
in Slovakia evaluates your savings in the
second pension pillar against environmental,
social and corporate governance criteria.
Also in Slovakia, we offer a premium
health benefits programme for all our
insurance and pension customers, and in
Hungary we introduced a similar health
assistance programme.
We develop products centred around the
theme of Carefree Retirement to help solve
challenges faced by people over 55. In the
Netherlands, we launched WYZ, a one-stop
shop for customers preparing for retirement or
recently retired. While the Doorwerkregeling
(‘Continued work scheme’) is a service that
allows employers to keep employees on after
they retire.
NN Bank label Woonnu, a mortgage provider
that aims to help consumers make their
homes more sustainable, orginated
EUR1.4 billion of mortgages in 2021 and
entered the top 20 mortgage originators in
the Dutch market.
Netherlands Non-life initiated a sustainable
car repair network for customers. It uses
electric service cars and circular repair
materials and aims to keep the negative
environmental impact of any repairs to
a minimum.
Supporting specific groups in society
Life can be challenging and adversity can
happen to anyone. However, not everybody
has the same access to tools, advice
or support. This is why we also develop
products designed to support a more
inclusive society. A few recent examples:
In the Czech Republic, in 2021 we introduced
long-term care that helps support families
look after elderly or disabled relatives.
Enabling people stay in their home
surroundings helps them to enjoy active,
higher quality lives, and supports cross-
generational bonding.
In Greece, in collaboration with the South
Aegean Region, we provide a free health
service, called Dr Online, to over 20,000
inhabitants on 15 islands in Dodecanese and
18 islands in Cyclades, including the smallest
and most remote ones. The Dr Online
teleconference application allows users
to receive medical recommendations via
video call or chat and to schedule doctors’
appointments.
Being there, in good
times and bad times
Being there for customers
means providing solutions
that create long-term value,
and developing products and
services that meet their real
needs through each phase of
their lives.
For young adults
Leaving home for
the first time
• Travel insurance
Living on your own
• Home insurance
(furniture)
• Personal loan
Young professionals
Starting a career
• Term life insurance
• Property and
casualty insurance
First home
• Savings solutions
• Mortgage
Middle age
Daily life
• Car insurance
• Home insurance
(building)
Thinking about the future
• Term life insurance
• Retail investment
Retirement
Daily life
• Health care insurance
• Legal insurance
Pension
• Immediate (bank)
annuities
• Term deposits
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Customers continued
36
NN Group N.V.
2021 Annual Report
Measuring our progress
Having a strong, well-known brand gives our
customers additional reassurance about
the quality of our offering and enhances
our credibility. As we invest in our brand,
we aim to build recognition, loyalty and
competitiveness. Moreover, customers are
known to engage with companies they like,
know and trust.
How customers view our products
and services
Through customer feedback we learn about
their preferences and views, helping us
improve and modify our services. We focus
on several key metrics, which are combined
in what we refer to as the Global Brand
Health Monitor (GBHM). The GBHM is
used to track how our brand is perceived
externally, and gain insights into brand
performance and development over time.
Net Promoter Score
One of the key metrics in the GBHM is the
internationally recognised Net Promoter
Score (NPS) system, which measures how
likely it is that our customers recommend
our products and services to colleagues,
friends or family. There are different sorts
of NPS. The relational NPS (NPS-r) is used
to measure the strength of the relationship
with customers and gain understanding of
customer satisfaction over time. We use
NPS-r to compare each NN business unit
with market averages at the end of the year
(see table). For the Netherlands, the NPS
score refers to retail customers of
Nationale-Nederlanden in Life and Non-
life insurance. Japan was included for the
first time in 2021; scores are therefore not
available for 2020.
In 2021, NPS-r scores show some
improvement compared to 2020, driven by
various initiatives along with the sharing of
best practices on NPS-r across business units.
In 2021, five of our insurance businesses
scored above market average — Greece,
Hungary, Poland, Romania and Turkey —
compared with only four business units
in 2020. In 2021, Japan, Slovakia and
Spain scored on par with market average.
In Poland and Romania, where we have a
large presence in the pensions market, we
scored above market average in both Life
products and pensions.
Our aim is for all insurance business
units to score above market average by
2023. To that end, we conduct additional
research in local markets to get a better
understanding of what drives the NPS-r
scores. We expect the implementation
of shared best practices to have an
effect on our service offerings and
customer engagement.
Brand consideration
At least twice a year, we measure key brand
indicators, such as brand consideration and
brand preference. Brand consideration is
measured to monitor the preferences of our
customers. The overall brand consideration
for NN Group is based on the total score of
our insurance business units. The weighting
of each business unit is based on its
strategic relevance.
In 2021, the overall brand consideration
improved from 21% to 23%, mainly driven
by an increase of brand consideration for
the Netherlands. Whilst we saw a significant
decrease in Romania, this was offset by an
increased brand consideration in several
markets for Insurance International.
In 2021, several activities and marketing
communication plans had to be adjusted
or postponed due to the cancellation
of (live) events because of Covid-19.
Marketing communication plans and
activities will be evaluated for all business
units in 2022, with the aim of further
increasing our brand consideration.
Brand consideration
Business unit
1
2021
Result
2020
Result
Belgium 3% 3%
Czech Republic 17% 13%
Greece 25% 21%
Hungary 23% 23%
Japan 11% 13%
Netherlands 23% 20%
Poland 26% 29%
Romania 51% 67%
Slovakia 18% 19%
Spain 14% 9%
Turkey 14% 11%
1 In July 2021 the sale of our Bulgarian business unit was completed. As a result, the Bulgarian scores are no longer included in this report.
NPS
Business unit
1
2021
Result
2020
Result
2021
Market average
2020
Market average
Belgium -18 -27 10 5
Czech Republic 1 5 14 13
Greece 17 15 9 17
Hungary 47 37 26 31
Japan -42 n.a. -41 n.a.
Netherlands -22 -30 -12 -16
Poland 28 35 17 13
Romania 55 54 45 29
Slovakia
2
1 1 1 -2
Spain 9 14 6 20
Turkey 73 70 53 50
1 In July 2021 the sale of our Bulgarian business unit was completed. As a result, the Bulgarian scores are no longer included in this report.
2 For the measurement of the number of business units scoring above market average, a reliability margin of 5 points is used.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Customers continued
37
NN Group N.V.
2021 Annual Report
Empowering our people to be their best
At NN, we empower our colleagues to be their best. Together, we create
a culture that supports an open mindset, aligned with our values and
purpose. We believe that working together, opportunities for development
and diversity of thinking lead to better results and help position NN as
we continue to transform our company. Through these times of change,
attracting, developing and retaining talented people is pivotal in building
engaged and vibrant teams with the right skills and capabilities.
NN culture
Our culture is aligned with our purpose,
values and ambition. We consider all
colleagues to be talents and work to create
an environment in which our people can be
their best.
Employee value proposition
In 2020, we launched our employee
value proposition (EVP) to position NN as
an employer of choice in a competitive
labour market, and to make the NN brand
accessible to new employees. Our EVP is
based on three pillars, i) NN’s promise to
employees, ii) what our people value most,
and iii) what sets us apart from competitors.
We measure the effectiveness of our
employee branding through employee
rankings. For 2021, our Brandchart Imago
Research ranking increased (35th place;
2020: 42nd), as did our Potential Park
ranking (10th place; 2020: 68th).
Covid-19 pandemic
Due to the Covid-19 pandemic, the majority
of our employees have been working from
home since March 2020. We monitor
their experience through regular surveys.
In the Netherlands, between February and
October 2021, all scores increased, showing
that our people value the flexible way of
working, believe they have the right tools to
work successfully and feel supported by NN.
When restrictions in the Netherlands were
lessened in September, 70% of the survey
respondents indicated they made use of the
opportunity to work from the office one day
a week. Once it is possible for employees to
return to the office more frequently, we will
start implementing a hybrid way of working,
called the NN way of working.
NN way of working
Flexible working is the cornerstone of the
NN way of working. In this hybrid working
model, employees choose together with their
manager and team when and where to work.
The International Insurance business units
have formed a working group and are co-
creating the joint vision on hybrid working.
They align on best practices, key behaviours
and principles, with each unit implementing
a tailored approach. For example, NN in
Slovakia has a fully flexible approach as part
of its four-day work week, while colleagues
in Greece, Turkey and Spain work in the
office two days a week. The working group
will evaluate local experiences in the first
quarter of 2022.
In the Netherlands, the new health and
vitality intranet page provides tips and
advice to support the physical and mental
health of our employees when working from
home. As part of the NN Way of Working
policy, we introduced a monthly allowance
for setting up a workplace at home and
covering the costs of using the internet.
To receive the allowance, and additional
advice, employees complete the annual
Arbo (Health & Safety) workplace checklist.
Through the checklist, employees become
aware of what is important for the home
workplace and the Health & Safety team
can give advice and advise on health risks.
Workforce transformation
There is increasing competition for talent
and a strong demand for digital capabilities.
Across NN Group, we are working to upskill
our workforce to deliver on our strategy
and support our employees in a changing
environment. Within International Insurance,
we invest in creating better products and
services for customers and agents, supported
by technology. To do so, we aim to recruit tech
specialists in a collaborative project across our
international business units. A taskforce made
up of both IT colleagues and HR professionals
will define what is needed to better recruit and
retain tech talent.
Also as part of our transformation,
NN introduced specific ‘guilds’ around core
capabilities such as Data Science, Customer
Research and User Experience. These newly
created guilds aim to bring together
colleagues working in the same field to
support their professional growth, share
knowledge and develop shared standards.
If successful, we aim to grow this concept
and expand the guilds to additional areas
of expertise.
• Employee engagement ≥7.8 by 2023
2021: 7.7
• 40% women in senior management
positions by 2023
2021: 34%
Key performance indicators
People and organisation
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Our people
38
NN Group N.V.
2021 Annual Report
Investing in skills and capabilities
We invest in skills as part of our workforce
transformation, and we strengthened the
focus on behaviour and development in the
annual performance management cycle.
Skills, attitudes and behaviours that are
important for our strategy and captured in
our i-LEAD profile are translated into a set of
tangible competencies that became part of
the cycle in 2021. Employees can, together
with their manager, identify their goals,
competencies and development areas.
The i-LEAD profile and NN competencies
are included in our key HR processes,
such as recruitment, our EVP, our talent
management approach and leadership
development programmes.
Offering our people opportunities to (re)train
supports them in preparing for changing
circumstances in the labour market. In 2021,
NN invested EUR14.7 million in training and
development (2020: EUR12.9 million).
Increasing the data literacy of our
employees is an important step in becoming
an innovative, data-driven organisation.
To date, more than 1,000 employees have
completed our data and artificial intelligence
(AI) e-learning course. We expanded
our data and AI training programme for
managers to include International Insurance
(Netherlands: 109 registrations, International:
79 registrations).
Diversity and inclusion
Together we strive to build an environment
in which people feel welcome, valued and
respected. A company where our colleagues
can bring their whole selves to work, where
an inclusive customer experience is the
status quo, and where we contribute to the
well-being of our communities. We published
our NN Statement on Diversity and Inclusion
(D&I) in 2020, and in 2021 took action to
further embed and strengthen our D&I
efforts within NN.
In 2021, we appointed a dedicated recruiter
in the Netherlands to hire new colleagues
who are neuro- or physically diverse. In the
Netherlands, we signed the Dutch Diversity
Charter as part of European Diversity
Month in May, and in Slovakia we became
an ambassador of the Slovakian Diversity
Charter in February. Nationale-Nederlanden
Spain has been an ambassador of the local
Diversity Charter since 2019.
Our efforts are being recognised, with
NN once again being included in the
Equileap rankings and Bloomberg Gender
Equality Index.
As the world of work is changing,
we are accelerating our efforts
to attract, train and develop
our talented people
Dailah Nihot
Chief Organisation and Corporate Relations
Our approach to diversity and inclusion (D&I) is about embracing everyone. At NN we
believe that all caretakers have the right to time to bond and connect with their children,
irrespective of their family structure. To support all families, we launched our Equal leave
for all families policy in 2021, for NN employees in the Netherlands. With this update, our
parental leave structure offers all families the same minimum leave. NN also has a more
lenient leave structure for adoption and birth leave than regulated by Dutch labour law.
The increasing diversity in families in society is also represented within NN. We want our
company to be a reflection of the societies in which we live and work. By updating our
leave structure to align with our D&I vision, we ensure that all families welcoming a child,
including same-sex couples, have time to bond and celebrate together, however the
child is welcomed into the family.
Equal leave for every family
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Our people continued
39
NN Group N.V.
2021 Annual Report
D&I: a globally consistent, locally
relevant approach
We held D&I workshops in all our markets
with employees from different levels
of seniority, and conducted several
assessments with internal and external
stakeholders. Within International Insurance,
this resulted in a maturity gap analysis report
per country, followed by a thorough analysis
and action plan for each business unit.
We aim to use these plans to further improve
our performance on D&I.
For NN as a whole, we launched a D&I
ambassadors’ network, with country
representatives who discuss, challenge
and inspire each other on D&I-related
topics. The ambassadors are responsible
for making and implementing local action
plans. For example, in 2021, NN Czech
amended its leave policy to provide a day
off for civil partnerships. In Belgium, Japan
and Spain, we extended paternity leave.
During Pride month, Nationale-Nederlanden
Spain held an internal campaign to raise
awareness of gender pronouns and invited
colleagues to include their own pronouns in
their email signatures. The business unit was
recognised as one of 30 companies with the
best D&I practices in Spain.
Gender diversity and equal pay
NN Group’s pay is analysed annually with
a focus on gender equality. In 2021, we
extended the research to all business units
and countries for the first time.
The annual equal pay analysis, which is
focused on (i) equal representation, (ii)
gender pay gap and (iii) equal pay gap,
shows (i) women are in lower pay grades and
under-represented in higher pay grades, and
(ii) the NN Group-wide gender pay gap of
36% is in line with that of the 2020 analysis.
The pay gap relates to where males and
females are positioned in the organisation
and not about equal pay for equal work.
An in-depth statistical analysis was carried
out for the Netherlands, Japan, Poland,
Belgium and Spain. For the Netherlands,
Belgium and Spain, it was concluded that
gender is not a triggering event for pay
differences. The underlying drivers for the
equal pay gap in Japan and Poland are being
further investigated.
We are focused on talent management
and succession planning activities, among
others, to address this gap and to meet
our target to have 40% women in senior
management positions by 2023.
We raise awareness of the importance
of having an inclusive environment and
mindset through initiatives in our business
units, such as developing unconscious bias
training, organising our internal Wo{men}talk
series, and supporting female empowerment
networks in Slovakia, Spain, Belgium,
the Netherlands, Poland and Czech
Republic. NN Life Japan is introducing a ratio
for 50:50 men and women when hiring
recent graduates.
Engagement
We invest in an environment that supports
the ongoing personal and professional
development of our people. We monitor
the sentiment within the company with
our biannual global engagement survey.
After improved scores in recent years, our
overall engagement score in 2021 showed
a slight decrease (2021: 7.7; 2020: 7.9) with
83% of employees participating in the
survey. Given the challenging working
conditions created by the pandemic, we are
pleased to see the levels of engagement
have remained relatively stable.
Overall, we observed strong results in the
areas of Autonomy, Recognition and Room
for Personal Growth. While the score for
Peer Relationships remained stable at 7.7
(2020: 7.7), it is below the industry (finance)
benchmark (8.3) and, like Process Efficiency
(6.5; 2020: 6.6), remains a point of attention.
There is also room for improvement in
the area of Strategy Communication (7.4;
industry benchmark 7.6), which monitors
individuals’ understanding of both how the
strategy impacts their role and how they
can contribute.
Top employer
The Top Employer Institute named NN a
Top Employer in all International Insurance
business units for the fourth time. NN Life
Japan was 1st out of 10 companies in its
market and Nationale-Nederlanden Spain
was 11th out of 107 companies. All business
units significantly improved their overall
score, particularly in the pillars Diversity &
Inclusion, Work Environment, and Learning.
The Top Employer certification recognises
our efforts to empower colleagues to be
their best and to nurture a culture aligned
with our purpose and values.
Employee representation
Our works councils facilitate employee
consultation in most NN countries in Europe.
In 2021, the measures taken to respond to
the Covid-19 pandemic was high on the
agendas of the European, Central and local
Works Councils, as was working from home
and the adjusted Whistleblower Policy.
CLA
Discussions with the trade unions on a new
collective labour agreement (CLA) for the
Netherlands are ongoing. The parties are
discussing a three-year CLA, including social
plan and pension agreement. The ambition
is to reach an agreement in the first quarter
of 2022.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Creating value – Our people continued
40
NN Group N.V.
2021 Annual Report
Creating value for investors
We offer attractive financial returns for the capital that shareholders
and bondholders provide to finance our activities. We actively
engage with our investors and aim to be clear and transparent in
how we communicate on our strategy, financial results and operating
developments, so they can make informed investment decisions.
Resilient balance sheet
• Priority is a strong capital position
and balance sheet
• Disciplined capital allocation
Strong and growing
capital generation
in the Netherlands
• Accelerating management actions
– Shift to higher-yielding assets
– Balance sheet optimisation
– Optimise Non-life business
– Focus on efficiency
Profitable growth in
attractive markets
• Leading market positions in Central
and Eastern Europe and in the COLI
market in Japan
1
• Shift to protection and leveraging on
strong distribution network
Dividend policy
Progressive dividend per share, annual share buyback of at least EUR250m and additional
excess capital to be returned to shareholders unless used for value-creating opportunities
Our commitment
Resilient and growing long-term capital generation for shareholders
Financial targets
Operating capital generation (OCG)
2
: EUR1.5bn in 2023
Free cash flow (FCF): over time, in a range around OCG
1 COLI: Corporate-owned life insurance market in Japan.
2 Operating capital generation (OCG): see ‘Glossary’ for a definition.
Our proposition to investors
Non-financial targets
• Excellent customer experience
• Engaged employees
• Positive contribution to society
Creating value – Investors
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
41
NN Group N.V.
2021 Annual Report
Resilient balance sheet
Having a strong balance sheet has always
been our priority. We combine a strong
solvency position with a conservative
investment portfolio and low economic
interest rate exposure. Our Solvency II ratio
was 213% at the end of 2021, compared
with 210% at year-end 2020. This mainly
reflects the operating capital generation
and favourable market impacts, partly
offset by the deduction of the proposed
2021 final dividend and the 2021 share
buyback programme.
Our balance sheet creates opportunities
for further investments in higher-yielding
assets. In 2021, we primarily invested in
mortgages, loans and real estate, while
selling government bonds. The solidity and
stability of our balance sheet, even in volatile
market conditions, demonstrates NN’s
robust and resilient profile. The cash capital
position at the holding company increased
to EUR1,998 million from EUR1,170 million
at year-end 2020, mainly due to free cash
flow to the holding and proceeds from the
issuance of senior debt, partly offset by
capital flows to shareholders and amounts
paid for acquisitions.
Strong and growing capital
generation in the Netherlands
In the Netherlands, we have leading market
positions and the businesses are delivering
strong remittances to the holding, but we are
also taking additional steps to grow capital
generation and free cash flow.
At Netherlands Life, the profitable in-force
book provides stable capital generation,
while we see growth opportunities in the
pensions business. The upcoming Dutch
pension reforms are expected to support
the Defined Contribution (DC) pension
business and accelerate the pension buyout
market. Higher investment returns are also
expected from the ongoing shift to higher-
yielding assets.
Netherlands Non-life is market leader in the
Dutch non-life market. We are in a unique
position to benefit from our scale in terms
of both efficiency and underwriting. This is
supported by the integration of VIVAT Non-
life, which was completed in 2021, as well as
by investing in digital and data capabilities.
NN Bank originates high volumes of
mortgages, of which more than half are sold
on to the Group’s insurance companies for
their investment portfolios. Our focus is on
originating high-quality mortgages at good
margins. Assuming the Dutch mortgage
market remains attractive in a similar way
to the past few years, we expect capital
generation at NN Bank to continue to
support our growth profile.
Profitable growth in
attractive markets
Outside the Netherlands, we are a leading
player in attractive, growing markets in
Europe and Japan.
Our European businesses are focused
on innovative protection products, which
are distributed through diverse channels,
including bank partnerships, brokers and
tied agents. Growth is further supported
by the low life insurance penetration rates
in Central and Eastern Europe, as well as
an increasing awareness of the need for
protection. We are investing to leverage
and build our customer base, while also
aiming to be the preferred partner for third-
party distributors.
In Japan, NN is a strong player with a market
share around 10% in the sizable COLI
segment. Active in this market since 1986,
we have built unique capabilities and are
known as a leading SME insurer with a focus
on agent education, innovative products and
the ability to adapt quickly.
For NN Group, the international businesses
provide an attractive way to invest capital in
organic growth. The European and Japanese
businesses generate virtually all VNB growth,
which is the main driver of capital generation
for these businesses.
The strong VNB growth trend in the
international markets is expected to
continue, driven by macro trends, evolving
customer needs and a tailored customer-
focused strategy.
Financial targets
During 2021, NN reconfirmed the Group’s
OCG target, as the capital generation lost
on the disposal of the asset manager is
expected to be offset by the additional
capital generation coming from the
acquisition of MetLife Poland, MetLife
Greece and Heinenoord in the Netherlands,
as well as strong business performance
across the Group.
The following targets for NN Group
1
and the
different businesses have been set for 2023:
Target
NN Group OCG of EUR1.5 billion
Free cash flow in a range
around OCG over time
Netherlands Life OCG of EUR0.9 billion
Netherlands
Non-life
Combined ratio of
94-96% over time
Insurance Europe OCG of EUR325 million
Japan Life VNB of at least
EUR150 million
Banking Net operating RoE of
12% or higher
Beyond 2023, too, NN Group expects mid
single-digit annual growth of OCG over time.
This outlook is based on the organic growth
opportunities of the businesses, and is
supported by both long-term market trends
and the steps we have taken to optimise
our portfolio.
In line with guidance, this long-term OCG
growth will translate into growing free
cash flow and growing capital returns
to shareholders.
Progress on targets
OCG for NN Group increased to
EUR1,584 million from EUR993 million
in 2020, driven by strong business
performance and commercial momentum.
NN IP will be included as part of OCG until
the closing date of the transaction, which
is expected in 2022. The impact on OCG is
expected to be partly compensated by the
acquisition of MetLife’s business activities in
Poland and Greece and Heinenoord in the
Netherlands, as well as a strong business
performance across the Group.
1 In August 2021, NN Group announced the sale of NN Investment
Partners (NN IP) to Goldman Sachs. The OCG target for the
Asset Management segment was set at EUR125 million in 2023.
Creating value – Investors continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
42
NN Group N.V.
2021 Annual Report
Capital return policy
NN Group intends to pay a progressive
ordinary dividend per share and execute a
recurring annual share buyback of at least
EUR250 million. Additional excess capital is
to be returned to shareholders unless it can
be used for value-creating opportunities.
A progressive dividend means a growing
dividend per share. We decide on the
amount of the dividend each year depending
on the circumstances at the time, but the
long-term growth pattern of the annual
dividend is ultimately linked to the growth of
capital generation. We expect mid single-
digit annual growth of OCG over time.
When proposing a dividend, NN Group
considers, among other things, the capital
and cash position, leverage, liquidity position
and credit rating.
Dividends are paid either in cash, after
deduction of withholding tax if applicable,
or in ordinary shares, as elected by the
shareholder. Dividends paid in the form
of ordinary shares will be delivered from
NN Group treasury shares or issued from
the share premium reserve. We intend
to neutralise the dilutive effect of the
stock dividend through repurchase of
ordinary shares.
On 1 September 2021, NN Group paid
an interim dividend of EUR0.93 per
ordinary share.
At the AGM on 19 May 2022, a final dividend
of EUR1.56 per ordinary share will be
proposed, bringing the total 2021 dividend to
EUR2.49 per ordinary share. This represents
an increase of 7% on the 2020 dividend
per share.
Share buyback
On 13 February 2020, NN Group announced
an open market share buyback programme
for an amount of EUR250 million within
12 months, commencing on 2 March
2020. This share buyback programme
was completed on 26 February 2021.
On 18 February 2021, NN Group announced
an open market share buyback programme
for an amount of EUR250 million within
12 months. This share buyback programme
began on 1 March 2021 and was completed
on 28 February 2022.
NN Group announced on 17 February
2022 that it will execute an open market
share buyback programme for a total
amount of EUR1 billion. This consists of a
EUR250 million programme that will be
executed within 12 months commencing
on 1 March 2022 as well as an additional
programme for
an amount of EUR750 million to commence
after completion of the sale of NN IP.
This intended additional share buyback
programme is expected to be completed
before 1 March 2023.
Both share buybacks will be deducted in full
from Solvency II Own Funds in the first half of
2022 and are estimated to reduce NN Group’s
Solvency II ratio by approximately 10% points.
NN Group reports on the progress of the
share buyback programmes on its corporate
website on a weekly basis.
On 5 May 2021, 12,400,000 NN Group
treasury shares that had been repurchased
under the share buyback programme
completed in February 2021 were cancelled.
Other developments
2021 has been an important year in our
preparation for the introduction of IFRS 9
and 17 in 2023. We held a number of parallel
runs to test our systems and process
readiness. We also started the preparations
for the transitional figures and the audit
thereof, which we will complete in 2022.
The implementation of IFRS 9 and 17 takes
place within our larger roadmap to establish
a more digital and data-driven finance and
risk operation.
Shareholder by country/region
IHS Markit shareholder analysis at September 2021 (%)
Asia 17%
United Kingdom 15%
United States 35%
The Netherlands 2%
Rest of Europe 28%
Rest of the World 3%
20172016 2018 2020 20212019
1.55
1.66
1.90
2.16
2.49
1
2.33
0.50
1.00
1.50
2.50
2.00
Final dividend
Interim dividend
1 Pro forma 2021 full-year dividend per share of EUR2.49, comprising the 2021 interim dividend
of EUR0.93 plus the proposed 2021 final dividend of EUR1.56
Creating value – Investors continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
43
NN Group N.V.
2021 Annual Report
Share capital
The authorised share capital of NN Group N.V. consists of ordinary shares and preference
shares. Currently, only ordinary shares are issued, while a call option to acquire preference
shares has been granted to the NN Group Continuity Foundation (Stichting Continuïteit
NN Group). Read more on page 105.
Major shareholders
According to the AFM register as at 7 March
2022, the following shareholders had an
interest of 3% or more in NN Group on the
notification date:
• RRJ Capital II Ltd. 9.60% (23 May 2017)
• BlackRock, Inc. 5.16% (2 December 2021)
• Norges Bank 4.91% (30 September 2020)
• UBS Group AG 3.17% (1 February 2022)
• FMR LLC 3.14% (19 August 2021)
Please refer to the AFM register of
substantial holdings and gross short
positions for more details on the nature and
characteristics of these interests.
Credit ratings
On 5 November 2021, Fitch Ratings
published a report affirming NN Group’s
‘AA-’ financial strength rating and ‘A+’ credit
rating with a stable outlook. On 9 December
2021, Standard & Poor’s published a report
affirming NN Group’s ‘A’ financial strength
rating and ‘BBB+’ credit rating with a
stable outlook.
Sustainability
We are rated on sustainability by specialist
research agencies, such as Sustainalytics,
MSCI and CDP. We are also included on
indices, such as the Dow Jones Sustainability
World Index and FTSE4Good. Read more on
page 126.
We proactively inform the market on our
approach and performance by publishing
and regularly updating an environmental,
social and governance (ESG) presentation
on our website and during one-on-one
investor meetings.
In February 2022, NN Group launched a
sustainability bond framework, to enable
the future issue of green, social and
sustainability bonds.
80
95
110
125
140
JanDec
20
Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
21
Euro STOXX Insurance indexNN Group
Listing
NN Group ordinary shares are listed and traded on Euronext Amsterdam under the symbol NN.
Number of shares in issue and shares outstanding in the market
Year-end
2021
Year-end
2020
Year-end
2019
Authorised share capital (in shares) 700,000,000 700,000,000 700,000,000
Issued ordinary shares 317,878,210 330,278,210 343,556,121
Own ordinary shares held by NN Group 12,294,129 19,822,194 21,485,285
Outstanding ordinary shares 305,584,081 310,456,016 322,070,836
Authorised and issued capital (in EURmillion)
Year-end
2021
Year-end
2020
Year-end
2019
Ordinary shares
– authorised 84 84 84
– issued 38 40 41
Preference shares
– authorised 84 84 84
– issued 0 0 0
Creating value – Investors continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
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information
44
NN Group N.V.
2021 Annual Report
Low-carbon economy
One of our goals is to make a positive
contribution to society by supporting the
transition to a low-carbon economy. We are
doing this in various ways:
• We manage our own carbon footprint,
which comes mainly from our office
buildings and travel activities. Even though
this footprint is limited, we have set
ourselves targets to significantly reduce
our emissions in the coming years.
Read more pages 131-134.
• In terms of our assets, we aim to reach a
net-zero carbon proprietary investment
portfolio by 2050. As part of the roadmap
to achieve this, we recently announced
interim targets for our corporate
investments for 2025 and 2030.
• We aim to develop more sustainable
customer propositions. We have joined
the Net-Zero Insurance Alliance to pool
our knowledge and goals with other
participating insurers. With them, we have
committed to transition to a net-zero
insurance underwriting portfolio by 2050,
starting with developing metrics and
targets over the coming months.
Responsible investment
NN Group’s Responsible Investment (RI)
Framework policy sets out our vision and
approach in this area: we integrate ESG
factors into our investment processes and
active ownership practices. We prefer
inclusion backed by engagement to
exclusion, but also uphold restrictions.
Our asset manager, NN IP, also offers clients
a range of ESG-integrated, sustainable and
impact investment strategies.
Our net-zero ambition and
intermediate targets
We have a clear ambition to support the
global transition towards net-zero greenhouse
gas (GHG) emissions by 2050, in line with
efforts to limit global warming to 1.5°C.
NN’s strategy for transitioning our proprietary
investment portfolio towards the global goal
of net-zero emissions has two dimensions:
decarbonisation of the investment portfolio
and increasing investment in climate
solutions. Drawing on the Institutional
Investors Group on Climate Change (IIGCC)
Net-Zero Investment Framework, we have
been developing asset-class-specific
strategies. A key principle in this framework
is to utilise a comprehensive set of levers
available to investors for accelerating
decarbonisation in the real world.
In 2021, we set intermediate reference
targets for GHG emissions reduction for the
corporate investment portfolio (listed equity
and corporate fixed income). This helps us
determine the direction and ambition, and
monitor the effectiveness, of our net-zero
investment strategy. By 2025, we aim to
reduce the GHG emissions of our corporate
investment portfolio by 25%, and by 45% by
2030, compared to 2019 levels.
NN also defined clear intermediate goals
for the (non-listed) real estate portfolio, as
well as a target to increase our investments
in climate solutions by at least EUR6 billion
by 2030, which would more than double
our current investments in renewable
infrastructure investments, green bonds
and energy-efficient real estate (refer to
the section ‘Facts and figures’ for more
detail on how we defined investments in
climate solutions).
Key performance indicators
Society
• ESG-integrated Assets under
Management (AuM): 80% by 2023.
2021 (year-end): 91%.
• Accelerate the transition to a low-
carbon economy by targeting a net-
zero carbon proprietary investment
portfolio by 2050.
2021:
– Defined a first set of interim targets
to steer and monitor the transition
of our investment portfolio to
achieve net-zero GHG emissions.
– Developed asset-class-specific
Paris Alignment strategies for
sovereign bonds, corporate
investments, and real estate.
• By 2023, contribute 1% of our
operating result (three-year average)
to our communities, including cash
donations and hours of volunteering.
2021: EUR8 million / 0.4% based on
the operating result of 2021 (including
EUR6.2 million in charitable donations
and 13,586 volunteering hours).
Additional performance
indicators
• Continue to increase NN IP’s AuM in
sustainable and impact strategies.
2021 (year-end): EUR37.9bn AuM
(+29% compared to year-end 2021).
• Reduce direct CO
2
emissions.
2021:
– Set new targets to decrease our
CO
2
emissions by 35% in 2025 and
by 70% in 2030.
– Decrease of CO
2
emissions of 16%
(compared to 2020).
• Reach at least 20,000 young people
through NN Future Matters.
2021: 21,525 people reached through
NN Future Matters.
Creating a positive impact on society
We strive to contribute to the well-being of people and the planet. We do
business with the future in mind and want to contribute to a world where
people can thrive for generations to come. We do this by investing our
assets responsibly, integrating ESG factors into our underwriting activities,
being a fair taxpayer and managing our direct environmental footprint and
through our activities in the communities where we live and work.
Creating value – Society and communities
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
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Annual
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45
NN Group N.V.
2021 Annual Report
These steps build on earlier decisions to
restrict investments in companies that have
activities in oil sands extraction and thermal
coal mining, and to execute a phase-
out strategy for thermal coal-exposed
companies in our proprietary investment
portfolio by 2030. In 2021, we lowered the
exclusion threshold: companies are put
directly on our exclusion list when they
derive 20% of their total revenues from the
extraction of oil sands or thermal coal mining
(previously 30%).
Our Paris Alignment Council is overseeing
the process of aligning the proprietary
investment portfolio to the Paris climate
goals, and defines related action plans and
targets. For more information on the Paris
alignment strategies and targets refer to
Our response to the Task Force for Climate-
related Financial Disclosures on page 66.
Supporting ESG integration
Our RI Framework policy includes norms-
based criteria that reflect our investment
beliefs and values, relevant laws, and
internationally recognised norms and
standards, such as the OECD Guidelines.
NN IP has a stringent definition of ESG
integration: for each investment analysis,
the integration of ESG factors needs
to be consistently demonstrated and
documented. At year-end 2021, ESG criteria
were consistently integrated for 91% of
total assets, amounting to EUR235.8 billion
(compared with 74% in 2020). The increase
was driven by the inclusion of mortgage
portfolios and the qualification of other
Alternative Credit portfolios as ESG-
integrated. This includes those assets
managed under the sustainable and
impact strategies.
We apply an engagement-led divestment
approach. This means restriction is
proposed only when we feel engagement
cannot change a company’s conduct or
involvement in specific activities. The ESG
Committee of NN IP assesses whether
an issuer fails to meet our norms-based
criteria, advised by the NN IP Controversy
& Engagement Council. In 2021, this council
met seven times and discussed more than
120 cases.
Influencing companies to take responsibility
Voting is one of the most powerful tools of
active ownership and we vote at shareholder
meetings on behalf of our own and our
clients’ assets. To ensure proper governance,
we have separate voting committees in
place, and publish our voting record on a
dedicated website.
During 2021, NN IP voted at 3,307 AGMs
on 35,985 agenda items. Voting activities
were focused on three main issues: board
elections, the alignment of executive
remuneration with company strategy and
sustainability shareholder resolutions.
A recently published report ‘Voting matters
2021’ by ShareAction shows how 65 of the
world’s largest asset managers voted on
146 social and environmental shareholder
resolutions in the period September 2020 to
August 2021. NN IP was ranked ninth, having
supported 90% of the resolutions (98%
environmental; 85% social).
Through engagement, we aim to raise
awareness of ESG issues and encourage
issuers to improve their policies and
practices. In addition to controversy
engagements, NN IP performs thematic
engagements on corporate governance,
natural resources and climate change,
and decent work. As a result of NN IP’s
active investment strategies, our equity
and fixed income analysts and our portfolio
managers are in frequent dialogue with
investee companies. Our RI specialists
also enter into dialogue with corporate
and sovereign issuers, and whenever ESG
issues are a topic of discussion during
company meetings we log the updates in a
dedicated database.
In addition to our own engagement efforts,
we use the services of Sustainalytics
Stewardship Services. They carry out
engagements with companies on our
behalf, primarily focused on compliance
with internationally-recognised conventions
and guidelines.
During 2021, NN IP also continued
its participation in collective investor
engagements, such as Climate Action 100+
and the CDP Non-Disclosure and Science
Based Target campaigns, encouraging
companies to disclose information on
climate risks and set long-term targets for
reducing their greenhouse gas emissions.
Utility sector engagement
Of all sectors of the global economy, electricity and heat
generation account for the largest share of direct greenhouse-
gas emissions. The electricity sector is also vital to the collective
effort to reach net zero because of the central role it plays in the
transition plans of other sectors. NN IP’s engagement with electric
utilities focuses on power-generating companies and the need to
transition to a low-carbon economy.
One of the utility companies NN IP has engaged with is the Czech
conglomerate CEZ Group. In 2021 CEZ pledged to achieve net
zero emissions by 2050 and to curb emissions in line with the
Paris Agreement scenario of ‘well below 2 degrees’ by 2025.
Thecompany has also committed to shut coal-burning power
plants, Some by 2030, while for others closure plans depend on
energy-security issues and the availability of renewables.NN IP
will continue to engage with CEZ in 2022 on the possibility of
setting a science-based target based on a 1.5-degree scenario
and on the company’s progress on realising its 2030 vision.
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NN Group N.V.
2021 Annual Report
As the chart shows, in total we had 1,312 ESG
dialogues with issuers in 2021. In addition
to the example mentioned in the ‘Utility
sector engagement’ box on page 45, you
can find more on NN IP’s engagements in
its Responsible Investing Report 2021 on
our website.
Encouraging governments
In addition to engagement with 541
companies, NN IP also enters into dialogue
with sovereign states.
In October, our CEO signed an open letter of
the World Economic Forum’s Alliance of CEO
Climate Leaders to encourage world leaders
to take decisive steps during COP26. It also
encouraged all business leaders to set
(science-based) targets to halve emissions
by 2030 and reach net-zero by 2050, with
a clear roadmap on how to get there, along
with transparency on emissions and their
financial impact. The Alliance is a global
community of CEOs who continue to raise
the bar and catalyse action across sectors,
and encourage policymakers to help deliver
the transition to a net-zero economy. NN’s
CEO became a member in 2021.
Making a positive impact through our
investments
During 2021, NN IP expanded its sustainable
and impact strategies offering with the
launch of a new Sovereign Green Bond
fund. Our green bond strategy (funds and
mandates) has seen significant growth,
reaching EUR4.5 billion at year-end
2021. Total AuM of our sustainable and
impact investing products grew 29% to
EUR37.9 billion at year-end 2021.
For NN Group’s own assets, too, we look
for investments that have a positive
impact on society while meeting our
investment criteria. For instance, we invest
in green bonds, renewable energy-related
infrastructure projects, and energy efficient
real estate. As mentioned above, we set
a target to increase these investments
by EUR6 billion by 2030. In total, these
investments amounted to EUR5 billion at
year-end 2021.
For NN Group’s non-listed real estate
portfolio, we use the Global ESG Benchmark
for Real Assets (GRESB) as the primary tool
to assess and monitor the sustainability
performance of our real estate portfolios.
We require all real estate and fund
managers to report in GRESB Real Estate
Assessment. In the 2021 assessment, 82%
of NN’s portfolio of directly-owned buildings,
joint ventures and funds was measured in
the reporting tool. The NN portfolio had a
(value-weighted) score of 87 (on a scale
of 1 to 100), well above the European
non-listed real estate benchmark average
of 78. While for the third consecutive year
our directly-managed real estate portfolio
received a 5-star rating, GRESB’s highest
rating and recognition as an industry leader.
Our carbon footprint analysis of proprietary
assets measures the carbon footprint of
80% of our total assets. Read more on
pages 131-134.
Responsible tax strategy
We believe a responsible approach to tax
is an essential aspect of good citizenship.
We manage our tax position in line with
our business operations, and our position
reflects our corporate strategy and
takes into account relevant international
guidelines, such as the OECD Guidelines for
Multinational Enterprises.
Being a responsible taxpayer also means
that our tax planning takes long-term
considerations into account and carefully
weighs up all stakeholder interests. We have
a set of tax principles to which we adhere
and that we communicate publicly on our
website through our Tax Strategy and
Principles, and the NN Group Tax Charter.
Besides the taxes NN Group pays as a
taxpayer, which represent a cost for our
company, we are also responsible for
collecting taxes on behalf of our clients,
employees and service providers, and
passing them on to tax authorities. To give
insight into our tax contribution, since 2019
we have published a Total Tax Contribution
(TTC) Report, which provides information
on the taxes we paid in the countries where
we operate on a country-by-country basis.
The 2021 TTC Report is available on our
website and covers the book-year 2021.
We are pleased that our efforts on this
front have been recognised by external
stakeholders, with NN being the top-scoring
company in the annual Tax Transparency
Benchmark published by the Dutch
Association of Investors for Sustainable
Development (VBDO) for the third year in a
row. This benchmark provides a comparative
study of Dutch listed companies’
fiscal transparency.
3,307
Number of shareholder
meetings at which we voted
1,312
Dialogues with issuers
on ESG factors
Dialogues on ESG factors
(%)
Social 13%
Governance 13%
Environmental 29%
ESG overlapping 45%
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NN Group N.V.
2021 Annual Report
Financial tax disclosures
The financial disclosures on corporate
income taxes paid by NN Group can be
found on Note 35 of the 2021 Consolidated
annual accounts. The same information is
included in the 2021 TTC Report, but with
more detailed explanations around the
disclosures. In addition, the TTC Report
provides information on other taxes
collected and paid by NN Group as part of
its operations.
NN Group’s total tax contribution in
2021 amounted to EUR2,621 million, and
consisted of the corporate income taxes
paid by NN Group and the total of the other
taxes collected and paid by
NN Group as part of its operations (including
Value Added Tax, Insurance Premium
Tax, payroll taxes, and withholding tax on
dividends paid by NN Group). Of this total
tax contribution, we paid 80% to the tax
authorities in the Netherlands, and 20%
to local tax authorities on behalf of our
international businesses.
Sustainable sourcing
NN Group is committed to making
sustainable procurement decisions and
we encourage our suppliers to do the
same. Our decisions not only aim to meet
our organisation’s need for products and
services. Through them, we also aim to
make a positive contribution to society and
minimise our environmental impact while
addressing socioeconomic issues. This is
explained more fully in our Sustainable
Procurement Statement, written in 2021.
Our approach starts with assessing
ESG factors that can present risks or
opportunities for NN. If these factors are
material, we incorporate appropriate
evaluation criteria in our sourcing processes
and evaluate all costs associated with the
product or service. We also challenge our
suppliers to offer sustainable and innovative
solutions. Our suppliers are asked to register
on an FSQS-NL supplier qualification
platform, where they provide detailed
information on the policies and processes
they have in place to, among other things,
minimise environmental impact.
We launched this system in the Netherlands
in 2020. In 2021, a total of 297 suppliers
(51% of our total tier 1 and tier 2 supply
base, covering 60% of total spend) have
registered, completed the questionnaire
and uploaded supporting documentation.
We also have a process and governance
in place for screening the integrity of the
supplier, both at onboarding and during the
contract lifecycle, when we also actively
engage with our suppliers to stimulate
ongoing improvements.
We strive to continually improve our
relationships with suppliers and work
together in a mutually beneficial way.
We have included our most important
standards in our approach to environment
and human rights issues in NN’s Terms &
Conditions and model contract repository,
which our suppliers agree to when doing
business with us.
In addition, in 2021 we developed the NN
Supplier Code of Conduct (SCC), which
outlines our expectations of the policies
and practices of our suppliers in terms of
the environment, human rights, diversity
and inclusion, and integrity and ethics.
All key suppliers will be asked to commit
to this code of conduct. To date, 148 of the
suppliers invited in the first wave in Q4 2021
have committed.
Managing our direct
environmental footprint
We aim to effectively manage our direct
environmental footprint by reducing our
use of natural resources, seeking green
alternatives and compensating the
remainder of our carbon emissions.
In 2021, NN Group committed to reducing
its CO
2
emissions by at least 35% by 2025
and 70% by 2030, compared to 2019 levels.
Following this path, we expect to reach net
zero by 2040. This covers CO
2
emissions
from our buildings, lease cars and business
air travel.
We aim to reach our targets through various
actions. Firstly by working in a hybrid way,
stimulating colleagues to also work from
home, thus reducing business travel and
commuting. Furthermore we aim have a
100% electric car fleet in the Netherlands
by 2025. To reach this goal we updated our
lease policy in the Netherlands to only allow
fully electric lease cars from 2022 onwards.
In 2021, our CO
2
emissions decreased
by 16% compared to 2020 and 67% of
our electricity use came from renewable
sources. The overall proportion of renewable
electricity has steadily decreased as a
result of less electricity being consumed in
the Netherlands (which is 100% renewable)
compared to international business units,
where a proportion of the electricity
consumed is not electric.
We continue to compensate the remainder
of our CO
2
emissions by purchasing
voluntary carbon credits and have been
carbon neutral since 2007. Since 2021
we have been investing in the forest
conservation of Alto Huayabamba in Peru.
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NN Group N.V.
2021 Annual Report
Our contribution to our communities
At NN, we put our resources, expertise and
networks to use for the advancement of our
communities. We promote a society in which
everyone can participate and thrive for
many generations to come.
Within our strategic commitment to society,
we pledge to invest 1% of our operating
result
1
before tax in society by 2023.
To ensure we continue the professional
development of our community investment
programme, we align with the highest
industry standards. In 2021, we joined the
Business for Social Impact (B4SI) network.
We use their framework and guidelines
to guide our implementation of our 1%
ambition, including internal and external
reporting. In line with their framework,
we include cash contributions, in-kind
donations, volunteer hours (monetised) and
management costs.
Overview of our contributions
to society (x EUR1,000) 2021
Cash contributions 6,244
In-kind donations (monetised) 62
Volunteer hours (monetised)
2
543
Management costs
3
1,151
Total contributions 8,000
% of operating result
before tax in 2021
0.4
In 2021, we also aligned and updated our
charitable donations policy, in line with
our revised strategic direction and the
B4SI framework. Guided by this policy,
we continued to grow and develop our
programme in line with our globally
consistent, locally relevant approach.
We built on our current strong foundations,
growing existing partnerships and starting
new ones. In doing so, we increased our
donations and volunteer hours.
We also decided to broaden our scope in
line with relevant themes for the business.
So as well as continuing our focus on
financial well-being through NN Future
Matters, we increased our contributions
under the theme: physical and mental
well-being.
Financial well-being:
NN Future Matters
Within our NN Future Matters programme,
we continue to work with our longstanding
partner Junior Achievement (JA) Europe
in the markets in which we are active.
JA Europe and NN Group have been working
together since 2015 to empower young
people to tackle societal challenges by
using innovation and entrepreneurship.
The Social Innovation Relay (SIR) is an
innovative programme designed to enhance
essential 21st century and entrepreneurial
skills among secondary school students.
The programme helps young people think
like social entrepreneurs, gives them access
to the latest technology and shows them
that starting their own business can be a
viable career choice. In 2021, we reached
13,282 students, and 285 colleagues from
NN volunteered to support the programme.
We also extended our partnership with
JA Europe to see how we can better help
enhance the employment opportunities for
young people who currently have limited
opportunities and resources. Together, we
founded the Economic Opportunities for
All initiative. This initiative commissioned
research on, among other things, how to
best support these youngsters. Based on
the research results, JA Europe is now taking
the first steps towards integrating this
knowledge into their programme offering.
In addition to continuing our current
partnerships, we also initiated new
partnerships locally. Alongside our
involvement with JINC in the Netherlands,
NN Belgium started to support the newly-
established chapter in Belgium. Through the
JINC programme, young people with limited
opportunities or resources are introduced to
all kinds of professions, discover which work
suits their talents and learn to apply for jobs.
In our Dutch market, we initiated several
new partnerships to support young people
in finding a stable job. For example Emma at
Work, which aims to increase the chances
on the job market for young people who
are physically challenged. In addition to our
financial contribution, 15 NN colleagues
volunteered to be mentors to young people,
helping them increase their confidence
and network in order to find a stable job.
Another example is our partnership with
Refugee Talent Hub, where we support job
opportunities for refugees by expanding
their network within the IT sector. 33 NN
colleagues volunteered to be mentors on
this programme.
In Slovakia, we started a partnership with
Cesta Von to support their mission to help
people caught in generational poverty to
become self-sufficient, find employment and
be able to live a decent life. In particular, we
invested in Omama, a social and educational
project where so-called ‘Omamas’
empower parents and support them in
the development of their child, so they get
the strong foundation necessary for later
success in life.
1 Based on a three-year average.
2 We use the standard hourly rate of 40 euros per hour
3 This includes FTEs allocated and any other costs that
are needed to professionally run our programme (e.g.
impact measurement, communication costs)
21,525
People reached through
NN Future Matters
13,586
Employee volunteer hours
EUR6.2m
Donations to charitable organisations
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NN Group N.V.
2021 Annual Report
Physical and mental well-being
In 2021, we put greater focus on physical and
mental well-being, as this theme is close to
our business.
In Romania, we began a major partnership
with Asociatia Inima Copiilor (Children’s
Heart Association). We are supporting
the expansion of a medical unit in the
Marie Curie Hospital in Bucharest that
will mean children with heart diseases
can enjoy the right treatment and medical
conditions. In addition to a direct donation
to this foundation, we supported a national
campaign where we invited Romanian
citizens to donate 2 euros a month towards
the costs of expanding the medical unit.
NN Romania will match these public
contributions up to the amount needed to
fund the expansion.
NN Spain has developed a two-year
partnership with Unoentrecienmil.
Through our support, this Spanish
foundation for childhood cancer research
can develop a digital app to guide physical
exercise for children with cancer to support
their recovery. Not only when they are
hospitalised, but also at home. The project
aims to implement this app in multiple
hospitals all over Spain.
NN Poland partnered with Fundacja Twarze
Depresji (Faces of Depression Foundation)
to overcome stereotypes about mental
illness, and in particular depression.
Among other things, NN Poland supported
online psychological consultations for
320 people from excluded communities
undergoing an emotional crisis.
Your Community Matters:
NN Volunteer Week
In 2021, we introduced our first-ever Your
Community Matters, NN Volunteer Week
to deepen our involvement with our local
charitable partners.
During the week, 1,599 colleagues from
10 different NN markets volunteered
2,510 hours for 36 different charities.
Colleagues from all levels of the
organisation, including management
board members, participated in several
volunteer activities. For instance, in Poland
our colleagues collaborated with the
Intergenerational Activity Center in Warsaw
working on senior citizens’ well-being.
NN volunteers kept seniors company and
seniors could attend workshops together,
and join a special concert where an Elvis
Presley impersonator played the music of
their youth.
In all ten markets that joined the volunteer
week, we also invited colleagues to join
our first-ever charity run. Colleagues ran
4,985km and in doing so raised EUR39,650
for local charities.
To further strengthen a culture of caring
for our communities, we initiated the
first-ever internal Your Community
Matters Award. This celebrates the most
impactful community investment and
volunteering projects across NN Group.
Colleagues across our company are invited
to vote and choose the winner.
Our support during Covid-19
During 2021, Covid-19 has continued to
cause concern and distress globally.
In addition to its immediate impact on
health, it makes even clearer just how fragile
the well-being of people and our planet is.
It also meant that many of our societal
partners continued to adapt their
programmes to local measures, and
wherever possible we supported them
in making this work. For instance, our
colleagues continued to volunteer, online
if necessary.
Research suggests the pandemic will
probably have long-term effects, especially
for those in fragile socioeconomic
situations. We therefore support a Covid-19
recovery fund with the Oranje Fonds in the
Netherlands. This focuses on supporting
non-profit organisations and social
enterprises that are trying to mitigate the
negative effects of the pandemic on the
economic opportunities for people with a
more fragile socioeconomic status. In other
countries, such as the Czech Republic,
we provided moral support to healthcare
workers by delivering 500 thank-you gifts
to them.
Reporting on progress
In 2022, we will continue to scale our
contributions to society in pursuit of our
ambition to contribute 1% of our operating
result by 2023. Because we believe sincerely
that making a lasting impact on society is
important, we will soon be launching our
first Community Investment Impact Report.
This will help us learn from and improve our
practices. More importantly, it will steer us
towards new activities that will enable us,
together with our partners, to contribute to
the well-being of people and the planet.
From Debt to Opportunities
In 2021, we finalised our foundation’s
five-year programme From Debt to
Opportunities. In November, together
with our partners, we organised a closing
conference presenting the final results and
lessons learned from the programme’s
longitudinal research. Among other things,
the research found that 75% of the 4,835
people who participated in the 85 projects
within the programme increased their
financial self-reliance.
With the programme officially closed, we
have now discontinued the foundation
and integrated long-term partners into our
NN Future Matters programme.
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NN Group N.V.
2021 Annual Report
Contributing to the SDGs
In 2015, the UN launched the 2030 agenda for sustainable
development. At its heart are the 17 Sustainable Development Goals
(SDGs), which address the world’s biggest global challenges, including
ending poverty, improving health and education, reducing inequality
and combating climate change.
In 2017, we identified our impact areas for
the first time through dialogue with internal
and external stakeholders. Since then, we
have continued to sharpen our focus and
determine where as a company we can have
the biggest impact.
Here, we highlight the SDGs where we can
have the biggest impact as an employer,
insurer, investor and business partner.
Key impact areas
As a responsible insurer, investor and
employer, NN contributes in particular to
the achievement of SDG 3 (Good health
and well-being), SDG 8 (Decent work and
economic growth), SDG 12 (Sustainable
consumption and production) and SDG 13
(Climate action). We do this through both our
core business activities and our value chain.
We also have an impact on other SDGs.
Through our ambition to accelerate the
transition to a low-carbon economy, we
support SDG 7 (Affordable and clean
energy). We have an impact on SDG 1
(No poverty) with our community
investments, through which we strive to
build better and stronger communities.
We impact SDG 5 (Gender equality)
through our continued efforts to enhance
diversity and inclusion within NN.
There is a strong link between our
performance in meeting our key strategic
commitments and our impact on the
SDGs. This is because the SDGs are
a close fit with the themes of our own
strategic agenda: healthy and safe
living, a sustainable planet and an
inclusive economy.
SDG Calculator Netherlands Non-life
In 2021, the Netherlands Non-life Taskforce Sustainability worked
on the development of a strategy to integrate the SDGs more
into our business activities. During the year, the taskforce evolved
into a Sustainability Programme, led by a dedicated programme
manager and consisting of nine workstreams.
One of the workstream is the SDG Calculator for which we entered
into a pilot with reinsurer Swiss Re. The aim was to develop a
framework of indicators and metrics that enables Netherlands
Non-life to facilitate discussions on targets and pathways, and steer
the underwriting portfolio during the transition period.
Through the use of the SDG Calculator, we identified the impact
of our Non-life property and motor portfolio in the Netherlands
on various SDGs. By analysing premiums, coverages, and our
own operations, we obtained the first meaningful insights into the
correlation between our property and motor portfolio and the
selected SDGs which align most with our strategy.
The SDG Calculator includes various climate-related indicators
that correlate to different SDGs. For instance, the coverages
against specific natural catastrophes like windstorm, hail and river
flood have a positive correlation with SDG 1 (No poverty), SDG 11
(Sustainable cities and communities) and SDG 13 (Climate action).
Another example is the Pollution Footprint which correlates not
only with SDG 11 and SDG 13 but also SDG 7 (Affordable and clean
energy). In 2022, we will conduct additional research to select
indicators and metrics, and define appropriate targets that reflect
the ambition of Netherlands Non-life regarding the SDGs.
Creating value – Sustainable Development Goals
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NN Group N.V.
2021 Annual Report
Please refer to the table below for an overview of how we are striving to contribute to the SDGs and continuously improve as
an organisation.
Healthy and safe living
Ambitions and targets Performance 2021 Material topic
SDG 3 Good health
and well-being
Ensure healthy lives and
promote well-being for
all at all ages
Contribute to the physical and
mental health of our colleagues, our
customers and the broader society
Contri
bute 1% of our operating
result (three-year average) to
our communities, including cash
donations and hours of volunteering
by 2023
Contributed to keeping our
colleagues safe by enabling them
to work from home, and stay fit and
healthy (reflected in the employee
engagement score of 7.7)
Contributed EUR1.2 million in cash
donations and 3,034 volunteer hours
to charitable partners focused on
physical and mental well-being
People
management
Community
investment
Continue to support our customers
with solutions that help them
address societal challenges related
to healthy and safe living
Scaling of products and services with
societal added value that address
issues, such as loneliness, diabetes,
access to healthcare and burn-outs
Products
with societal
added value
Sustainable planet
Ambitions and targets Performance 2021 Material topic
SDG 7 Affordable and
clean energy
Ensure access to
affordable, reliable,
sustainable and modern
energy forall
Invest in clean energy infrastructure such as
wind parks and solar farms as part of our overall
objective to increase investments in climate
solutions
Amount of renewable infrastructure
investments: EUR566 million at year
end 2021
Climate
change
Responsible
investing
SDG 12 Sustainable
consumption and
production
Ensure sustainable
consumption and
productionpatterns
Integrate ESG factors into investment
process for 80% of our total AuM
by 2023
Integrated ESG factors into investment
process for 91% of our total AuM at
year-end 2021
Responsible
investing
Continue to increase our AuM in sustainable and
impact strategies
Total AuM of our sustainable and
impact strategies grew 29% to
EUR37.9 billion at year-end 2021
Responsible
investing
Support our customers with solutions that help
them address societal challenges related to
climate change
Introduction and scaling of products
and services with environmental
impact such as a greener housing
market, sustainable living and
promotion of climate-neutral transport
Products
with societal
added value
Creating value – Sustainable Development Goals continued
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2021 Annual Report
Sustainable planet continued
Ambitions and targets Performance 2021 Material topic
SDG 13 Climate action
Take urgent action to
combat climate change
andits impacts
Help accelerate the transition to a low-carbon
economy in order to limit the rise in
average global temperature to 1.5°C.
Signed the PAII Asset Owner
Commitment, affirming our
commitment to transition our
investment portfolio to net-zero GHG
emissions. Developed strategies
for sovereign bonds, corporate
investments, and real estate
Joined the Net-Zero Insurance Alliance
(NZIA) to develop a framework for
strategy and target-setting for the
insurance industry
Climate
change
Reduce GHG emissions of our own business
operations by 35% by2025, and 70% by 2030
(compared with 2019)
Contri
bute 1% of our operating result (three-year
average) to our communities, including cash
donations and hours of volunteering by 2023
CO
2
emissions per FTE decreased by
20% to 0.5 CO
2
emissions per FTE
Contributed EUR329,000 and 1,720
volunteer hours to charitable partners
focused on a sustainable planet
Climate
change
Community
investment
Inclusive economy
Ambitions and targets Performance 2021 Material topic
SDG 1 No poverty
Improving access to
sustainable livelihoods,
entrepreneurial
opportunities and
productive resources
Contribute 1% of our operating
result (three-year average) to
our communities, including cash
donations and hours of volunteering
by 2023
Contributed EUR4.3 million and 8,356
volunteer hours to charitable partners
focused on promoting financial
empowerment, creating economic
opportunities, and alleviating financial
distress
21,525 people reached through NN
Future Matters
39 scholarships provided to students
from eight countries
Community
investment
SDG 5 Gender equality
Achieve gender equality
and empower all
women and girls
40% women in senior management
positions by 2023
Together increase diversity,
inclusion and equality in our teams;
engage everyone, and encourage
them to be who they are, share their
voices and drive change
34% women in senior
managementpositions
Diversity and
inclusion
Diversity and
inclusion
SDG 8 Decent work
and economic growth
Promote sustained,
inclusive and
sustainable economic
growth, full and
productive employment
and decent work for all
Employee engagement ≥7.8
by 2023
Employer to 15,417 employees
worldwide
Employee engagement 7.7
People
management
Creating value – Sustainable Development Goals continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
53
NN Group N.V.
2021 Annual Report
Our values
Empower people to be
their best, and respect
each other and the
world we live in
Communicate
proactively and
honestly, while being
accessible and open
Act with integrity and
do business with the
future in mind
Our values are the foundation of our culture. They serve as a compass
for decision-making, guide us in all our interactions and are an integral
part of our strategic framework, with the aim of creating long-term
value for our stakeholders. Our values help us live up to our company’s
purpose. And last, but not least, they unite and inspire us.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding
value creation
54
NN Group N.V.
2021 Annual Report
Living our Values programme
The ‘Living our Values’ programme was
launched in 2014 to raise awareness, involve
our colleagues and oversee how our values
are implemented. The programme employs
various measuring tools to monitor how
effective we are in living our values, providing
management with insights into our values-
related behaviour and identifying areas for
improvement. This annual assessment of the
programme’s progress, the Living our Values
report, is discussed and approved by the
Management Board and Supervisory Board.
It was also discussed with the Central Works
Council, where a key item for discussion was
the participation of the various business
units in awareness initiatives around values.
A values-driven culture
To ensure all employees know and live the
values throughout their NN careers, they
are incorporated into our HR policies and
processes: they form the starting point
for hiring new employees, are embedded
in our i-LEAD profile and form part of our
Key Talent Management process. Our new
onboarding programme, launched in 2021
to accommodate employees working from
home, also explicitly covers the NN culture
and values.
Values week
In October 2021, we held our seventh
annual NN Values week across 11 countries.
Values week provides an opportunity to
engage colleagues in how we live our values.
The 2021 edition was entitled ‘Our values at
work’ and looked at practical ways we can
employ the values.
In the Netherlands, Values week was held
as a fully digital event for the second time.
Over 1,000 colleagues joined workshops,
dialogues and presentations on business-
and values-related topics. As the sessions
were offered online, International Insurance
colleagues were also able to attend, with
around 110 colleagues participating.
A survey found that 78% of participants in
the Netherlands felt Values week provided
a good opportunity to reflect on our
values (2020: 81%), 65% felt it stimulated
discussion (2020: 68%) and 97% would
encourage colleagues to join the next
edition (2020: 99%). A digitalised Values
week enables colleagues from all buiness
untits to participate in sessions organised in
the Netherlands. Values week will therefore
continue at least partly in a digital format.
Leading by example
Our Management Board and senior
leaders are important role models in living
our values. Values week opened with
six members of the Management Board
participating in a live discussion viewed by
over 300 colleagues. They discussed the
values, open dialogue, clear communication
and taking responsibility for mistakes.
Management Board members also hosted
small, informal sessions with colleagues in
order to share personal reflections and their
experiences of including values in their
day-to-day work.
Our employee engagement survey asks
colleagues how their direct managers
perform on living our values. Even with
people largely working from home, the
response to the statement ‘My manager
consistently acts as a role model when it
comes to living our NN values’ scored 8.2
(2020: 8.1). Scores are consistent with the
generally high appreciation employees show
for management in the survey, and in line
with the benchmark.
Engaging with senior leaders
We launched our strategy, which is aimed
at creating value for all stakeholders, in
June 2020. This was during the Covid-19
pandemic, when we were largely working
from home. So to engage senior leaders in
the strategy and create an open dialogue
on its implementation, we developed virtual
‘Let’s connect’ initiatives. In 2021, these
included a virtual International Leadership
Meeting for some 250 leaders, and a ‘Let’s
connect tour’ where over the course of 19
virtual sessions our CEO connected with
over 500 senior leaders from across all
units to explain and personally discuss
the strategy.
Segment 2021 2020 2019
Care
‘In our team we genuinely care about our
customers and treat them with respect’
8.2 8.4 8.2
Clear
‘In our team we are easy to approach and
communicate proactively and honestly’
8.1 8.3 8.0
Commit
‘In our team we take responsibility for our
actions and deliver on our promises’
8.1 8.3 8.1
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Our values
55
NN Group N.V.
2021 Annual Report
Monitoring progress
We monitor the effectiveness of the
Living our Values programme in our
annual employee engagement survey.
The Management Board and the Living
our Values Project Group use the
outcomes to evaluate where we need to
focus attention. The 2021 results saw
a slight (-0.2) though not significant
decrease on 2020 engagement levels at
overall group level. We do not, however,
see this as cause for concern, as it fits
with a worldwide engagement trend (-0.2),
whereby an increase in engagement
following the early days of Covid-19 was
followed by a gradual normalisation to pre-
Covid scores by the end of 2021.
Consumer perceptions
We measure the perception of our values,
care, clear, commit, among our customers
and the general public through the Global
Brand Health Monitor (GBHM).
Purpose Council
Our purpose: We help people care for what matters most to them’,
expresses the ‘why’ behind our actions and reflects the kind of
company we want to be: one that delivers long-term value for
our stakeholders.
The Purpose Council oversees how we are upholding our purpose
and progressing on our non-financial targets. It was set up in
2019 to advise and support the Management Board in developing
a new purpose statement. Chaired by the Chief Organisation
& Corporate Relations, and sponsored by the Group CEO, the
Council consists of several Management Board members, heads
of relevant staff departments and business representatives.
The mandate of the Purpose Council is to support the
Management Board in steering, measuring and reporting on
non-financial issues. It performs an advisory, consultative and
preparatory role with regard to purpose-related areas such as
company culture, including the values, brand and reputation
management, employee engagement, diversity and inclusion,
sustainability, environmental, social and governance matters, and
community investment. Final decisions related to NN’s purpose,
values, and non-financial KPIs and targets are made by the
Management Board.
The Purpose Council met four times in 2021 to discuss progress
on non-financial KPIs linked to our strategic commitments.
These KPIs are reported in a strategy dashboard that is updated
every quarter.
Two Permanent Education sessions were organised, focusing
on NN’s climate change initiatives and community investment
activities. Other topics discussed included NN’s commitment
to the Sustainable Development Goals (SDGs) and NN’s
Sustainable Finance Regulations programme, as well as external
developments and changing stakeholder expectations and
dilemmas. The Purpose Council also reviewed and commented on
the 2021 Living our Values report.
For customers, the 2021 year-end results
show that the values remain strongly
embedded in the NN brand, with at least
50% of customers recognising each of the
values in most markets. In most markets,
50% or more of the NN customers (totally)
agree with the fit of care, clear, commit with
the NN brand. However, in 2021, Belgium,
Japan, and the Netherlands scored below
50%. Belgium showed a significant increase
for care and clear. Despite scoring below
50%, the Netherlands shows a significant
increase on all values. The scores have not
significantly changed for Japan.
For the general public, most markets
show stable scores in comparison with
2020. The Netherlands, Turkey, and Czech
Republic show a significant increase on all
values. Belgium, Japan, and Spain show
significant decreases for care. We also see a
significant decrease for commit in Belgium,
Japan and Poland.
In 2022 we will continue to work together
with the local business units by providing
them more guidance on how to translate the
brand values in their communication.
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Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Our values continued
56
NN Group N.V.
2021 Annual Report
NN Code of Conduct
Based on the NN statement of Living our
Values, the NN Code of Conduct offers clear
guidance in a single, easy-to-understand
document on how NN employees should
behave: how we interact with colleagues and
customers; how we deal with information
and (personal) data; how we deal with
conflicts of interest, fraud, corruption and
financial economic crime; how we use
equipment and the internet; and how we
report and deal with breaches. Every year
we review and update the content of the
Code of Conduct and Manager Annex, and
the underlying policies and standards.
Employees must formally acknowledge
annually that they understand the content
of the NN Code of Conduct, and can and will
apply the underlying policies and standards.
Formal acknowledgement of the NN Code
of Conduct has been mandatory for all
business units for several years. The Code of
Conduct has a supplement for management,
that contain topics only relevant for
managers: the Manager Annex.
In 2021, we achieved an acknowledgement
score of 100% for internal NN staff and
managers (excluding staff on long-term
or sick leave). External employees and/
or contingent workers receive the Code of
Conduct as part of their contract.
Awareness and e-learnings
In 2019, we launched the online learning
platform ‘Conduct Matters’ to raise
awareness on the NN Code of Conduct.
It is accessible for all NN employees in local
languages. We updated the online learning
platform with relevant data in 2020 and
2021, and are reshaping the format to match
our hybrid way of working.
Since 2020, we have rolled out several new
interactive e-learning courses for employees
groupwide. Next to all the local training
initiatives these groupwide e-learning
courses aim to raise risk awareness around
Confidential/Price-sensitive Information
(Confidential Matters), Market Abuse/
Insider trading (Trading Matters – all NN
insiders), Bribery & Corruption/Conflicts of
Interest (Conflicting Matters), Silent Voice
Activation/Whistleblowing Procedure (Your
Voice Matters). In 2021, the offering was
expanded with a e-learning on handling
Data and Confidential information with care
in a hybrid-working context (Data Matters).
Digital compliance dashboard
In 2021, we continued to improve the digital
compliance dashboard, used by the local
compliance departments in all NN business
units, as part of progress towards a more
data-driven compliance function within NN.
The dashboard uses various data sources
to create a detailed overview of information
available in order to facilitate effective and
efficient compliance monitoring on various
risks in the compliance domain. Future focus
will be in expanding the topics on the
dashboard. Data from the compliance
dashboard will be included in the strategy
dashboard developed for the Management
Board. This dashboard contains both
strategic and risk-related data metrics.
Risk Culture Check-in, ECF
Maturity Reflection
In January 2019, Group Risk and Group
Compliance launched the Risk Culture
Check-in, whereby all business units perform
a self-assessment of the risk culture within
their unit (including the independent view of
local control functions) and the cooperation
of head office control functions with the
business units.
The second Risk Culture Check-in was
performed in 2020. We used 2021 to
integrate, for efficiency and optimisation
purposes, the Risk Culture Check-in
model with the model for the Maturity
Assessment of local control functions.
The new integrated model is called the ECF
Maturity Reflection.
The ECF Maturity Reflection forms the basis
for constructive dialogue with NN senior
management on how we manage the risk
culture within the company, and where we
can improve. The resulting 360-degree
loop delivers content to underpin the
‘Employee Conduct & Business Culture’
statement within our risk management
framework. The process is led by Group Risk
in close cooperation with Group Legal and
Group Compliance.
As we accelerate our digital transformation,
it is more important than ever that we
safeguard the privacy of our customers
and treat personal data with care
Janet Stuijt
General Counsel
Our Code of Conduct and other policies
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – NN Code of Conduct and other policies
57
NN Group N.V.
2021 Annual Report
Product insights
In December 2020, we launched ‘Product
Talks’, an online digital learning platform
designed to enhance knowledge and
skills needed to develop and review NN
products and services in line with our
Product Policy. Since then, we expanded the
number of micro-learnings on the platform,
and intensified the cooperation between
colleagues from Group Legal, Group
Compliance and Group Risk involved in
product development or review.
In 2021, NN executed an assessment of the
open book unit-linked (UL) products in our
international businesses. Most business units
implemented active monitoring of the UL
funds. Some business units actively changed
the set-up of the UL funds and increased
the level of transparency to improve the
return for the customer. Based on the PRIIPS
(Packaged Retail and Insurance-based
Investment Products) KID calculations, we
actively monitored the balance between the
gross product return and the cost levels.
We also shared best practices, and the
business units are encouraged to evaluate
the adoption and implementation of these
best practices in the current or next product
planning cycle.
In addition to product and service
assessments and improvements, in close
cooperation with the business units we
executed a behavioural insight scan on
the Product Approval and Review Process
(PARP) designed to enhance speed and
efficiency. Several improvements were
discussed, including a new workflow
management tool to strengthen the
efficiency of the PARP. We expect to
implement improvements in the PARP in the
first half of 2022.
Reporting misconduct
By living up to our values, we create a safe
working environment for our colleagues
and protect our and protect the reputation
and integrity of our company. Not living up
to our values may also expose NN Group
and its employees to possible regulatory
and/or criminal liability. Internal reporting of
criminal or unethical conduct or breaches of
(local and EU) law by or within NN is of great
importance for a safe working environment,
where everyone feels welcome, valued and
respected. Whenever breaches of the Code
of Conduct or Union (EU) legislation/law
occur, NN carefully reviews and assesses
whether a further investigation or other
action is needed.
The NN Group Whistleblower Policy was
updated in December 2021 to comply with
the new EU Whistleblower Directive and
related local legislation. It enables every
employee and certain external parties to
report, if they wish anonymously, a concern
and/or breach outside regular reporting
channels. NN Group guarantees various
rights, including protection from retaliation,
for any employee or external party who
reports a concern/breach in good faith in a
work-related context, provides information,
or otherwise assists in an investigation.
An outline of the Whistleblower Policy can
be found in the NN Code of Conduct.
All NN managers are made aware of
the updated Whistleblower Policy and
processes. In the first quarter of 2022, all NN
employees will be informed of the changes
via a mandatory e-learning. In addition,
the Whistleblower Reporting Officers, who
are appointed in all NNs business units,
participated in a two-day masterclass in
2021 on the new rules and processes.
Cases involving
disciplinary
measures 2021 2020 2019
Fraud-related 0 0 1
Unethical
behaviour 2 6 5
Conflict of
interest 0 0 0
Total 2 6 6
Whistleblower
cases 2021 2020 2019
Total 1 2 4
In the one whistleblower case listed above,
Corporate Security & investigations carried
out an investigation in 2021. Concerns are
recorded and the number of cases is
reported by the Chief Compliance Officer
periodically to the Management Board and
Supervisory Board.
Other incidents and concerns
Up to December 2021, Corporate Security
& Investigations was involved in 41 cases in
total. (2020: 66). In two cases, disciplinary
measures (warning, reprimand, termination
of employment or instant dismissal) were
taken. Employees are informed in writing of
any disciplinary measures.
Other policies
NN has policies, processes, systems and
practices in place to ensure we always
do business in line with our values and
regulatory requirements. That means,
for example, developing products and
services designed with the best interests
of our customers at heart, and managing
our processes and the personal data of
customers in line with best practice in terms
of transparency, safety and security. In doing
so, we demand standards from all our
business units and employees that meet and
often exceed regulatory requirements.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Our Code of Conduct and other policies continued
58
NN Group N.V.
2021 Annual Report
PARP and golden rules
The demand for transparent, simple
products from the financial services industry
continues to grow. Customers expect value
for money, transparency, and products and
services that evolve with developments.
Any new or modified product or service must
first undergo a careful PARP to ensure it is
transparent and meets customers’ needs.
An integral part of PARP are our Customer
Golden Rules:
• Offer fair value to customers
• Explain the risks, returns and costs of our
products and services
• Regularly assess products, services and
distribution practices
• Only work with professional and
licensed distributors
Data privacy
As digitalisation continues rapidly, we are
conscious that to safeguard the privacy of
our customers it is more important than ever
to secure their personal data and handle it
responsibly. We do this by complying with
all legislative data protection requirements,
of which the EU General Data Protection
Regulation (GDPR) is most important.
Data is vital to serve today’s customer
effectively. Using big data to analyse
customer propositions helps us strengthen
our interactions with customers, forge more
intuitive partnerships and create superior
tailor-made solutions.
Our data and artificial intelligence (AI)
analyses are focused on product/market
optimalisation, process efficiency, and fraud
and claim analytics. For all AI use cases, it
is vital that the application is trustworthy by
design. To help us ensure this, we developed
our own AI ethics framework (the ‘NN AI
Guidelines) in 2020, in line with our values.
These guidelines facilitate the development
and use of trustworthy AI, and set even
stricter requirements than legislation
prescribes. The guidelines adhere to the
seven principles of trustworthy AI, as set
out in the Ethics Guidelines for Trustworthy
AI developed by the High-Level Expert
Group on Artificial Intelligence (set up by the
European Commission).
Our AI Guidelines also enable us to deploy
AI in line with the Ethical Framework of the
Dutch Association of Insurers (Verbond
van Verzekeraars).
In addition, we have been closely monitoring
and anticipating the development of
a European AI Regulation, which was
published in draft form by the European
Commission in April 2021.
We are very aware that we need to strike
an appropriate balance between individual
choices, privacy and social responsibility.
So, in addition to our focus on the
(personal) data we manage and protect,
we also provide cybersecurity services, like
Cyberwacht, to consumers who have been
hacked. Next to that we help companies
to get their basic cybersecurity in order
with services like Perfect Day, as the
consequences of inadequate cybersecurity
can be far-reaching for both individuals
and companies.
Financial economic crime
NN guards against money laundering,
funding of terrorism, tax evasion and other
forms of financial economic crime (FEC), and
does not tolerate any deviation from relevant
FEC laws or regulations. Primarily because
FEC is illegal and unethical, but also because
it can harm confidence in NN as a financial
services provider.
Digitalisation and increasing dependency
on digital contacts with customers
and business partners is posing posing
challenges to Know-Your-Customer (KYC)
requirements and similar business partner
related processes. NN is taking pro-active
measures to ensure adherence to these
requirements.In the Netherlands, our Best in
Data programme, introduced in 2020, has
delivered updated FEC processes, leading to
improvements in monitoring, transparency
and FEC controls. In addition, employee
awareness sessions have increased FEC
knowledge and the data quality of the
business portfolio has improved.
In 2022, for reasons referred above and
to keep pace with increasing regulatory
requirements, NN will continue to improve
operations with regards to the management
of financial economic crime related risks.
Unit-linked products in theNetherlands
In the Netherlands, unit-linked products have
received negative public attention since the
end of 2006. We have taken this criticism to
heart, as our aim is to support our customers
as best we can.
The Dutch insurance subsidiaries of
NN Group reached out to all individual
customers who purchased unit-linked
products in the past (‘activeren’), and
continue periodically to reach out to groups
of selected customers to encourage them
to carefully assess their unit-linked products
in order to enable them to address their
personal situation and offer them the
option to switch to another product or
make changes to their policy free of charge.
Customers are also entitled to free advice.
As of 31 December 2021, the portfolios of
Dutch insurance subsidiaries of
NN Group comprised less than 340,000
active unit-linked policies. In a limited
number of cases (less than 1,250), Dutch
insurance subsidiaries of NN Group have
settled disputes with individual customers.
These are tailormade solutions. A limited
number of individual customers and several
consumer protection organisations have
initiated legal proceedings against Dutch
insurance subsidiaries of NN Group.
Read more on Note 45.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Our Code of Conduct and other policies continued
59
NN Group N.V.
2021 Annual Report
Stakeholder engagement and
international commitments
Stakeholder engagement
Stakeholder engagement is a vital part of
our efforts to earn their trust and support,
and of our duty as a responsible and
engaged company. NN Group identifies
stakeholders based on their potential to
influence or be affected by our business.
Important stakeholder groups include
customers, employees, investors, business
partners and society, including regulators
and societal organisations. We seek
feedback from these groups on key topics
that matter to them. This helps us align
our business interests with the needs and
expectations of relevant stakeholder groups,
and is a source of information for strategy
development and decision-making.
Our dialogue with stakeholders takes many
forms: day-to-day interaction and regular
feedback sessions with customers on
our products and services; works council
meetings and continued dialogue with our
employees; roadshows for analysts and
investors; regular contact with regulatory
bodies, government agencies and other
organisations (including non-governmental
organisations (NGOs), trade unions and
industry associations); and roundtables with
policymakers, academics and peers.
National and
international commitments
As a company based in the Netherlands,
we adhere to Dutch law and the Dutch
Corporate Governance Code. We observe
the laws and regulations of all markets
in which we operate. We also adhere
to relevant international standards and
guidelines, including the UN Global
Compact and the OECD Guidelines for
Multinational Enterprises.
To underline our ambitions, NN Group and/
or our respective businesses have endorsed
various national and international initiatives,
and we are a member of various relevant
international organisations. For an overview,
please visit our website.
Commitment of the financial sector
to the Dutch Climate Agreement
In July 2019, NN signed the commitment
of the financial sector to the Dutch
Climate Agreement and thereby commits
to contribute to the financing of energy
transition, to disclose the carbon footprint
of our relevant investments and publish an
action plan in 2022.
Since 2017, NN has disclosed the carbon
footprint of our proprietary assets.
Our 2021 measurement covers 80% of our
total asset portfolio, which comprises the
general account assets of the insurance
activities, and the assets of NN Bank and
NN Group. More detail can be found in
‘Carbon footprint proprietary assets’ on
pages 131-134. We continuously enhance
our approach to address climate change
into our strategy, policies and activities.
We encourage the energy transition, for
example through our active ownership
activities, and make sustainable and
impact investments.
In addition to our ambition to transition our
proprietary investment portfolio to net-zero
greenhouse gas emissions by 2050, we
announced intermediate targets for our
corporate investment portfolio.
Furthermore, as a mortgage provider we
want to contribute to the reduction of
greenhouse gas emission in the houses we
finance. NN Bank offers financing options to
make homes more sustainable.
Through prevention and advice tools such
as Powerly, we encourage and support
customers to improve the energy efficiency
of homes. Read more in the sections on
Responsible investing on pages 44-47, Our
response to the Task Force on Climate-
related Financial Disclosures on pages 66-
76, and NN IP’s Responsible Investing Report
2021 on our website.
International Corporate Social
Responsibility (ICSR) sector covenant
The ICSR covenant for the Dutch insurance
sector aims to ensure that insurers identify
and mitigate any potential negative
environmental, social and governance (ESG)
impacts through their investments.
The covenant’s signatories (all Dutch
insurers, the government and six NGOs)
pool their knowledge and experience,
identify ESG risks, and initiate steps to
mitigate those risks. Insurers are expected
to have due diligence processes in place
to address ESG risks and, where necessary,
to develop, adjust and improve their policies.
Publication of policies and restricted
lists are required, as are disclosures on
voting and engagement activities with
investee companies.
During the year under review, we
participated in many of the activities
organised by the parties of the covenant.
Among others, we co-signed an
engagement letter to three companies
that process meat and dairy. The goal is to
contribute to stopping deforestation in Brazil
as a result of soy cultivation. NN Investment
Partners (NN IP) acts as one of the three
lead investors performing the dialogues with
the investees on behalf of all Dutch insurers
that signed the letter. Read more in NN IP’s
Responsible Investing Report 2021.
NN Group engages in ongoing dialogue with stakeholders on a variety of
topics, ranging from products, services and business performance to our role
in society. By endorsing national and international initiatives, we underline our
ambitions and join forces with other organisations to increase leverage.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Stakeholder engagement
60
NN Group N.V.
2021 Annual Report
For an overview of fixed-income bonds held
on the NN Group balance sheet by type of
issuer, refer to Note 52.
Net-Zero Insurance Alliance
In 2021, NN joined the Net-Zero Insurance
Alliance (NZIA). The NZIA brings together
insurers and reinsurers to play their part
in accelerating the transition to net-zero
emissions economies. Together with all NZIA
members, NN is committing to transition
its underwriting portfolio to net-zero
greenhouse gas (GHG) emissions by 2050.
The first steps will focus on developing
metrics and setting targets.
Our approach to human rights
Respect for human rights is an integral
part of our values, as confirmed in the
NN statement of Living Our Values.
The principles contained in the UN Guiding
Principles for Business and Human Rights
guide us in implementing human rights
in our business activities and interaction
with stakeholders.
Our NN Group Human Rights Statement
serves as an umbrella document and
relates to various policies, such as our
Human Capital policy, Responsible Investing
Framework policy, and a Guidance paper on
Human Rights for Investors.
Following a review of our human
rights policies and processes across
our organisation in 2020, we further
strengthened our approach on human rights
due diligence in our procurement activities.
In 2021, we developed a Sustainable
Procurement Statement and engaged
with suppliers to register in a qualification
platform providing information on related
policies and processes. In addition, key
suppliers are asked to commit to our new
Supplier Code of Conduct outlining our
expectations of policies and practices on
human rights. For more information, refer to
page 47.
Stakeholders, engagement, topics and outcomes
Stakeholder group Engagement Topics discussed Outcome
Customers (retail) Customer interviews, panels
and surveys, both online
and offline
Customer experience related
to any change in products,
services and processes
Increase customer
engagement and loyalty
Clients (institutional) Client surveys, (digital) events,
roundtables
Client satisfaction, sustainable
finance regulation, responsible
investing
Informed and engaged clients
Financial advisors,
brokers, agents
Advisor survey, roundtables,
webinars, (digital) visits
Products and services,
performance, strategy,
partnering, integration and
conversion acquired business
Stimulate good cooperation,
increase financial advisor and
broker satisfaction, leading to
customer satisfaction
Shareholders, analysts,
investors
Annual shareholders meeting,
analyst calls, investor meetings
Strategy, financial and
operational developments,
capital position, approach
to ESG
Inform and engage
shareholders, analysts and
investors
Employees Leadership and other (digital)
conferences, surveys, works
councils, unions
Values, Code of Conduct,
Covid-19 measures, integration
process, engagement
Inform and engage employees,
values-driven culture
Investee companies Voting at shareholder meetings,
dialogue with company
management, engagement
Financial and operational
developments, corporate
governance, natural resources
and climate change, decent
work, (non-)financial
disclosures
Create value through
consistent and transparent
voting behaviour, improved
disclosures, improved
decision-making including
on ESG issues
Regulators, government
bodies
Meetings, reporting,
information exchange
Economic and financial
market developments, risk
assessments, (pension)
regulation, ICSR sector
covenant, sustainable finance
Ensure compliance with,
and discussion of impact
of regulation
Non-governmental
organisations
Correspondence, meetings,
reports, benchmarks
Climate change, natural
resources and human rights,
deforestation, biodiversity,
benchmarking methods
Exchange vision and insights,
engagement with investee
companies, participation in
working group on biodiversity
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Stakeholder engagement continued
Customers and
distribution
Strategic
risks
Financial
risks
Non-financial
risks
Products and
services
People and
organisation
Financial
strength
Society
Key
risks
Regulatory and (geo)political environment
ALM and investment risk
Sustainable cost levels
Sustainable
cost levels
Corporate social
responsibility
Delivering on strategic commitments
Change agility
Longevity risk
Data capabilities
Product suitability
IT and change risk
Cyber risk
61
NN Group N.V.
2021 Annual Report
We regularly review the key risks to our
strategy using a variety of inputs, including:
• external trends and material topics, as
identified by our stakeholders;
• macroeconomic reports and publications
from analysts, the CRO Forum (a group
of professional risk managers from
the insurance industry) and the World
Economic Forum;
• scenario analyses and stress-testing by
our investment and risk teams;
• risk self-assessments by the management
of NN Group and its businesses.
Key risks are categorised into strategic,
financial and non-financial risks, based on
their similarities. For each category, we
express how much risk we are willing to take
(= risk appetite) and identify how to manage
them (= mitigating measures). The following
table shows which key risks can impact each
of our strategic commitments:
Managing our risks
Risks represent uncertainties that could impact NN Group’s ability
to achieve its strategic objectives and commitments. Strong risk
management helps us monitor developments in our operating
environment and act where necessary.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Managing our risks
62
NN Group N.V.
2021 Annual Report
The next table provides more information on our key risks (listed in no particular order) and how we manage them. For a more detailed
explanation of NN’s approach to risk management, please see Note 52 Risk management in our annual accounts.
Strategic risks
Risk appetite: We manage our businesses on a risk-return basis, so we can meet strategic objectives while taking into account the
interests of our stakeholders.
Key risk How we manage this risk
(Geo)political
and regulatory
environment: Risk
of disintegration of
existing economic and
political structures,
adverse regulatory
change or increased
supervisory scrutiny
which may have a
profound impact on
our business model
or performance (e.g.
Solvency II regulations,
internal model, crisis
measures, sustainable
finance and reporting,
anti-money laundering,
etc).
Geopolitical tensions may have an impact on macroeconomic developments, regulatory and legislative
uncertainty, volatility in financial markets, the free flow of capital or supply chains. For example tensions
between the US and China, Russia-Ukraine conflict, or solidarity between EU and Eurozone members
coming under pressure.
Rising instability caused by Russia’s invasion of Ukraine in February 2022 is expected to have a significant
impact on our operating environment. At the time of writing, Russian troops continued to invade Ukraine
and hundreds of thousands of Ukrainians had fled their homes. The war has fuelled international tensions,
resulting in market volatility, increase in energy prices and impacting capital flows and global supply chains.
NN does not have business activities in Ukraine or Russia, and our direct financial exposure to these
countries is limited. We will continue to closely monitor the developments. A growing number of people
seek refuge in countries where we operate, and together with our colleagues we will support charitable
organisations helping Ukrainian refugees.
In the short term, NN Group should be able to deal with any possible impact of these potential adverse
developments, thanks to our strong solvency and liquidity position and current asset exposures. Our asset
exposures can be characterised as having low exposure to other financial companies, relatively high asset
duration, a low duration gap and a high allocation to highly rated European countries with relatively strong
economies and sovereign currencies that are considered a safe haven in times of crisis. NN manages its
asset exposures using a system of concentration limits on sovereign and country exposures, which are
subject to regular review and monitoring.
Regulatory developments that could significantly impact our businesses include implementation of IFRS 9
and 17, new pension regulations in the Netherlands and new regulations around sustainability. Furthermore,
our capital position might be impacted by further changes to the Solvency II framework (e.g. Solvency II
2020 review) or supervisory scrutiny in areas like substantiation of deferred taxes or diversification within our
internal capital model.
We follow the development of regulations closely and regularly assess their potential impact on our business.
NN has a proactive relationship with regulators and supervisors, so that our view will be heard during the
process of developing legislation and our concerns can be raised in the relevant forums.
Delivering on strategic
commitments: Risk
of not delivering on
commitments towards
our stakeholders,
due to undisciplined
strategic execution,
overambitious targets
or a high number of
strategic initiatives
going on at the same
time
In June 2020, as part of its strategic framework, NN made a public commitment to achieving an ambitious
set of financial and non-financial objectives that aim to create long-term value for all stakeholders and
that go beyond just financial targets. We have also said that, when it comes to portfolio management,
we will regularly evaluate and optimise all our businesses against a set of objective criteria. Meeting our
strategic commitments requires us to run an ambitious set of activities: (1) disciplined strategic execution, 2)
programmes that will help us manage, simplify and transform our existing businesses, and (3) carrying out
targeted acquisitions, mergers and divestments. With so many changes underway or in the pipeline, NNruns
the risk of not being able to deliver on all these commitments.
We have therefore set up a Strategy Dashboard where we can monitor progress against our strategic
commitments, and see where we are on-track and where additional attention may be needed. The
Management Board regularly reviews our progress on implementing the strategy together with our largest
business units. We apply strict programme and change management principles for all strategic-change
programmes and integration-separation programmes (e.g.NN IP divestment, the acquisition of MetLife
Greece and Poland and Heinenoord). We apply thorough due diligence procedures before entering into
transactions, with risk, legal and compliance teams providing independent opinions on potential risks both
before, during and after the transaction.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
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Safeguarding value creation – Managing our risks continued
63
NN Group N.V.
2021 Annual Report
Key development How we manage risks
Change agility:
Risk of NN Group
notbeing able to timely
identify threats and
opportunities in the
business environment
and to successfully
andsufficiently
implement necessary
change
Economic, technological, ecological and demographic developments are impacting the strategic context in
which we operate at a faster pace than ever before. Change agility refers to the ability to effectively address
new threats and opportunities as they present themselves, rapidly learn and implement new insights or
practices and, where necessary, completely change direction quickly and efficiently.
The Strategic Transformation Office (STO) is working to enhance NN’s change agility by creating,
developing, validating and encouraging participation on platforms in the areas of Carefree Retirement,
Self-care, B2B Well-being and Business Continuity. Capability-building teams are in place to help maximise
business impact through partnerships, resources and education around innovation.
The NN Innovation Method, launched in 2019, is helping us become a more flexible and agile organisation,
in both our mindset and how we work. We also composed a new leadership profile, i-LEAD, based on which
managers are trained to coach and manage their people. Formore information, see Data capabilities.
Sustainable cost levels:
Risk of expense levels
remaining at a too
high level compared to
competitors
To remain competitive it is important to ensure our revenues and cost base are well aligned. For Netherlands
Life, improving IT systems and efficiency is important to keep cost levels in line with the run-off of the closed
books, and to grow profitable defined contribution (DC) business. Cost challenges also exist for our Dutch
Non-life business, where we have set a combined ratio target range of 94-96%.
We target future cost reductions through projects related to digitalisation, product rationalisation, creating
a simpler organisation and IT simplification. We also employ an Agile Way of Working in those parts of the
organisation where it is beneficial.
Data capabilities: Risk
of not being able to
attract, develop and/or
apply best-in-class big
data capabilities for
pricing, underwriting
and distribution
Artificial intelligence (AI), greater access to Big Data and the Internet of Things are just a few examples
of technologies that are enabling companies to act faster, and deliver products and services that meet
customer needs more precisely. These developments require different types of skills from employees,
such as using data mining and new ways of working. We are striving to find the right people in tight labour
markets, while also encouraging current employees to develop new skills. We invest in personal and
professional development throughout our employees’ careers, offer people unique learning opportunities
and advocate job rotation. HR is introducing a global Strategic Workforce Planning framework to identify
future capability requirements and take the necessary steps to meet them.
In addition to finding people, we also need to further build infrastructure that supports new techniques, such
as a data lake, strict data governance and online engagement platforms. The main challenge is to simplify
our IT system landscape, while at the same time testing and implementing new technology for developing
new ecosystems and customer engagement platforms. A large training programme on Data & AI has been
rolled out in both the Netherlands and our international businesses.
Corporate social
responsibility:
Risk of NN Group not
adequately balancing
differing stakeholder
interests, deviating
from societal norms
or failing to be
transparent in such
areas as responsible
investments, climate
change, equality,
diversity, taxes and
renumeration
Sustainable value creation is at the core of our strategy. Companies in general, and financial institutions
in particular, are under increasing scrutiny from consumers, non-governmental organisations, regulators,
professional investors and other stakeholders on how they do business. Norms and values in society
are evolving fast and not always codified in formal legislation. By responding adequately to increased
stakeholder expectations, we will be able to improve our business, create long-term value, and strengthen
our brand and reputation among customers, employees, investors and society as a whole.
For this reason, we integrate ESG targets and criteria into our decision-making. We do this by formulating
clear policies then monitoring our adherence. For example, we have an ambition to move to a net-zero
greenhouse gas emissions investment portfolio by 2050 and have joined the newly established Net-Zero
Insurance Alliance. Other examples include our Responsible Investment Framework Policy, Remuneration
Framework, and Tax Risk Management Policy. We use our Strategy dashboard to monitor and report on our
progress on non-financial KPIs.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
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information
Safeguarding value creation – Managing our risks continued
64
NN Group N.V.
2021 Annual Report
Financial risks
Risk appetite: We want to avoid having to raise equity capital after a 1-in-20-year event or being a forced seller of assets when markets
are distressed.
Key risk How we manage risks
ALM and
investment risk:
Risk of reduced
available capital or
lower investment
returns, due to
financial market
volatility, a low interest
rate environment or
ESG factors (such as
climate change)
Market risk is taken in pursuit of returns for the benefit of customers and shareholders. We accept financial
risks on our balance sheet that we understand and can effectively manage; but we limit concentration,
interest rate, currency and inflation risk.
As part of our overall strategy, NN continues to gradually shift to higher-yielding assets within our risk
appetite, in order to generate attractive investment returns. Market risks are managed through a well-
diversified portfolio under a number of relevant policies and standards, within acceptable risk limits and
tolerances, and with the possibility to reduce downside risk through hedging programmes. We reduce
interest rate risk by matching asset and liability cash flows where markets are deep and liquid. We have
set risk limits and tolerances for our remaining exposure to interest rate risk. Regarding our strategic asset
allocation, we aim to optimise capital generation within acceptable risk levels and other restrictions.
The Covid-19 pandemic, as well as monetary policy to mitigate its effects, has impact on both supply and
demand in the general economy. Worldwide, supply chain disruptions and labour and energy shortages
partially restrict economic growth. Euro area annual inflation has risen to approximately 5% by end of 2021.
Potentially, additional inflation might be driven by further rising of energy prices and impact of the Russian/
Ukraine crisis. The impact of inflationary developments on our balance sheet and solvency position depend
on inflation itself, but also on how other market factors move, a.o. driven by the response by central banks
to rising inflation, or market expectations by investors. The risk of structural inflation for NN’s business plans
and financial position is both direct (operating expenses and claims) or indirect (effect on interest rates,
equities, real estate, sales). Netherlands Life fully hedges its inflation linked liabilities on an economic basis.
Managing indirect impact of inflation (interest rate movements and financial market volatility) is managed as
described earlier in this paragraph.
Sustained low interest rate levels impact our balance sheet, new sales (products offering options/
guarantees based on market returns), closed/defined benefit (DB) books, as well as our ability to offer
attractive renewal rates. We are improving our investment return by partly replacing low-yielding sovereign
bonds by illiquid assets including Dutch residential mortgages, loans and real estate. At Netherlands Life, we
are gradually converting the separate account DB pensions business into capital-efficient DC solutions or
DB solutions, with transparent embedded profit-sharing.
ESG factors, including climate change, cannot yet be fully assessed or quantified but could in the future
affect the viability of NN Group’s strategy. Climate change can affect the asset side of our balance sheet
(through our investment processes), the liability side (through financial risks related to NN Group’s products)
and/or our operations (business continuity). Impact may depend on such factors as the type of business,
asset portfolio or geography involved. NN is currently working on climate scenario analyses to better
understand the impact of both physical and transitional risks, over both the medium and long term. We are
also offering and developing a range of products that help customers adapt to and mitigate climate change,
as well as further integrating ESG aspects into our proprietary investment strategy.
Longevity risk:
Risk of higher
technical provisions or
required capital if life
expectancy increases
faster than expected
NN Group’s pension and guarantee product portfolios are exposed to longevity risk, especially in the
Netherlands. We expect this exposure to continue to increase for a relatively short period and then steadily
decrease over time. We expect the impact of the Covid-19 pandemic will be small. In the short term, the risk
may even be lower, due to an increased number of fatalities; but we don’t yet fully know what the longer-term
impact might be, and it will be only partly offset by mortality risk.
NN continues to explore opportunities to manage longevity risk efficiently from a risk-return perspective
and completed an additional longevity reinsurance transaction in December 2021. We also manage our
exposure by continuing to move from DB to DC products, taking advantage of appropriate reinsurance
opportunities when entering the pension funds buy-out market, and stimulating customers to move to
‘longevity-light’ products.
NN is joining forces with the Amsterdam School of Economics and other organisations to jointly study the
financial and social consequences of changing life expectancy.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
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Safeguarding value creation – Managing our risks continued
65
NN Group N.V.
2021 Annual Report
Non-financial risks
Risk appetite: We conduct our business with the NN Group values at heart and treat our customers fairly. We aim to avoid human or
process errors in our operations and to limit the impact of any errors.
Key risk How we manage risks
Product suitability:
Risk that products do
not appropriately cover
customers’ interests
over the full product
lifetime
Product suitability is essential to our relationship with customers and creating longer-term value for our
stakeholders. NN’s Product Policy covers product risk-related requirements, including specific requirements on
product suitability.
In the Netherlands, there are ongoing legal and complaints proceedings pending where customers are making
claims for compensation related to unit-linked products that were sold in the past. There is no assurance that further
proceedings claiming compensation for damages will not be brought before courts and/or Kifid. When these legal
claims and proceedings will conclude is uncertain. We aim to resolve individual customer complaints where possible
and appropriate, which might include tailored individual settlements with policyholders. However, where necessary
we defend our position in proceedings. For more information refer to Note 45, ‘Legal proceedings’.
Throughout the company, a Product Approval and Review Process and product risk committees are in place to
oversee product design, product suitability, sound underwriting and claims management, and adequate pricing
of all existing and new products.
IT and change risk:
Risk of material failures
or inadequately
managed change in
IT systems, networks
or platforms, leading
to higher expenses,
operational losses
and/or disruption of
operations (due to a
high level of change,
legacy data quality
issues, etc.)
Simplifying and standardising the IT landscape is one of NN Group’s strategic priorities. This should lower
our cost base in line with the run-off of the portfolios, but also achieve a higher standard of operational
excellence by lowering the number of incidents, losses and errors. For new business, NN is introducing and
embedding new technologies that help achieve our business objectives, such as cloud technology, AI and
sophisticated modelling.
Managing and optimising the current landscape, while also introducing new technologies, may create risks.
For example, inadequate management of the high level of change or end-to-end testing of changes, or
prioritising migration and decommissioning of systems at the expense of processing regular change requests
in time or adequately addressing legacy data quality issues.
The IT Change Board and Steering Committee of the IT Simplification Programme direct and monitor
progress of the simplification roadmap and dependencies. As part of any specific migration project,
assessments are made regarding the IT and/or operational risks associated with data migration and
adequately addressing such risks. A change management process is followed for relevant systems and
infrastructure, including steps to ensure security, such as impact analyses, testing, fall-back scenarios and
post-implementation review.
Cyber risk:
Risk of cyber-attacks,
leading to misuse or
loss of information,
privacy breaches,
discontinuity of
operations, or financial
or reputation loss
Technical developments are reshaping our business model, as well as impacting on our operations. Increasing
data volumes, mobilisation of data access, and making IT more agile and flexible (pay per use) have been
important drivers for the adoption of services offered by Cloud Service Providers. Moving to the cloud enables
NN not only to be more flexible, but also to make use of scale, knowhow and other benefits that help lower
the overall IT risk profile; though it will also change the type of IT-related risks to which NN is exposed. The
Covid-19 pandemic has accelerated remote working, increasing the external cyber risks related to end-users
and end-points (e.g. laptops, mobile phones and tablets). Although it also mitigates IT risk, the use of standard
IT components is itself a risk, as a vulnerability within such a component may create significant exposure, for
example the risk of a supply chain compromise such as the Log4j code red exploit.
Group IT has adopted the Standard of Good Practice of the Information Security Forum (ISF) as the basis
for managing IT, cyber and cloud risks within NN Group. ISF forms the basis of our NN Group IT Policy and
IT Standard, and ensures a consistent view and treatment of our risks in this area. Within central Group IT,
the Information & Infrastructure Security (IIS) function leads all efforts within NN Group to enhance our
information security, and provides 24/7 protection against cyber threats. Education and awareness-raising at
all levels of the organisation are another important part of our security strategy.
NN has an outsourcing policy and framework in place for managing dependencies with third parties, with
NN IT security principles included in outsourced contracts. We perform regular monitoring of the performance
of third parties versus contract requirements. Cyber insurance has also been taken out, with coverage for
first-loss risk and third-party damage.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Safeguarding value creation – Managing our risks continued
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2021 Annual Report
Safeguarding value creation – TCFD
Our response to the Task Force on
Climate-related Financial Disclosures (TCFD)
At NN Group, we have reported on climate
change since the financial year 2017 in
accordance with the Financial Stability
Board’s Task Force on Climate-related
Financial Disclosures (TCFD). This section
is broadly structured along the four
TCFD pillars: governance, strategy, risk
management, and metrics and targets.
Where necessary, we also cover other risks
beyond climate risks, as we have an holistic
approach to ESG. We also refer to other
sections in the Annual Report:
• For more on our net-zero commitments,
see pages 44-47
• For more on our general risk management
processes, see Note 52, Risk
Management paragraph.
Governance
Strategy setting
The NN Group Executive Board ensures
that the company has adequate internal
risk management and control systems in
place so it can be aware of any material
risks taken by the company, and know
that these risks can be managed properly.
Each year, the Executive Board evaluates
the company’s risk appetite, related limits
and tolerances. This evaluation is ratified by
the Supervisory Board.
The Executive Board’s responsibilities
include the formulation and execution of
the company’s strategy, consistent with its
position on long-term value creation. In 2020
and 2021, as part of its overall strategy, NN
disclosed additional strategic commitments
that concerned, amongst other things, ESG
matters (see Our strategy and performance).
The Supervisory Board supervises the
strategy pursued by the Executive Board,
while the Management Board is responsible
for the company’s day-to-day management
and overall strategic direction. This includes
the setting and achievement of the company’s
objectives including any ESG objectives it
deems relevant. More details can be found on
our corporate website: NN Group/Corporate
governance (nn-group.com).
Within the Management Board, the Chief
Organisation & Corporate Relations (COCR),
who reports to the CEO, has Corporate
Citizenship, including sustainability, in her
portfolio. The COCR is the sponsor of
any sustainability, climate or responsible
investment-related topics discussed by the
Management Board. The Chief Risk Officer
(CRO), also a member of the Management
Board who reports to the CEO, has day-
to-day responsibility for NN Group’s risk
management function. The CRO is tasked
with ensuring both the Management Board
and Supervisory Board at all times are
informed of and understand the material
risks to which NN is exposed. This includes
risks related to sustainability matters,
including climate change. The CRO is also
the sponsor of the NN Group annual Own
Risk & Solvency Assessment (ORSA),
where we evaluate outcomes of scenario
analyses, including climate change.
To ensure NN Group adheres to ESG-related
regulations, the Risk and Compliance
functions are tasked with overseeing
proper implementation and monitoring
ongoing compliance.
In addition, each of our other Management
Board members is responsible for
promoting and integrating sustainability
into their respective businesses or functions
as relevant.
Strategy execution
Reporting to the Management Board, the
following teams execute its strategy:
• The Corporate Citizenship team
advises the Management Board on
implementation of the overall approach
to sustainability. They work closely with
the various businesses and functions
to steer and advise on embedding ESG
aspects into their implementation of
the overall strategy. This includes our
net-zero commitments, with a focus
on accelerating the transition to a
low-carbon economy, a responsible
investment (RI) strategy, and ESG-related
non-financial KPIs.
• The Investment Office sets the
investment direction and decides upon
the allocation of NN’s investments, in line
with the Strategic Asset Allocation, the RI
framework, and risk limits and tolerances.
• The Product Management and Innovation
teams work on research and development
in line with the Management Board’s
strategy including, for example, ESG
aspects of our product design &
underwriting activities.
• The Risk, Actuarial and Compliance teams
support and challenge management on
the material risks to which our customers
or NN as a company are exposed. This also
includes running scenario analysis to
identify the impact of climate and
ESG risks.
Since 2020, we have a Purpose Council
to advise the Management Board on
steering and reporting. We use the strategy
dashboard to monitor and report progress on
non-financial KPIs.
Given the increasing requirements and
focus on ESG and in particular climate
change, several teams have set up Centres
of Expertise to further develop knowledge
and capabilities.
We describe in this section the specific activities we undertake to manage
climate and other related Environmental, Social and Governance (ESG) risks.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
67
NN Group N.V.
2021 Annual Report
Safeguarding value creation – TCFD continued
To support TCFD implementation at a group
level, NN has a Climate Change Dialogue:
a multi-disciplinary working group, which
holds regular meetings throughout the year
to discuss climate scenario analysis work,
explore new developments, and identify
further actions to improve our insights
and disclosures.
A major development having an
impact on NN, and of relevance to our
customers, are new regulations on ESG/
sustainability. In particular, implementing
the EU Sustainable Action plan will require
significant work, and working groups have
been established throughout the business,
including a Sustainable Finance Regulation
Core Team at Group level to implement the
requirements of the Sustainable Finance
Disclosure Regulation (SFDR).
Training and education
In 2021, as part of the Supervisory Board’s
Permanent Education programme, a
session was organised to discuss how NN is
addressing climate change and responding
to evolving stakeholder dynamics. A series
of Sustainability and Responsible Investment
educational modules were organised for
the Management Board. The Management
Board also discussed and confirmed NN’s
approach to climate change risks and
opportunities. It also sponsored selected
activities carried out by NN’s teams to
engage in industry initiatives, leading to
publications such as ‘Insuring the climate
transition’ from the UN-convened TCFD
Insurer Pilot and ‘Mind the Sustainability
Gap’ from the CRO Forum.
Remuneration
NN’s remuneration principles are laid
down in the Remuneration Policy, under
which performance management is
based on a number of financial and non-
financial performance objectives, whereby
financial performance objectives cannot
exceed 50% (25% for control functions).
The objectives focus on robust and effective
risk management, as well as balanced risk
taking. In line with NN Group’s ambition,
the focus of non-financial performance
objectives includes customer engagement,
our people, contribution to society and
climate change. Performance is reviewed
via regular check-ins and an annual year-
end review. For the Executive Board, this is
carried out by the NN Group Supervisory
Board. Read more on Remuneration Report,
page 109.
ESG-related governance related
toinvestments
NN’s Responsible Investment (RI) Framework
policy describes our approach to integrate
ESG factors, including climate change, in
our investment process. NN Group has set
up an RI governance structure to facilitate
multidisciplinary discussions and exchange
of information between the right people
at the right time. The various bodies within
the RI governance have specific mandates
to enable them to effectively advise the
Management Board of NN Group on
(adjustments to) the RI Framework policy and
restrictions. The key governance bodies are:
• The NN ESG Policy Committee, which
evaluates and monitors progress on the
RI ambition. The committee is chaired by
the CEO of NN Investment Partners (NN
IP) and comprises the Chief Investment
Officers (CIOs) of NN Group and NN IP, the
Chief Sustainability Officer of NN IP, and
representation of NN Group Corporate
Citizenship. The committee advises the
Management Board on our positioning on
RI, including Group RI-related policies and
the restricted list.
• The NN Paris Alignment Council develops
and oversees our approach to aligning
the proprietary investment portfolio to
the Paris Agreement goals. This includes
defining related action plans and targets,
and monitoring progress. The council
is chaired by the NN Group CIO, and
includes representatives of NN Group
staff and NN IP.
In addition, NN IP has its own governance
bodies to support implementation of RI
policies and activities. The NN IP Executive
Team provides strategic direction and
oversees implementation of the RI
Framework policy in investment processes,
as well as the execution of NN IP’s climate
change policy, which determines climate
change governance within NN IP and
describes how it addresses climate-related
risks and opportunities. To ensure proper
support and implementation of these
policies, the Executive Team receives input
from NN IP’s ESG Committee.
To support the investment teams in
integrating ESG into the investment
process, and drive the development of
and engagement with RI, NN IP also has a
dedicated RI team.
As a result of the sale of NN IP, the group’s
governance bodies for RI will be revised
in 2022.
ESG-related governance within our
insurance activities
To align with NN Group’s strategy and further
integrate sustainability within NN Non-life, a
Sustainability Taskforce was launched early
2021. The objectives of the taskforce include
setting up a governance structure to enable
NN Non-life to define a sustainability strategy,
setting up a risk management framework
to assess the impact of sustainability in
general, and climate change in particular,
on underwriting risks and opportunities; and
defining an approach to develop sustainability
related targets and metrics.
At year-end 2021, a Sustainability Programme
was set up to accelerate sustainability
progress within NN Non-life over the coming
two years. Specific tracks (e.g. on risk
management and product development) have
been defined and a reporting structure put in
place to inform the NN Non-life Sustainability
Steering Group. The steering group is chaired
by a member of the NN Non-life Management
Board with representation from each
business line of NN Non-life, which will set-up
their own ‘local’ sustainability governance.
Climate change will be a major focus of the
Sustainability Programme. For example in the
development of new propositions, our Product
Approval Review Process, our Physical Risk
Climate Change Tool, and carbon footprint
calculations for our underwriting portfolio.
Strategy
One key commitment in NN Group’s strategy
concerns our contribution to society: we
want to contribute to the well-being of
people and the planet, we do business
with the future in mind and contribute to
a world where people can thrive for many
generations to come. For more information,
refer to Our strategy and performance.
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environment
Our strategy and
performance
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Safeguarding value creation – TCFD continued
Having integrated addressing climate
change into our strategic commitments,
we aim to:
• Help accelerate the transition to a low-
carbon economy in order to limit the rise in
average global temperature to 1.5°C.
– Through our investments, advocate
investing in companies that are well
positioned to transition to a low-carbon
economy, and deal appropriately with
ESG matters as part of their business
activities. We have a specific net-
zero strategy with commitments and
targets for both investments and our
direct operations. For our insurance
and banking activities, we are in the
process of developing metrics and
targets to help steer the transition within
our portfolios.
• Develop and offer products and
services that address the environmental
challenges our customers face (e.g.
by developing new products and
services contributing to a low-carbon
economy, or insuring them against
climate-related impact).
We also focus on the following activities to
further realise our strategic commitments:
Defining net-zero commitments
For our proprietary investment portfolio,
NN has committed to transition to net-
zero greenhouse gas (GHG) emissions
by 2050. Guided by the Institutional
Investors Group on Climate Change
(IIGCC) Net-Zero Investment Framework,
our approach has two dimensions: (i)
decarbonisation of the investment portfolio
and (ii) increasing investment in climate
solutions. Playing our part in helping the real
economy decarbonise serves as a guiding
principle. To ensure appropriate action, in
2020 we started to develop asset-class
specific approaches.
In 2021, we introduced a Paris Alignment
Strategy for sovereign bonds, corporate
investments and real estate, as well as a
strategy for investments in climate solutions.
We also formulated intermediate objectives
for 2025 and 2030 (read more on page 75,
Metrics and targets).
In October 2021, we extended our net-
zero ambition to our insurance activities,
committing to develop an approach that
enables the underwriting business to set
targets and help facilitate the transition
to global net-zero emissions. In the same
month, NN Group also joined forces with
other large insurers in the UN-convened
Net-Zero Insurance Alliance (NZIA) to
start developing a framework for strategy
development and target-setting for the
insurance industry.
For our direct operations, NN has adopted
targets for 2025 and 2030 that put us on
a path to achieve net-zero GHG emissions
by 2040 (read more on page 75, Metrics
and targets). These targets cover the
emissions from our buildings, lease cars, and
business air travel. To help us reach these
targets, we signed two ambitions with the
‘Anders Reizen’ (‘Travel Differently’) coalition
designed to reduce the footprint of our lease
cars and business air travel.
Phasing out coal in our portfolio
In 2019, we adopted a policy to phase out
our investments in companies involved in
thermal coal mining and coal-fired power
generation, reducing our exposure to
‘close-to-zero’ by 2030. At the end of 2021,
the approximate amount of assets covered
by the coal phase-out strategy for the
proprietary portfolio was EUR1.1 billion, down
from EUR1.6 billion in 2020. This portfolio’s
gradual reduction reflects bond maturities
and changes in corporate involvement in
coal activities. We monitor the portfolio
closely, and may selectively divest some of
our holdings to ensure that by 2030 we no
longer hold companies in our portfolio that
have more than 5% involvement in coal-
related activities.
To create consistency across our business,
we have aligned our policy for insurance
underwriting with the investment side.
We believe the policy sends a strong signal for
an urgent phase-out of coal in order to achieve
the Paris targets, and also helps mitigate the
climate-related transition risks in our portfolio.
Capitalising on opportunities
Our strategy seeks to leverage opportunities
for financing a low-carbon, climate-resilient
future. For example by offering our asset
management customers sustainable
and impact strategies, and by providing
insurance products that protect against
physical climate impacts and support low-
carbon business models.
In 2021, NN IP further expanded its green
bond offering by launching a sovereign
green bond fund. Market developments in
the green bond space have led to strong
investor interest in green bonds. Since the
launch of its first fund in 2016, Assets under
Management (AuM) in NN IP’s green bond
strategies have grown to EUR4 billion.
Our banking business’ Woonnu aims
to stimulate sustainable housing in the
Netherlands. Woonnu’s consumer mortgage
loans reward steps taken by the consumer
to reduce their carbon footprint by improving
the energy efficiency of their property.
Since the start in September 2020, Woonnu
has originated EUR1.4 billion in sustainable
mortgages and entered the top 20 of
mortgage originators in the Dutch market.
We also adapt existing features in our
insurance offerings. For example we now
provide cover for solar panels on residential
insurance policies without charging an
additional premium. We also support
customers through risk prevention and
advisory tools like Powerly, which provides
tailored advice to Dutch homeowners on
improving their home’s energy-efficiency and
connects them with partners who can carry
out improvements.
NN Non-life, has started to assess the
‘climate sustainability factors’ in current
and new products according to the latest
(regulatory) insights. These factors relate
to the six environmental related objectives
of the EU Taxonomy regulation. To define
these factors, NN will implement external
screening criteria and potentially develop its
own criteria.
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Safeguarding value creation – TCFD continued
Active dialogue with investees
Our asset manager engages with investee
companies on climate-related matters.
‘Natural Resources and Climate Change’ is one
of NN IP’s engagement themes and focuses
on deforestation, plastics and the transition
to low-carbon business models for the utilities
and oil & gas sectors. These engagements are
often conducted in collaboration with other
investors, for example via the PRI and Climate
Action 100+. NN also takes part annually in the
CDP Non-Disclosure Campaign, encouraging
companies to disclose information on climate
change, water and deforestation risks.
Additionally, we support the CDP Science-
Based Target Campaign to encourage
companies to set long-term targets on
reducing their GHG emissions.
Voting is another instrument through which
we can influence companies towards more
sustainable behaviours and practices.
In 2021, NN IP voted ‘for’: 84% (out of 64)
climate-related shareholder proposals,
and 100% (out of 14) Climate action 100+
shareholder proposals.
Joining forces to develop best practices
We also collaborate with peers to develop
industry best practices. As a member of the
Platform for Carbon Accounting Financials
(PCAF), we contributed to the report published
in October 2021: ‘Updates from implementing
GHG accounting for the financial sector in the
Netherlands’. This report gives insights into
how PCAF members use the global standard
for carbon-accounting financials, what they
consider the key benefits of measuring and
disclosing financed emissions, and the main
challenges. In the last quarter of 2021, we also
joined the PCAF for insurance so we can join
forces with international (re)insurers to develop
a standard for measuring insured emissions.
In March 2021, NN Group endorsed the
IIGCC Net-Zero Investment Framework and
signed the Paris Aligned Investment Initiative
(PAII) Asset Owner Commitment. At the
same time, NN IP signed the Net-Zero Asset
Managers Commitment. NN IP also co-led
a working group focused on infrastructure
investments as part of the second phase of
the Paris Aligned Investment Initiative of the
IIGCC. This will further develop the Net-Zero
Investment Framework, which is designed to
help investors develop strategies to align their
portfolios with the Paris goals.
NN’s banking business contributed to
the establishment of the Energy-Efficient
Mortgages (EEM) Netherlands Hub, to
support and promote the acceleration and
adaptation of energy-efficient housing in the
Netherlands. Within this initiative, we aim to
develop and maintain a Dutch framework for
energy-efficient mortgages that facilitates
the translation and application of European
regulation to the Dutch mortgage and
property market.
In respect of specific insurance underwriting
initiatives, we collaborated with UNEP
FI and 21 other insurance companies in
the PSI TCFD pilot group for insurance to
develop risk management approaches,
forward-looking scenario-based tools,
and methodologies based on the TCFD
recommendations. The pilot group published
a paper entitled ‘Insuring the climate
transition’ in January 2021.
Joining NZIA in October 2021 (see ‘Defining
net-zero commitments’ above) is an example
of how we believe that by collaborating with
other international (re)insurers we can all
increase our knowledge and impact.
Public policy advocacy
Government policies are key to achieving
the goals of the Paris Agreement. As a
financial institution, we can play a part in
this process by expressing our support for
ambitious policy action. We publicly join with
other investors and businesses in supporting
the need for stronger climate policies.
For instance, NN IP supported the ‘2021
global investor statement to governments on
climate change’, which calls on governments,
among other things, to significantly
strengthen their transition plans for 2030
to put us on a pathway to achieve net-zero
emissions by 2050 or sooner.
NN Group became a member of the World
Economic Forum ‘Alliance of CEO Climate
Leaders’ and supported an open letter to
world leaders in the run-up to COP26 in
October 2021, in which the group of more
than 60 CEOs of large organisations express
their willingness to work with governments
in a joint effort to accelerate the race
tonet zero.
Risk management
Climate change presents risks and
opportunities, and these are expected
to increase over the mid- to long term,
which could affect the viability of NN
Group’s strategy. It is difficult to quantify
climate change-related risks because,
as both physical and transition risks are
characterised by deep uncertainty and
non-linearity, their chances of occurrence
are not reflected in past data and the
possibility of extreme values cannot be ruled
out. As such, it is subject of ongoing analysis
and monitoring to assess the impact on our
business model and balance sheet.
The materiality and time horizons over
which climate change-related risks may
impact our business activities depend on
the specific types of business (life insurance,
non-life insurance and banking) and asset
portfolios, as well as geography and a range
of other factors, as illustrated in the three
examples below:
• Our property & casualty (P&C) business
is predominantly a one-year renewal
business, and consideration of these risks
in the underwriting and pricing processes
is therefore on a relatively short time
horizon (one to three years)
• Many of our product development and
strategy updates are based on three-to-
five-year time frames
• Our investment and underwriting
strategies for life and income insurance
liabilities need to consider the impact of
climate change over a period well beyond
the next five years.
We do not consider climate change or ESG
a separate risk, but as a driver creating risks
in different parts of our operations. As part
of our strategic risk assessment, the Group
Management Board identified the following
key risks, partially driven by climate change
developments: ‘ALM and investment risk’
(physical and transitional), ‘Corporate social
responsibility’ and ‘Regulatory and
(geo)political environment’.
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Safeguarding value creation – TCFD continued
Risk Level:
Floods
Heat stress
Hurricanes
/Typhoons
Sea level rise
Water stress
Wildfires
NN Portfolio% of NAV with potential exposure to
climate change hazards by type
No risk
0% 20%10% 30% 40% 50% 60%
70% 80% 90% 100%
Low risk
Medium risk High risk Critical
NN Group invests in European real estate both directly and
indirectly via non-listed real estate funds. The portfolio is spread
over sectors and regions and is therefore exposed to property
damage caused by natural events which can lead to a decrease
in value of the assets or even stranded assets. To conduct an
analysis of the portfolio’s potential exposure to the physical risks of
climate change, our real estate manager CBRE, used the ‘Moody’s
427’tool.
The Moody’s 427 tool assesses six climate hazards: floods, sea
level rise, water stress, heat stress, wildfire, and hurricanes and
typhoons. The tool considers the potential severity and frequency
of each climate hazard based on a 2030-2040 outlook as each of
the predicted climate scenarios (1.5˚, 2˚ or 4˚C above pre-industrial
levels) produce similar climate impacts for this period. Each asset’s
potential exposure is assessed against each of the six climate
hazards in that specific location considering the building’s use e.g.
office, retail or industrial. This serves as an initial screening where
the results are addressed as qualitative indicators from low to high
or critical potential risk exposure.
Portfolio results
The assessment found that the maximum potential exposure of
our portfolio to ‘critical’ risks is 19% and to ‘high or critical’ risks
is 53% (based on Q1 2021 net asset value). As can be seen in
the figure, the largest potential impact is primarily from water
stress, floods or heat stress. To get a sense of how our portfolio
compares to a benchmark, we used a ‘neutral portfolio’, which is
based on the institutionally investible real estate world-wide and
applied 427’s country rating for each hazard. This analysis showed
that NN’s portfolio is not located in areas that have significantly
greater potential risk of exposure to climate change hazards than
the neutral benchmark.
Prioritising engagement
This tool only looks at the severity of ‘potential exposure’ to
hazards. To get a complete picture of physical risk exposure, one
also has to look at the resilience of the underlying asset. We are
using this assessment therefore as a starting point to ask our real
estate manager for a more detailed risk analysis of the relevant
assets. Such analysis could show that measures to mitigate the
risks have already been taken, or that they are not required due
to how the property is used. In cases where the potential climate
hazard risks need to be addressed, we encourage the underlying
manager to develop an asset mitigation plan to increase each
asset’s resilience to climate hazards and reduce its vulnerability.
To make the buildings more resilient, a variety of measures can be
considered. For instance, to reduce water stress due to drought,
measures could include using drought-tolerant plants in the
landscaping, encouraging tenants to use water more efficiently,
or installing water metering. For buildings that are susceptible
to flooding, measures could include, for instance, monitoring
drainage systems’ ability to cope, or relocating any water sensitive
plant and equipment above ground level. Examples of measure
to tackle the problem of heat stress could include carrying out
regular inspections of façade materials to confirm that premature
degrat degradation does not occur, or installing back-up
generators in case of power failures.
Clear objectives
This analysis was the first step toward assessing our potential
exposure to physical climate risks. Together with our real estate
manager, we have set clear objectives for our portfolio:
• For those assets identified as potential high or critical risk within
our directly-managed portfolio, engagement with an underlying
manager should verify whetherfurther action is needed at
a property and investment level, to ensure resilience of the
underlying holding(s). In that event, a mitigation plan should be
developed and included in the annual asset business plan(s) to
make the asset more resilient to physical risks. We aim to have
climate change mitigation plans for all relevant assets by 2023.
From our real estate funds we expect this to be in place by 2025.
• In order to promote reporting in line with the TCFD framework,
we aim for all funds to have TCFD-aligned reporting and
consider climate risks in all investments by 2023.
Assessing physical climate risks in real estate
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In the following sections we discuss each
risk and how we mitigate its impact.
The section ends with more on how we apply
scenario analysis and stress testing, and the
qualitative and quantitative techniques we
deploy to better understand the impact of
climate change-related risks, for mid-term
planning and beyond. We use two case
studies to illustrate this (refer to page 70 and
pages 76-77).
ALM and investment risk
Definition: Risk of reduced available
capital or lower investment returns, due
to financial market volatility, a low interest
rate environment or ESG factors (such
as climate change).Climate change can
affect both the asset side (through our
investment processes) and liability side
(financial risks related to the products that
NN Group markets) of the balance sheet.
We distinguish:
Physical risk for assets
Definition: Risk of (in)direct financial losses
to investments, or lower investment returns,
resulting from changes in weather patterns,
temperature, hydrological conditions, or
natural ecosystems (both acute and longer-
term shifts). For instance, a severe windstorm
or flooding might damage buildings within
our European real estate portfolio, which
could result in asset impairments or
indirectly affect our customers’ ability to pay
their mortgages.
Transition risk for assets
Definition: Risk of (in)direct financial
losses to investments, or lower investment
returns, resulting from the transition to a
lower carbon/green economy, which may
adversely affect individual businesses,
sectors or the broader economy (examples
include public policy, technological
developments and changing consumer
preferences).
Overall, NN anticipates that the global
pricing of financial assets will increasingly
be influenced by factors such as public
policy, technological developments,
changing consumer preferences and
evolving interpretations of legal frameworks.
Such trends and changes are likely to
materialise over the medium term and
insurers may be exposed to these risks
through their investment portfolio. However,
our investments are also exposed to specific
short-term risks, such as possible sudden
adjustments to market sentiment around
climate risks, impacting segments and
investments in our portfolio.
Physical risk for liabilities
Definition: Risk of actual claims and benefits
paid to customers deviating adversely from
expectations, resulting from changes in
weather patterns, temperature, hydrological
conditions or natural ecosystems. This could
lead to higher mortality rates (for life and
pensions products), higher morbidity
benefits (for disability, accident and health
products) or property and casualty claims
(P&C products).
Physical risks related to long-term changes
in climate, and increases in natural
catastrophes, as seen with the 2021 floods
in Belgium and the Netherlands. These risks
are particularly relevant to our non-life
insurance business. Although this applies
predominantly to the Netherlands, we also
offer a range of relevant non-life products in
Belgium, Spain and Poland.
Prolonged, multiple periods of heatwaves or
other consequences of rising temperatures,
resulting in increased mortality and
morbidity, thereby impacting our life and
income insurance liabilities. Such long-term
threats are difficult to quantify, but we
currently expect this to have less impact
on our life and income insurance liabilities
than other risks, such as changes in
demographics. Furthermore, we note that
from an overall risk perspective, NN has a
larger exposure to longevity risk, which is
partly offset by mortality risk.
Transition risk for liabilities
Definition: Risk of actual claims and
benefits paid to customers deviating
adversely from expectations, resulting from
transition to a lower carbon/green economy
which may adversely affect individual
businesses, sectors, and the broader
economy. Examples include public policy
developments, businesses and shifts in
consumers’ preferences.
Transition risks could also arise from
a change in the composition of the
underwriting portfolio, affected by our
efforts to diminish the carbon footprint,
explore initiatives to keep the climate-
related underwriting risks insurable,
and develop sustainable products and
services. Furthermore, asset and liability
management of insurers might be impacted
by revised macroeconomic and financial
assumptions (e.g. risk-free interest rates or
claims inflation).
The transition towards a low-carbon
economy also creates legal challenges for
both customers (liability insurance) and the
insurer. We monitor climate-related litigation
risks. Most cases are against governments,
but complaints against business are on
the rise. This can have consequences
for NN where we insure such companies.
However, given the relatively limited size of
NN’s general liability insurance portfolio for
corporate customers, we consider risks in
this area low at this time.
Mitigating climate risks impacting
our investments
NN has a policy framework in place to
ensure our assets are invested responsibly.
The framework includes a requirement to
systematically incorporate ESG factors into
the investment process. Consideration of
ESG factors, alongside traditional financial
data, helps to make better informed
decisions and optimise the risk-return profile
of investment portfolios. At NN IP and our
external asset managers, assessing the
materiality of ESG factors, including climate
change, is an integral part of the investment
process, where the analysts identify material
risks and opportunities within the investment
case. The processes are continuously
being improved.
As well as analysing individual investment-
level risks, we carry out analyses at a
portfolio level to assess potential climate
risks and opportunities, and to support
the implementation of a broader climate
strategy. For example, we measure
the carbon intensity of our proprietary
investments, which provides us with
information on where our highest carbon
risk exposure lies and is useful, for example,
for engagement purposes. We consider
engagement a valuable tool. In the context
of managing climate risks, engagement
means entering into dialogue with investee
companies on the risks of climate change,
and the need to transition to a low-
carbon economy.
Safeguarding value creation – TCFD continued
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Although we prefer to use engagement as
a means to affect change, we may decide
to exclude a company that isn’t willing to
engage in dialogue or when we believe
insufficient progress is being made. We have
environmentally focused exclusion criteria
on oil sands and thermal coal mining, which
were updated in 2021: companies are now
placed directly onto our exclusion list when
they derive more than 20% of their total
revenues from the extraction of oil sands
or thermal coal mining (previously 30%).
For NN’s proprietary investment portfolio, in
addition we implement a policy to phase out
thermal coal by 2030 (read more on Strategy,
page 67).
We have a clear ambition to transition our
proprietary investment portfolio to net-zero
GHG emissions by 2050. We believe a
strong focus on low-carbon transformation
and investing in opportunities will help
us manage risks associated with climate
change. In aligning our proprietary
investment portfolio with our climate
goals, we believe that a single approach
or target is inappropriate, and have set out
to develop asset class-specific strategies
and to use the guidance of the Net-Zero
Investment Framework:
• For the sovereign bonds portfolio,
investments are scored against a set of
current and forward-looking alignment
criteria, with the preference for allocation
to higher climate performing issuers
and/or eligible green bonds. In addition,
we will seek to increase dialogue
with governments.
• For the corporate investments portfolio,
NN has developed a methodology to
categorise the companies in the portfolio
according to their alignment or potential
to align to a net zero pathway. For new
investments, we use a best-in-class
policy to allocate towards companies
who are better positioned in their
journey to transition to a low-carbon
economy. For existing assets, we focus
on stewardship and engagement to drive
alignment, as we believe this has the best
chance of realising real-world impacts.
• In setting a net-zero strategy for NN’s
non-listed real estate portfolio, we have
defined specific net-zero commitments for
both our directly-managed and indirect
portfolios. Furthermore, we have defined
the key measures to achieve our net-
zero targets, one of the most important
being improving energy efficiency and
expanding the use of renewable energy.
For our directly managed portfolio, we are
currently performing asset-level analysis,
utilising the Carbon Risk Real Estate
Monitor (CRREM) to model each building’s
pathways and define the necessary
improvement plans. For our indirect
portfolio, our main lever is engagement
with the management of the funds in which
we invest to increase their ambition to
reach net-zero emissions.
• To grow our investments in climate
solutions that support the transition, we
have developed an internal framework for
defining ‘climate solutions investments’,
setting an ambition to increase these
investments by an additional EUR6 billion
by 2030. As an initial step in classifying
climate solutions investments, and in line
with guidance from the IIGCC PAII, we
focused on the SDG 7-related areas of
energy efficiency and renewable energy.
We have underpinned our definitions with
external certifications, asset labels and
environmental standards where possible
and relevant. In setting our definitions, we
have tried to align as much as possible
with the EU taxonomy criteria. Though it is
proving a challenge to assess the extent of
alignment, as the taxonomy requires very
detailed information that is often not (yet)
available, and it is still uncertain what is
accepted as evidence for alignment.
Risks in our asset portfolio, like any other
market risk, are managed through a
well-diversified portfolio, employing a
range of relevant policies and standards,
within acceptable risk limits and other
boundaries, and with the option to
reduce downside risk through hedging
programmes. For concentration risk, we
use concentration limits on corporate and
sovereign issuers, asset type and country
of risk. For liquidity risk, we assess the
ratio between liquid assets and liquidity
requirements. More information on how
we manage market risks, see Note 52, Risk
Management paragraph.
Mitigating climate risks
impacting our liabilities
(underwriting processes)
Physical risks relate to long-term changes
in climate and increases in natural
catastrophes, such as the 2021 floods in
Belgium and the Netherlands, and are
particularly relevant to our P&C business.
An increased frequency or severity in
weather events, such as windstorms or hail,
can lead to higher expenditure (claims and
operational costs), so affecting the margins
of our P&C insurance products.
During the summer of 2021, southern parts
of the Netherlands and Belgium were
confronted with flooding events that were
partly attributed to climate change related
effects. Immediate possible payment
advances have been made by NN and
additional coverage to customers in Belgium
and the Netherlands has been provided,
although occasionally claims still had to be
rejected. In line with EIOPA’s objective to
close existing protection gaps as much as
possible, NN has expanded the coverage
under its policies with protection against a
breach of secondary dikes. Furthermore,
NN believes that a joint approach with
P&C insurers in the Netherlands, reinsurers,
and environmental authorities is needed
to provide additional protection against
losses resulting from breaches of primary
dikes. Through our membership of the Dutch
Association of Insurers and our intensive
involvement in climate change related topics,
NN Non-life encourages the investigation of
risk mitigating market solutions.
Within our insurance business, we manage
physical climate risks in various ways.
We offer and develop a range of products
that help customers adapt to and mitigate
climate change, such as green mortgages,
coverage against severe weather events
and Defined Contribution lifecycle pension
products, which promote sustainable
characteristics. For 2022, non-financial
Management Board performance targets
have been set that integrate ESG criteria into
underwriting with a focus on (acceptance)
policies, the product approval process and
risk management of ESG-related risks.
Safeguarding value creation – TCFD continued
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Within our P&C business, NN helps
customers take precautionary measures,
with the aim of preventing and minimising
claims caused by windstorms, fire or other
events. We monitor our claims experience
and reprice or adjust policy conditions
where necessary. NN’s P&C portfolio is
predominantly renewable on an annual
basis, allowing repricing over the short term.
We apply such measures cautiously, as
longer-term affordability for our customers
remains an important consideration for us
when making strategic choices.
We let insights from catastrophe
models guide our pricing/underwriting
risk management process. For this, we
use external vendor models (based on
meteorological modelling, reflecting
observed storms and patterns) to estimate
the impact and damage that would be
caused by large natural catastrophes,
such as windstorms. NN uses a multi-year
forward-looking approach.
Catastrophe models are also
part of the solvency and capital
management risk management process.
Portfolio diversification and tracking
concentration risks are other key risk
mitigating steps. NN’s product range offers a
broad variety of non-life insurance protection
cover options against damage and loss from
a wide range of causes. In addition to our
P&C products, our portfolio includes income
protection products, such as disability and
accident insurance, which are less sensitive
to windstorm or climate change.
Finally, external reinsurance will, under
certain conditions, partially mitigate potential
impacts. We have a group-wide catastrophe
reinsurance programme in place to protect
against the severity and frequency of large
natural catastrophes. Reinsurance covers
are placed with a broad and diverse range
of strongly capitalised external reinsurers,
and reduce the losses to NN Group from
both large events and multiple smaller ones.
Both the applicability of the external vendor
models, and the reinsurance structure and
cover, are reviewed annually for renewal.
Regulatory and (geo)political
environment
Definition: Risk of disintegration of existing
economic and political structures, adverse
regulatory change or increased supervisory
scrutiny that may have a profound impact
on our business model or performance (e.g.
for example sustainable finance & reporting).
From an overall perspective, the most
important political risks related to climate
change are (1) political inability or passivity
in taking appropriate policy action to
make the transition to a greener economy;
(2) creating inconsistent regulatory
standards or standards that do not align
with NN’s perspective on ESG matters;
(3) regulatory standards that have a high
level of complexity and short period for
implementation; and (4) an overly one-sided
approach (e.g. only via the financial industry).
NN or our customers might be affected by
regulatory developments on ESG topics, such
as responsible investments, environmental
protection, climate change or human rights.
Implementing the EU Sustainable Action
Plan will require significant work, and though
efforts are being made in this respect, for
example through the Sustainable Finance
Regulation Core Team that NN Group has
set up to implement the requirements of
the SFDR, nevertheless the plan’s inherent
complexity presents challenges. In addition,
some legislation has been delayed,
creating uncertainty.
In 2022, an amendment to the Solvency II
directive was made that aims to integrate
sustainability risks into the prudential
framework, requiring insurers to, among
other things, consider sustainability risks
in actuarial and risk management, and (as
part of the ORSA) to perform a mandatory
sustainability risk assessment of the material
risks to which the insurer is exposed. NN has
installed a project team to implement
these requirements.
Corporate social responsibility
Definition: Risk of NN Group not adequately
balancing stakeholder interests, deviating
from societal norms, or failing to be
transparent in such areas as responsible
investments, climate change, equality,
diversity, taxes and renumeration.
Companies, and financial institutions
specifically, are under increasing scrutiny from
consumers, non-governmental organisations,
regulators, professional investors and other
stakeholders regarding how they do business.
Norms and values in society are evolving
fast and are not always codified in formal
legislation. Failure to deal adequately with our
stakeholders’ increased expectations with
respect to doing business in a responsible way
or legal action involving our business could
lead to reputational damage, consumers
being less likely to buy our products or
investors being unwilling to invest in our
company. There is also an expectation
from both supervisors and customers that
insurers offer products and services that help
customers deal with climate change impact
for an affordable price.
Measures to mitigate this risk are generally
classified as environmental, social
or governance:
• Environmental: how NN deals with climate
change, environmental protection, energy
transition and sustainability in investing
and its own operations;
• Social: how NN does business in a socially
responsible way, taking into account
equality and inclusion, human and labour
rights, and consumer protection; and
• Governance: how NN is structured to
ensure its corporate governance system
balances the interests of its stakeholders
and the company’s long-term focus in
its decision-making. This includes such
topics as balanced objective-setting and
countervailing powers, executive and
employee renumeration, and managing
our tax position.
Balanced decision-making, taking into
account all stakeholders’ interests, is
ensured by applying the principles of the
Dutch Corporate Governance Code.
NN Group’s Governance Manual sets out
the roles and responsibilities of the different
Management Board committees, as well as
a governance model based on three lines
of defence (Business Management, Risk/
Compliance, Audit).
NN’s values, care, clear, commit, are a
cornerstone of decision-making. Our Risk
Appetite Statement on Sound Business
Performance expresses our aim to act as a
company with a responsibility to society at
Safeguarding value creation – TCFD continued
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large. The NN statement of Living Our Values
defines our values, which are reflected
in many of our company-wide policies,
standards and processes.
We integrate ESG considerations into our
investment decision process. We believe
there is a strong link between the longer-
term positive impact of ESG integration and
improved risk-adjusted returns. Focusing on
ESG also ensures we live up to our values
and demonstrate good corporate citizenship.
It helps us better align our core business with
the broader expectations of society.
To help close the protection gap, we are
developing new products and services
that aim to also cover damage that current
policies are either not covering or for which
claims are expected to rise, driven by
increased physical risks. We assess external
data to properly price these risks and offer
these products to customers.
Scenario analysis and stresstesting
The Solvency II supervisory framework
requires insurers to hold sufficient capital
to cover the losses of a 1-in-200-year event,
over a one-year time period. In addition,
insurers also consider risks beyond this one-
year period, as part of their ORSA, and hold
a level of capital in line with their defined risk
appetite. NN Group, and each of its regulated
(re)insurance subsidiaries, prepares an ORSA
at least once a year. The ORSA includes the
outcomes of stress tests and/or scenario
analyses that are aligned with the identified
key risks.
As part of regular risk management activities,
risk assessments are performed to identify
key risks that pose a threat to NN Group’s
strategic and capital objectives. In June
2021, NN Group performed a Strategic Risk
Assessment (SRA) to assess the key risks as
well as emerging risks in the light of current
global and sectoral trends. The basis for
this risk assessment was NN Group’s Risk
taxonomy. For ORSA purposes, this gives
insight into a) risks that are not modelled
and b) risk types that are modelled explicitly,
but for which we try to assess whether the
required capital is an adequate reflection
of the actual risks and whether existing
buffers would also suffice for adverse
developments during the business plan
period. Compared with 2020, the ALM and
investment risk was expanded, for example
to include the impact of ESG factors (such as
climate change).
Deploying qualitative and quantitative
scenario-based analyses helps us better
understand the impact of physical and
transitional risks, both during the business
plan period and beyond. Where possible,
these analyses consider a relevant short-,
medium- and long-term scenario, aligned
with the TCFD recommendations. We use
the insights gained as further input for
formulating our investment strategy and
integrating climate change aspects into our
risk management practices.
In 2020-2021, NN Group and our entities
performed the following scenario analyses
and stress testing:
• A qualitative assessment of transition risks
associated with policies for government
bonds. This is built on our assumption
that countries that have a well-developed
long-term strategy towards achieving
GHG emissions reductions consistent
with the Paris Agreement are more likely
to face lower transition risk. Based on this
assessment, we looked for a data provider
who could provide us with relevant climate
assessments that contains forward-
looking elements for a much broader
range of countries. We began using the
Climate Change Performance Index
(CCPI) published by Germanwatch, CAN
International and the NewClimate Institute,
which evaluates and compares the climate
protection performance of 57 countries
and the EU. The CCPI forms a key part
of the proprietary scoring methodology
which we developed as part of our Paris
Alignment strategy for sovereign bonds.
• A quantitative assessment using
geographical data to assess physical
(concentration) risks for NN’s mortgage
book as well as underwriting portfolios in
the Netherlands, looking at flooding events
(including surface water flood caused by
heavy rainfall, river flood and coastal flood)
and pole rot (read more on pages 76-77).
• A quantitative assessment of the
preparedness of corporates to deal
with climate change. Investments in
certain industries might lose value when
companies cannot adapt to a low-carbon
business model.
• A quantitative assessment of physical
risks related to our real estate investment
portfolio (read more on page 70).
• A quantitative assessment of a series
of windstorms, and the potential impact
on the solvency position of Netherlands
Non-life.
• A quantitative assessment of a disorderly
transitional scenario ensuing from prompt
and radical global action and policies to
limit global warming, which has an impact
on our assets (equity, mortgages, real
estate) that materialises over the medium-
term business planning period, in line with
a (2019) PRA scenario.
• A quantitative assessment of the
effects on homeowners confronted
with the unintended adverse effects of
government energy transition policies,
including a severe but plausible economic
downturn with uncertainty about future
property values and reduced sales of
existing homes.
The general conclusions from these
assessments are:
• The impact of climate change contains high
levels of uncertainty and, as such, caution
is warranted in drawing conclusions based
on scenario outcomes. Furthermore,
climate-related scenarios potentially fail to
represent the full impact of climate change,
as it is virtually impossible to create an
all-inclusive scenario.
• Scenario analyses performed so far
show any impact from climate change
is more imminent for our non-life
insurance businesses than our life and
pensions businesses.
• Qualitative scenarios and other data-
supported analyses can help us gain
greater understanding of potential
exposures in our portfolios, for
example for the mortgage portfolio,
where geographical data visualises
the concentration of physical risks.
Based on current insights, and assuming
the Dutch government will continue to
execute its infrastructure improvement
programme, our exposures until 2050 are
limited. But we will of course continue to
incorporate new data and assumptions
into our regular monitoring.
Safeguarding value creation – TCFD continued
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performance
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NN Group N.V.
2021 Annual Report
• For our corporate bond portfolio, we
consider the potential impact to be
moderate and manageable. In recent years,
we have been refining our RI strategy and
will continue to do so. While maintaining a
diversified portfolio, this will help steer our
portfolio composition towards companies
we believe best positioned to follow a
path to decarbonising and/or offering
climate solutions.
We will continue to explore potential
scenarios, to develop more accurate
parameters for quantifying the impact of
climate risks and to build our capabilities to
make more detailed assessments per type
of investment. This will include a specific
focus on deepening our understanding
of climate-related risks, and focusing on
our non-life insurance portfolio by, among
other things, using the insights gained
from the UN-convened TCFD Insurer Pilot
mentioned above.
Metrics and targets
Own operations
At NN Group, we are committed to reducing
the environmental impact of our own
operations, which have been carbon-neutral
since 2015, by reducing our emissions
year-on-year and offsetting any remaining
emissions. We have committed to reducing
our GHG emissions by at least 35% by 2025,
and 70% by 2030, compared with 2019.
Following this path, we expect to reach net-
zero by 2040. This covers GHG emissions
from our buildings, lease cars and business
air travel. We intend to realise this through
energy-efficient technologies, increased use
of renewable energy and less travel. For our
lease cars, our ambition is electrification of
our lease car fleet by 2025 in the Netherlands.
Our investments
Since 2017, we have been tracking the
carbon footprint of the main asset categories
of the asset portfolio on our balance sheet
(defined as the general account assets of the
insurance entities, and the assets of NN Bank
and NN Group). This helps us identify where
risks and opportunities are concentrated,
and enables us to track how the carbon
footprint evolves over time. The 2021 carbon
footprint analysis covers EUR161 billion of
assets, representing 80% of our total asset
portfolio. For more detail refer to section
‘Facts and figures’.
In 2021, we set the following specific
intermediate objectives for the general
account assets portfolio to help deliver on our
commitment to achieve net-zero emissions
by 2050:
• Reduce GHG emissions from corporate
investments (listed equity and corporate
fixed income) by 25% by 2025, and by 45%
by 2030. Our baseline is 125 tCO₂e per
EURmillion invested as reported at year-
end 2021 (relating to underlying emissions
data from 2019) and covers scope 1and2
emissions. This reference reduction target
is supported by portfolio alignment goals
that include: (i) an engagement threshold
of 75% by 2025, meaning that by that time
a minimum of 75% of financed emissions
are in sectors that already meet net
zero ‘aligned’ criteria or will be subject to
direct or collective engagement actions
(at year-end 2021: 66%); (ii) a portfolio
coverage target of 45% by 2025, meaning
that by that time at least 45% of the AuM
is invested in assets in material sectors
classified as ‘achieving net zero’, ‘net
zero aligned’, or ‘aligning’ (at year-end
2021: 29%),
• Achieve EUR6 billion of new investments
in climate solutions by 2030. At year-end
2021, we had invested EUR5 billion in
green bonds, renewable infrastructure, and
energy efficient real estate. Refer to the
section ‘Facts and figures’.
• Phase out our investments in companies
involved in thermal coal mining and
coal-fired power generation, reducing our
exposure to ‘close to zero’ by 2030. At the
end of 2021, the approximate amount of
assets covered by the coal phase-out
strategy for the proprietary portfolio was
EUR1.1 billion, down from EUR1.6 billion in
the year prior.
We also defined our net-zero ambitions for
our (non-listed) real estate portfolio. Using the
CRREM 1.5°C tool to guide the process, we
have set the following interim objectives:
• For our directly managed assets, our
aim is for all our buildings to be on a
1.5-degree pathway by 2030. This is for
scope 1, 2 and part of scope 3 (tenant
operational emissions). For operational
GHG emissions (i.e. scope 1 and 2) we aim
to achieve net-zero by 2040.
• For 100% of standing assets in the direct
portfolio to have a Sustainability Certificate
as approved by GRESB (beginning of
2021: 83%).
• For our investments in real estate funds,
that by 2030 the majority of our funds
(>75% based on GAV) are committed to
achieving net-zero GHG emissions by
2040 or sooner (scope 1 and 2), and the
remainder by 2050 or sooner.
We have also set objectives to take into
account physical risks in our real estate
portfolio. Refer to ‘Assessing physical climate
risks in real estate’ on page 70.
Our products and services
For our insurance and banking activities, NN
is working on roadmaps for the transition to a
low-carbon economy so we can set metrics
and targets.
We have joined commitments like the
commitment of the financial sector to the
Dutch Climate Agreement and the NZIA to
strengthen our strategy. With this commitment,
NN sets its ambition to also bring its insurance
underwriting portfolio to net zero by 2050.
Together with the alliance, NN is working
on the development of metrics and
targets to set a clear pathway towards
this goal. In addition, Netherlands Non-life
is developing a Climate Change Physical
Risk Tool, which will be designed to
qualify and quantify the impact of climate
change-related perils on the underwriting
portfolio. Quantification of the preselected
perils will be based on the Representative
Concentration Pathways (RCPs) of the
Intergovernmental Panel on Climate
Change (IPCC) and various time horizons.
Based on the outcomes of the initial
quantifications, specific geographic and
peril-related indicators can be developed
and targets defined.
For our banking activities, we are working
together with industry peers in the Energy-
Efficient Mortgages (EEM) Netherlands Hub,
and the PCAF for investments to develop
standards and frameworks for energy
efficient mortgages and carbon footprint
measurement. This work will feed into the
development of strategy and targets to
contribute to commitment of the financial
sector to the Dutch Climate Agreement.
Safeguarding value creation – TCFD continued
Our operating
environment
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In 2019, we analysed the impact of (river) flooding and heavy
precipitation on our Dutch residential mortgage portfolio,
originated and/or serviced by NN Bank). In 2021, we updated
the analysis and extended it to cover our non-life underwriting
book as well as drought (causing pole rot damage to the wooden
foundations of buildings through low groundwater levels).
These risks could impact us in the following ways:
• Customers may file a claim with NN Non-life to compensate
for the damage, as per agreed policy terms and conditions,
driven by political or societal pressure, or as a goodwill gesture.
In general flooding and pole rot are not covered under Dutch
insurance policies, while damage caused by heavy rainfall is.
• If damage to a customer’s property is not fully insured, nor
compensated, customers might receive compensation from the
Dutch government. Regarding flood risk, this comes from an
emergency fund, as made available under the Dutch Disaster
Compensation Act, to be activated by ministerial decree.
• Any remaining damage is the customer’s responsibility.
Depending on their financial situation, they might not be able
to restore the property, or might (partially) default on their
mortgage if they cannot pay regular costs, or if the collateral
(partially) loses value. This impacts the value of the investments
on the insurers’ balance or increased loss provisions for NN Bank.
The analysis of flood risk includes coastal and fluvial (river) flooding,
including a consideration of current and future (projected) flood
defences. We used national datasets from Klimaateffectatlas and
global datasets (IPCC) to indicate the aggregated value at risk for
a baseline (current) scenario and a 2050 scenario, based on the
KNMI’14 (Royal Dutch Meteorological Institute). The results of the
analysis are based on the current composition of the mortgage
portfolio, aggregated at national, province and postal code level.
For the analysis on pole rot we used the Klimaateffectatlas which
presents pole rot risk at a neighbourhood level, and are derived
from the estimated percentage of wooden foundations in a
neighbourhood, as well as the neighbourhood’s vulnerability level
(based on groundwater levels, foundation depth, and the type
of soil).
The results of the analysis give further insight in parts of NN’s
portfolios that have a higher risk of flooding or pole rot in 2050.
Two figures below give an example view for the mortgage book,
showing the aggregated value potentially at risk of flooding or pole
rot in the High Probability (<1 in 30 years) category for the projected
2050 scenario.
Assessing physical climate risks of Dutch mortgages
andunderwriting book
Similar to the analysis in 2019, the parts of NN Group’s mortgage
portfolio most exposed to potential flood risk, are located in the
greater metropolitan Rotterdam area and regions near the Lek
and Meuse rivers, especially in the provinces of Limburg and
Gelderland. Areas where high values are exposed to a risk of
flooding, but at lower probability levels, are located in the larger
cities of the Randstad area (Amsterdam, The Hague) and the
northern provinces (Groningen, Friesland).
The impact of pole rot is of a much smaller scale, and limited to
certain parts of the Netherlands. The main results from the pole
rot analysis for the mortgage portfolio indicate that the most
impacted areas are the Randstad area, the regions close to large
rivers, and the provinces of Groningen, Friesland and Zeeland.
The concentration of NN Group’s portfolio is situated in the
Randstad area and as a result, postal codes in city centres such
as Amsterdam, Haarlem, Utrecht and Schiedam show the largest
potential value at risk.
We have performed a similar analysis for our full non-life
underwriting book, for all lines of business. Exposures are partially
overlapping, but different in some areas, depending on the type
of coverage defined in the policy and locations of the insured
properties. We use these insights among others to consider
products that could provide additional coverage for our customers.
Analysis and limitations
The outcomes of this analysis are considered a first step to further
analyse the impact of climate change on our business. Initial results
imply that in the short term, climate change will not materially
affect our business. In the longer term (2030-2050) it is an area for
further consideration, given the considerable investments that will
be required by both governments as well as our customers to deal
with the impact of these risks.
Exact impact for individual properties cannot be derived from the
results of the analysis, as this requires more detailed data and
further modelling, which also applies to other types of physical
risks. We will continue to monitor the national climate data
sources that we have used to incorporate further changes when
new studies into the effect of climate change become available.
Furthermore, we monitor the Dutch government’s policies and
protection schemes as it is a key assumption in this assessment
that for primary flood defences, all necessary improvements will be
made in accordance with the protection levels defined in the Dutch
Water Act.
Safeguarding value creation – TCFD continued
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Flood risk projected by 2050 at postal code level
Pole rot risk projected by 2050 at city level (Randstad)
Safeguarding value creation – TCFD continued
Low
Value at Risk (€)
High
Our operating
environment
Our strategy and
performance
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governance
Safeguarding
value creation
Creating value for
our stakeholders
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figures
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Corporate
governance
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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figures
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The interests of NN Group
andourstakeholders
In performing their duties, the Executive
Board, Management Board and Supervisory
Board must carefully consider and act in
accordance with the interests of NNGroup
and the business connected with it, taking
into consideration the interests of all
stakeholders of NN Group. The organisation,
duties and way of working of the Executive
Board, Management Board and Supervisory
Board can be found in the charters of the
respective Boards. These are available on
the NN Group website.
Dutch Corporate
Governance Code
NN Group is subject to the Dutch
Corporate Governance Code (the Code).
The application of the Code by NN Group
during the financial year 2021 is described
in the publication Application of the
DutchCorporate Governance Code by
NN Group, dated 9 March 2022, which
is available on the website of NN Group.
This publication is to be read in conjunction
with the Corporate governance chapter on
page 97.
NN Group Compliance
Function Charter
NN Group is committed to upholding its
reputation and integrity through compliance
with applicable laws, regulations and ethical
standards in each of the markets in which
the company operates. All employees
are expected to adhere to these laws,
regulations and ethical standards, and
management is responsible for ensuring
such compliance. Compliance is therefore
an essential ingredient of good corporate
governance. The purpose of the
NN Group Compliance Function Charter
is to help businesses effectively manage
their compliance risks. This document is
available for download on the NN Group
corporate website.
The Executive Board is entrusted with the
management, the strategy and theoperations
of NN Group under supervision of the
Supervisory Board.
Read more in the Corporate governance
chapter on page 97-108.
The Management Board is entrusted with the
day-to-day management of NNGroup and
theoverall strategic direction of NN Group.
Read more in the Corporate governance
chapter on page 97-108.
Supervisory Board
Executive Board
Management Board
The Supervisory Board is responsible for
supervising the management of the Executive
Board and the general course of affairs of
NN Group and its businesses. The Supervisory
Board also assists the Executive Board with advice.
Read more in the Report of the Supervisory
Board on page 83-96 and in the Corporate
governance chapter on page 97-108.
How we are organised
NN Group N.V. (NN Group) is a public limited company (naamloze vennootschap)
incorporated under the laws of the Netherlands.
Corporate governance – How we are organised
Our operating
environment
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The Management Board is entrusted with the day-to-day management
and overall strategic direction of NN Group.
Our Management Board
Tjeerd Bosklopper
Chief Executive
Officer Netherlands
Non-life, Banking &
Technology
Nationality: Dutch
Date of birth: 1975
Dailah Nihot
Chief Organisation
& Corporate
Relations
Nationality: Dutch
Date of birth: 1973
Bernhard Kaufmann
Chief Risk Officer
Nationality: German
Date of birth: 1969
David Knibbe
Chief Executive
Officer and chair
of the Executive
Board and
Management Board
Nationality: Dutch
Date of birth: 1971
Delfin Rueda
Chief Financial
Officer and
vice-chair of the
Executive Board and
Management Board
Nationality: Spanish
Date of birth: 1964
Janet Stuijt
General Counsel
Nationality: Dutch
Date of birth: 1969
Leon van Riet
Chief Executive
Officer Netherlands
Life & Pensions
Nationality: Dutch
Date of birth: 1964
Fabian Rupprecht
Chief Executive
Officer International
Insurance
Nationality: German, Swiss
Date of birth: 1969
On 19 August Satish Bapat stepped down from his role as a member of the Management Board of NN Group,
following the announcement that NN Group had reached anagreement to sell NNInvestment Partners to GoldmanSachs Group, Inc.
Corporate governance – Our Management Board
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NN Group N.V.
2021 Annual Report
David Cole
Chair
Nationality: Dutch,
American
Date of birth: 1961
Hélène Vletter-van Dort
Vice-chair
Nationality: Dutch
Date of birth: 1964
Heijo Hauser
Member
Nationality: German
Date of birth: 1955
Robert Jenkins
Member
Nationality: American
Date of birth: 1951
Hans Schoen
Member
Nationality: Dutch
Date of birth: 1954
Inga Beale
Member
Nationality: British
Date of birth: 1963
Rob Lelieveld
Member
Nationality: Dutch
Date of birth: 1962
Cecilia Reyes
Member
Nationality: Filipino,
Swiss
Date of birth: 1959
Clara Streit
Member
Nationality: German,
American
Date of birth: 1968
The Supervisory Board is responsible for supervising the management of the
Executive Board and the general course of affairs of NN Group and the businesses
affiliated with it. The Supervisory Board assists the Executive Board with advice.
Our Supervisory Board
Corporate governance – Our Supervisory Board
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Introduction by the Supervisory
Board Chair
The year 2021 was another extraordinary
year dominated by the Covid-19 pandemic.
While the pandemic had a significant
impact on society at large, it has also
demonstrated the resilience of NN Group
and our employees. Throughout the year, NN
delivered a strong performance, both from a
financial and a non-financial perspective. At
the same time, we continued to support the
health and well-being of our customers, our
partners and our employees.
Just as in 2020, most meetings of the
Supervisory Board of NN Group in 2021 were
virtual. Despite the practical challenges
arising from this, we were able to fulfil
our duties while maintaining an open and
constructive dialogue with the Executive
Board and Management Board. While
doing so, our guiding principles remained
the same: focus on the long-term nature of
NN’s business model and our overall aim to
create sustainable, long-term value for our
stakeholders.
Throughout the year, the Supervisory Board
was closely involved in the following key
developments: 1) the implementation of
the Group strategy, with a special focus on
customer engagement; 2) active portfolio
management; 3) the increased focus on ESG;
and 4) ongoing succession planning.
Regarding the implementation of our
strategy, the Supervisory Board paid
particular attention to initiatives taken
to improve the satisfaction scores of our
clients and business partners. Given the
nature of many of our products and services,
in some lines of business we do not have
many contact points with customers during
any given year. The Supervisory Board
therefore advised and challenged the
Management Board to increase its focus
on ensuring customers see NN as a trusted
and accessible partner to do business with -
whether it is physically, by phone or digitally.
While clear progress was made in 2021, there
is more work to do in this area.
In addition to the strategy, the Supervisory
Board spent a significant amount of time
advising on acquisitions and divestments, as
well as the regular assessment of all of our
individual businesses. During our discussions,
the Supervisory Board consistently took into
account the interests of our stakeholders,
including customers, business partners,
employees and shareholders. In the case
of NN Investment Partners, we looked in
particular at how the intended sale would
impact our clients and employees, as well
as our focus on responsible investing. This
multi-stakeholder approach underpinned our
decision-making on all transactions and we
used it as a framework for our evaluations of
each individual business.
Let me turn now to climate change, one of
the most pressing developments of our time
and a matter that is having an increasing
impact on our customers and the societies
in which we operate. The Supervisory
Board devotes a growing focus on this topic
and throughout the year we had several
discussions on this theme with experts
across NN. To ensure we maintain our focus
as a company, we have embedded clear
sustainability targets in our Remuneration
Framework so that the performance
objectives of our Executive and Management
Board properly reflect the ambitions of the
Group.
The Supervisory Board was also engaged in
succession planning for the various Boards.
On 12 October 2021, it was announced that
we intend to appoint Annemiek van Melick as
CFO and vice-chair of the Executive Board,
succeeding Delfin Rueda. Her appointment
will be effective as of 1 July 2022, after
notification to the General Meeting.
Annemiek will bring extensive executive
experience in the financial industry and she
is well-placed to help drive our strategy in the
years to come.
At the same time, we would like to thank
Delfin for his valuable contribution and
continuous dedication to NN. During his
ten years at NN and its predecessor ING
Insurance Eurasia, Delfin has played an
instrumental role in shaping NN’s strategy
and in transforming the company into the
strong international player that it is today.
With his focus on NN’s robust financial and
risk profile, Delfin played a key role in the IPO
of the company in 2014, the implementation
of Solvency II, the acquisition of Delta Lloyd
in 2017, and several other acquisitions and
divestments which further strengthened
the company’s footprint and competitive
position.
Regarding the Supervisory Board itself, we
were pleased to welcome Cecilia Reyes, Rob
Lelieveld and Inga Beale as new members
during the year. All three new members bring
highly relevant experience and expertise,
which ensures the Supervisory Board
remains well positioned to fulfil its role in the
future.
The Supervisory Board would like to thank
NN Group’s employees for their ongoing
commitment and hard work during another
challenging year. With their dedication
and flexibility, they continued to support
our customers under often difficult
circumstances.
We hope that in 2022 we will have more
opportunities to meet in person again, as we
believe every team benefits from physical
meetings. At the same time, we are deeply
concerned by the war in Ukraine and we will
closely monitor the developments to assess
the potential impact on NN. Together with
the Executive and Management Boards,
the Supervisory Board looks forward to
contributing to the further strengthening of
NN’s foundation and the creation of long-
term value for our stakeholders in a manner
fully aligned with the company’s values and
purpose.
Yours faithfully,
David Cole
Chair Supervisory Board NN Group
Introduction by the Supervisory Board Chair
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NN Group N.V.
2021 Annual Report
21 hours
In total, 21 hours spent on Permanent
Education sessions arranged by
NN Group Permanent Education
attendance rate: 74.4%
20
Supervisory Board meetings held in 2021
Attendance rateMeetings held
Composition
Education sessions
Overall attendance ofthe
Supervisory Board meetings
95.8%
4
Supervisory Board
Committees
Supervisory Board composition
(after 1 September 2021)
Male 5
Female 4
5:4
Report of the Supervisory Board
Supervisory
Board facts
& figures
Supervisory Board
The Supervisory Board is
responsible for supervising the
management of the Executive
Board and the general course
of affairs of NN Group and the
businesses affiliated with it.
The Supervisory Board also advises
the Executive Board. In performing
its duties, the Supervisory Board
carefully considers and acts in
accordance with the interests
of NNGroup and its affiliated
businesses, taking into account
theinterests of all stakeholders.
More specifically the Supervisory Board
supervises, advises and monitors the
Executive Board with respect to among
others (i) setting and achieving the
objectives of NN Group, (ii) long-term
value creation by NN Group, and (iii) the
environmental, social and governance
aspects which are relevant to NN Group.
This Supervisory Board Report should be
read in conjunction with the Corporate
Governance section (pages 97-108) and the
Remuneration Report (pages 109-123) of this
Annual Report.
Profile of the Supervisory Board
The composition of the Supervisory Board
is such that the members are able to act
critically and independently of one another,
the Executive Board and any particular
interests. The Supervisory Board operates
as a collegial body and the knowledge,
experience and background of its individual
members is considered in the context of the
Supervisory Board as a whole.
Our operating
environment
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performance
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NN Group N.V.
2021 Annual Report
The overall composition of the Supervisory
Board is balanced taking into account
the members’ (a) nationalities, gender,
age, experience, education and work
background, (b) affinity with the nature of
the businesses and culture of NN Group,
and (c) executive experience, experience in
complex multinationals, and experience in
the political and social environment in which
such multinationals operate. This ensures
a wide range of relevant perspectives and
opinions on NN Group, and the opportunities
and challenges it faces today and will
face tomorrow.
The Supervisory Board strives to ensure that
all its members are independent, as defined
in the 2016 Corporate Governance Code.
The matrix on page 85 provides an overview
of the range of knowledge, experience and
backgrounds of the individual Supervisory
Board members.
Supervisory Board meetings
The Supervisory Board held 20 Supervisory
Board meetings in 2021. All meetings up
to May 2021 were virtual meetings due to
the Covid-19 pandemic. As from August
2021, meetings were held in hybrid form.
As a further result of the pandemic, the
Supervisory Board did not visit one of the
NN Group business units as is customary
every year. The average attendance rate
for Supervisory Board meetings was 95.8%.
None of the Supervisory Board members
were frequently absent from meetings, and
at all meetings attendance was sufficient to
constitute a valid quorum.
In addition to the formal meetings, the chair
and other members of the Supervisory
Board maintained regular contact with
NN Group’s Chief Executive Officer, other
members of the Executive Board and
Management Board, senior management,
heads of staff, business unit CEOs. Due to
the pandemic, the Supervisory Board was
unable to meet with the supervisory
authorities in 2021 as is customary every
year. However, the Supervisory Board did
meet with the supervisory authorities in
January 2022. Finally, the chair and the
Central Works Council-nominated members
of the Supervisory Board were in contact
with (representatives of) the Central
Works Council.
The attendance rate of the individual Supervisory Board members was as follows:
Name Supervisory Board Audit Committee Risk Committee
Remuneration
Committee NomGov Committee
Combined RemCo/
NomGovCo
Inga Beale
1
9/9 – 2/2 – 3/3 -
David Cole 20/20 6/6 – – 11/11 1/1
Heijo Hauser 15/20 5/6 3/4 – 10/11 1/1
Robert Jenkins 20/20 6/6 4/4 – - –
Rob Lelieveld
2
3/3 1/1 – 1/1 2/2 –
Cecilia Reyes
3
8/9 – 2/2 1/1 – –
Hans Schoen 20/20 6/6 4/4 4/4 – 1/1
Clara Streit 20/20 – 4/4 4/4 – 1/1
Hélène Vletter-van Dort 20/20 – – 4/4 11/11 1/1
Total weighted average 95.8% 96% 95% 100% 97% 100%
1 Ms Beale was appointed member of the Supervisory Board per 20 May 2021.
2 Mr Lelieveld was appointed member of the Supervisory Board per 1 September 2021.
3 Ms Reyes was appointed member of the Supervisory Board per 20 May 2021.
Report of the Supervisory Board continued
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NN Group N.V.
2021 Annual Report
I. Beale D. Cole H. Hauser R. Jenkins R. Lelieveld C. Reyes H. Schoen C. Streit
H. Vletter –
van Dort
Nationality GB NL/US DE US NL PH/CH NL US/DE NL
Gender Female Male Male Male Male Female Male Female Female
Year of birth 1963 1961 1955 1951 1962 1959 1954 1968 1964
Education
Mathematics,
Economics,
Accountancy
and
Communication
Business
Administration Mathematics
International
Studies Accountancy
Management/
Industrial
Engineering
Finance
Economics
Auditing
Business
Administration Law
Insurance √ √ √ √ √ √ √ √ √
Asset Management √ √ √ √ √ √ √ √
Banking √ √ √
Risk √ √ √ √ √ √ √ √ √
Finance and Control √ √ √ √ √ √ √ √
Law and Governance
√ √ √ √ √ √ √ √ √
Technology √ √ √ √ √ √
Organisation and
Conduct √ √ √ √ √ √ √ √ √
Executive Maturity √ √ √ √ √ √ √ √ √
Multinationals √ √ √ √ √ √ √ √ √
Social Antenna √ √ √ √ √ √ √ √ √
International
Business √ √ √ √ √ √ √ √ √
Financial Expert
1
√ √ √ √ √ √
ESG Experience √ √ √ √ √ √ √ √ √
1 As defined in article 39 (1) of Directive 2014/56/EU of the European Parliament and of the Council of 16 April 2014 amending Directive 2006/43/EC on statutory audits of annual accounts and
consolidated accounts.
All members of the Supervisory Board are independent, as defined in the 2016 Dutch Corporate Governance Code.
Supervisory Board Committees
Four committees support the Supervisory
Board: the Risk Committee, Audit
Committee, Remuneration Committee and
Nomination and Corporate Governance
Committee. The committees are responsible
for preparing matters delegated to them.
The chair of each committee verbally reports
the main points of discussion and resulting
recommendations to the Supervisory Board,
which enables the Supervisory Board as a
whole to make a decision on these matters.
For each committee, the key inputs and
underlying considerations leading to a
recommendation are recorded.
Please refer to pages 90 to 96 of this report
for the reports of each of the committees.
Key developments
In 2021, the Supervisory Board was involved
in a number of key developments aimed at
long-term value creation for NN Group and
its stakeholders.
Implementation and progress of
thestrategy
In 2020, the Supervisory Board was
taken along the journey in redefining NN
Group’s strategy and purpose statement.
This resulted in a strategy that is focused
on sustainable long-term value creation
for all stakeholders and aims for resilient
and growing long-term capital generation
for shareholders. The SB is pleased to
see that NN continues to build on the
solid foundations of the company, while
becoming an even more customer-centric
and data-driven organisation, accelerating
management actions to increase cash flow
generation and driving profitable growth in
attractive markets.
Throughout 2021, the Executive Board
andthe Management Board ensured that
the Supervisory Board was kept up to date
on the implementation of the strategy,
as well as the challenges faced in the
implementation process on a regular basis.
These updates provided the Supervisory
Board with a holistic overview on the
progress towards both the non-financial
andfinancial targets related to the five
strategic commitments (i) customers and
distribution, (ii) products and services,
(iii) people and organisation, (iv) financial
strength, and (v) society.
NN had a strong year and performed
well across markets and segments,
with increased focus and attention on
sustainability. Netherlands Life saw an
increase in its defined contribution Assets
under Management, and NN Bank and
Woonnu originated a record volume of
new mortgages. Netherlands Non-life’s
results were strong, despite the claims
resulting from the floods in July 2021. NN’s
business in Japan and strong tied agent
force throughout Europe continued to
Report of the Supervisory Board continued
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environment
Our strategy and
performance
Corporate
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NN Group N.V.
2021 Annual Report
make a solid contribution to our overall
results as they were increasingly able to
meet our customers’ needs via remote
sales and service processes and saw an
increased demand for protection products.
Partnerships were further strengthened
and expanded, for example, by building
reciprocity with our bank partners to offer
banking products such as mortgages to our
customers. Furthermore, NN strengthened
its contribution to the transition to a
sustainable economy, playing its part in
limiting the rise in global temperature to
a maximum of 1.5°C in line with the Paris
Agreement through setting targets for
our investments and our own operations.
As part of NN’s commitment to building
stronger and better communities, volunteer
initiatives were increased and existing and
new non-profit initiatives, aimed at improving
people’s financial well-being, were scaled up
and started.
Transformation remains a priority for
all business units and the first tangible
signs of progress became evident in 2021.
Customer engagement platforms around
Carefree Retirement and Self-care were
launched in Spain, and in Turkey and
Poland, respectively. In the Netherlands,
NN further expanded its customer
engagement platforms through various
new launches, such as Veerkracht, which
promotes mental, physical and social
well-being. Throughout NN, the focus
was on digitalisation and improving data
and artificial intelligence (AI) capabilities,
enhancing customer engagement and
efficiencies. These developments also
require different skills from employees, such
as IT and data analytics, as well as new ways
of collaborating and managing teams.
Workforce transformation therefore remains
one of NN’s top priorities in implementing
our strategy, especially given the scarce
labour market. NN is an attractive employer;
however, this will continue to require
significant efforts in recruitment, re-
skilling, leadership development and ways
of working.
The SB concludes that in general, good
progress has been made in executing the
strategy, with further room to improve the
speed of implementation, which continues to
be addressed throughout the company.
That said, in light of the rapid technological
developments in the industry, the war
on talent, and the high importance of
sustainability, the Supervisory Board
encouraged and supported the Executive
Board and Management Board on the
need to accelerate by building an engaged
workforce and nurturing a culture aligned
with our purpose, values and ambition.
M&A
The Supervisory Board was taken along in
and supported the outcomes of the 2021
portfolio review, taking into account the
different markets and strategy reviews that
were conducted, leading up to among others
the sale of the Bulgarian Pension and Life
business, the sale of the Belgium closed
book portfolio, the acquisition of MetLife
Poland and Greece and Heinenoord in the
Netherlands, and the divestment of NN
Investment Partners (NN IP).
Throughout 2021, the Supervisory Board
was regularly updated on all stages of
the various projects. This allowed the
Supervisory Board to advise, supervise and
robustly challenge the Executive Board and
Management Board on these transactions
ensuring that throughout these processes
the interests of all stakeholders and long-
term value creation remained an integral
part of the considerations on the respective
transactions. The Supervisory Board
wishes to express its appreciation for the
commitment shown by everyone involved
and the diligent approach in which these
transactions were executed successfully,
ensuring continued long term value creation
for NN Group and all its stakeholders.
On 11 February 2021, NN Group announced
the sale of its Bulgarian Pension and
Life business.
On 5 July 2021, NN Group announced
that it had agreed to acquire MetLife’s
business activities in Poland and Greece,
for a total consideration of EUR584 million.
The acquisition will further bolster NN’s
leading market position, strengthening its
position in life and pensions in Poland, while
creating the market leading insurance
company in Greece.
On 8 July 2021, NN Group announced the
acquisition of a majority stake in Dutch
insurance broker Heinenoord. Heinenoord is
one of the largest insurance brokers and
service providers in the Dutch insurance
market, offering policy administration,
underwriting services and claims handling,
among others. The company is growing
rapidly in both revenues and margin and is
active as a broker and mandated agent for
a wide variety of non-life insurance products
and insurers, servicing both the SME and
retail market. The acquisition is in line with
NN’s customer-centric proposition.
On 19 August 2021, NN Group announced
the agreement to sell its asset manager
NN IP to Goldman Sachs Group, Inc. for total
cash proceeds of EUR1.7 billion. As part of
the agreement, NN Group and Goldman
Sachs Asset Management will enter into
a ten-year strategic partnership under
which the combined company will continue
to provide asset management services
to NN Group. Throughout this process
the Supervisory Board paid particular
attention to the proposed terms of the
strategic partnership, the future investment
capabilities of the combined entity and the
shared vision and alignment of interests such
as environmental social and governance
(ESG) factors and ensuring that the overall
goal is to continue creating long-term value
for NN Group and its stakeholders.
The combination of the complementary
investment capabilities of NN IP and
Goldman Sachs will create a full suite of
asset management products that can be
offered to clients through the distribution
networks of both parties. Through Goldman
Sachs, NN IP has a broader platform to
accelerate its growth and further improve
the offering and service to its clients.
It will also allow NN Group to continue
its successful cooperation with NN IP
and to benefit from the strengths and
complementary product propositions of
Goldman Sachs.
On 8 October 2021, NN Group announced
the intention of NN Belgium to sell the
closed book life portfolio, a transaction that
will simplify NN Belgium’s IT structure and
allow NN Belgium to focus on executing its
strategy to further grow its protection and
pension business.
Report of the Supervisory Board continued
Our operating
environment
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performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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Changes in the Supervisory Board and the
Executive Board
On 10 February 2021, NN Group announced
that the Supervisory Board nominated
Ms Cecilia Reyes and Mr Rob Lelieveld for
appointment as members of NN Group’s
Supervisory Board for a term of four
years. These nominations were made
with the intention to further strengthen
the composition of the Supervisory Board
from a risk management and financial
expertise perspective. On 2 April 2021,
NN Group further announced that the
Supervisory Board nominated Ms Inga
Beale for appointment as member of NN
Group’s Supervisory Board for a term of
four years. This nomination was made
with the intention to further strengthen the
composition of the Supervisory Board with a
specific focus on transformation processes.
These appointments were approved by the
Dutch Central Bank (DNB) and adopted
by the General Meeting at the annual
general meeting.
On 12 October 2021, NN Group announced
that the Supervisory Board intends to
appoint Ms Annemiek van Melick as Chief
Financial Officer (CFO) and vice-chair of
the Executive Board of NN Group for a term
of four years. The appointment of Ms Van
Melick was approved by the DNB and will
be notified to the General Meeting at the
annual general meeting.
Ms Van Melick will succeed Mr Delfin Rueda
who will leave NN Group as of 1 July 2022,
after being CFO and vice-chair of the
Executive Board of NN Group since 2014.
The Supervisory Board followed an extensive
selection process using a specialised
agency with the close involvement of the
Nomination and Corporate Governance
Committee and other members of the
Supervisory Board in relation to the
appointment of Ms Van Melick.
The Supervisory Board is confident that,
with this appointment, the Executive Board
will continue to be well-positioned to lead
the company in this fast-paced and dynamic
environment, delivering on the strategic
priorities and ensuring sustainable long-term
value creation for all stakeholders.
Other discussion topics
Other important topics of discussion during
the Supervisory Board meetings in 2021
included (i) the ongoing Covid-19 pandemic,
(ii) culture, (iii) business plan and capital plan,
(iv) responsible investment, (v) unit-linked
products in the Netherlands, (vi) Executive
Board and Management Board assessment,
and (vii) annual accounts, dividend and
share buyback programme. These topics are
addressed below in turn.
In addition, the Supervisory Board:
• Actively followed developments,
opportunities and challenges in the
various insurance markets, the impact of
continued low interest rates and increasing
inflation rates in the second half of 2021,
impact of the European Insurance and
Occupational Pensions Authority’s (EIOPA)
Opinion on the Solvency II review to the
European Commission, and preparations
for the Dutch pension legislation revision,
of which implementation has been delayed
by one year.
• Was periodically updated by the Executive
Board and Management Board on the
overall commercial performance of
NN Group and its affiliated businesses,
the ongoing integration of VIVAT Non-
life, the IT budget and benchmark, IT
simplification project, and engagement
with stakeholders, and provided input on
the deep-dive investor presentations of
26 May 2021 and 25 November 2021.
• Discussed and/or approved the financial
quarterly and semi-annual results of NN
Group, which included the Quarterly
reports of Corporate Audit Services (CAS)
and Quarterly reports of KPMG, 2021
Key risks and risk appetite statement, NN
Bank Funding plan 2021, and NN Group
debt issuance.
• Was regularly updated on the (ongoing)
review of the internal governance and
operating arrangements applicable within
the group in order to contribute to the
ambition of remaining competitive and
delivering on the strategy by identifying
and eliminating inefficiencies that can be
facilitated by a change in our Governance
and Operating Model and the benefits
realised in 2021.
• Was updated on and addressed matters
concerning the NN Group values and
its purpose, the results of the annual
employee engagement survey, and the
performance goals for the Executive
Board and Management Board.
• Gained insight into the Key Talent
Management and Succession Planning
within NN and discussed the succession
plans of the Executive Board, Management
Board and several senior leaders.
• Paid continued heightened attention in
different sessions to the non-financial
key performance indicators and the
monitoring thereof by the Purpose Council
in preparation of the Management
Board’s decision-making on the related
issues. The objectives of the Purpose
Council are to promote the successful
adoption of the NN purpose, embed it in
the company’s culture and to centrally
oversee the implementation and advise
the Executive Board and the Management
Board on determining company-specific
metrics for fulfilling the purpose and on
setting performance indicators that drive
behaviour throughout the organisation.
• Addressed the main points of discussion
as verbally reported on by the chair of
each of the committees. These topics
included amongst others the Year Plans
2021 Control Functions, which included
the NN Group Systematic Integrity Risk
Assessment, the Risk Control Framework,
Information technology and security, NN
Group’s partial internal model, the NN
Group Own Risk and Solvency Assessment
(ORSA) Report 2020, the Preparatory
Crisis Plan 2021, Financial Economic Crime
(FEC) related topics, implementation of
the IFRS 9 and 17 Programme, Board
objectives and NN Group System of
Governance Review. These topics are
further addressed in detail below under
the respective committee reports.
Report of the Supervisory Board continued
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environment
Our strategy and
performance
Corporate
governance
Safeguarding
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Creating value for
our stakeholders
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Ongoing Covid-19 pandemic
Following the outbreak of the Covid-19
pandemic, the Supervisory Board was
regularly updated on the impact of the
pandemic on various aspects of NN Group’s
business, employees, customers and the
resulting operational crisis management.
A Corona Coordination Team (CCT), a multi-
disciplinary team of specialists, was formed
in 2020 and continued throughout 2021 to
ensure the daily monitoring and proactive
management of business continuity and
employee safety.
The vast majority of employees were able
to continue working from home in 2021.
The morale of employees was monitored
throughout this period through surveys, and
the results were shared with the Supervisory
Board. All relevant risks, financial and non-
financial, related to Covid-19 developments
were monitored regularly via a dashboard
that was shared with the Executive Board,
Management Board and Supervisory Board.
The Supervisory Board was also updated on
and addressed several initiatives launched
to support the different stakeholder groups,
including provision of additional customer
support, during the Covid-19 pandemic.
The Supervisory Board wants to express
its appreciation for the commitment shown
by the Executive Board, the Management
Board and each employee during these
challenging times, which commitment is
also reflected in the measurement of the NN
Group values further described below under
the heading Culture.
Culture
NN Group’s values, described in the
NN statement of Living our Values, set
the standard for conduct and provide
a compass for decision-making within
the group and all our interactions with
stakeholders. The values, care, clear
and commit, are an integral part of our
strategic framework and are a crucial
element in achieving our ambition to
become an industry leader, known for
customer engagement, talented people, and
contribution to society. In addition, the NN
Code of Conduct clearly outlines minimum
rules of conduct that NN Group employees
must adhere to at all times, and which they
are requested to formally acknowledge on
an annual basis.
The Executive Board and Management
Board are responsible for creating a culture
aimed at long-term value creation, for which
the NN statement of Living our Values and
NN Code of Conduct form the foundation.
The Executive Board and Management
Board therefore periodically report to the
Supervisory Board on how the NN statement
of Living our Values is being put into practice
within the group, and the effectiveness of
and compliance with the Code of Conduct.
The Supervisory Board supervises the
Executive Board and Management Board on
this matter.
The Supervisory Board was presented
with the annual Living our Values Report
on programme implementation 2021,
which provided insight into how NN is living
the values according to our employees,
customers and the general public,
addressed areas of concern, and provided
recommendations for improvements.
Measurements on the three values
continued to score high among employees
and employees feel highly connected
with the NN values. The NN values remain
recognisable for customers and the general
public and are well-embedded in the NN
brand in most markets where NN is active.
From a compliance perspective a new
mandatory e-learning was launched in 2021,
focused on handling confidential information
with care. In addition, the Risk Culture check,
which monitors cultural elements within the
organisation that form the bases for solid
risk management, was integrated with the
Maturity Assessment on risk management,
jointly now referred to as the Risk Framework
Maturity Reflection.
Business plan and capital plan
In January 2021, the Executive Board
and Management Board presented the
Supervisory Board with NN Group’s
business plan for 2021-2023 and capital
plan for 2021-2025. This outlined, among
other things, the projected growth of the
operating result and value of new business,
operating capital generation, capital flows,
solvency development, administrative
expense savings and investments and
the challenges in this regard, investments
related to innovation and strategic initiatives,
projected improvements to the combined
ratio (non-life), return on equity (bank) and
cost/income ratio (asset management),
the capital and cash position over the plan
period, projected performance against
various other financial parameters, as well
as Covid-19 impact. After thorough analysis
and discussion, the business plan for 2021-
2023 and the capital plan for 2021-2025
were approved by the Supervisory Board in
January 2021.
Throughout the year, the Supervisory Board
was regularly updated on how NN Group
was performing on its business and capital
plan and is satisfied with the performance
reported. Topics of particular focus included:
• The shift towards operating capital
generation during the year as key
performance indicator and the challenges
in this regard.
• Digital transformation of the business and
driving innovation across markets.
• Investments versus capital return.
• The impact of the low interest
rates, increasing inflation rates and
market volatility.
• Performance improvement at Netherlands
Non-life (taking into account the negative
impact of floods and Covid-19) and
NN Bank.
• The strong results at NN Life Japan and
the continuing dynamic market in Japan.
• Challenges faced by business units
including Movir, NN Spain Non-life, NN
Belgium, Netherlands Life and the ongoing
optimisation of the investment portfolio,
and NN Turkey.
• Steps taken by NN Group and NN IP to
further embrace sustainability and the
inclusion of ESG factors.
Responsible investment
For NN Group, as a large international
financial services company, responsible
investment is an important factor in
what we do. In our role as investor, we
integrate ESG factors into our investment
process. Our asset manager, NN IP, has
been integrating ESG factors into the
investment process for over a decade.
Significant progress was made in 2021 in
the areas of responsible investing, client
experience and operations and technology,
of which progress the Supervisory Board
was regularly updated. NN Group’s
Responsible Investment (RI) Framework
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policy describes the measures the group
takes to responsibly invest its own assets
and those entrusted to them by customers.
Measures include integration of ESG factors in
research/valuation, voting, engagement and,
as a measure of last resort, restriction.
NN’s responsible investment approach is
guided by norms-based responsible investing
criteria, which reflect our investment beliefs
and values, relevant laws and internationally
recognised standards from the United Nations
Global Compact and OECD Guidelines for
Multinational Enterprises. If we identify that a
company severely and structurally breaches
our norms-based criteria, we first assess the
engagement potential to address the violation.
Only when engagement is not considered
feasible, we will decide to remove the issuer
from the eligible investment universe and place
it on the Restricted List, which applies across
the organisation. The Restricted List is updated
four times a year and the Supervisory Board
is informed on changes where relevant, for
example, when it concerns the exclusion of
specific sectors.
Furthermore, as part of NN’s long-term
ambition, the proprietary investment portfolio is
being transitioned to net-zero greenhouse gas
emissions by 2050, which is in line with the 1.5˚C
target of the Paris Agreement. Playing our part
in helping the real economy to decarbonise
serves as a guiding principle in our approach.
To oversee the process of aligning our portfolio
to the Paris goals and defining action plans and
targets, a NN Paris Alignment Council has been
established, chaired by the NN Group Chief
Investment Officer. Paris Alignment strategies
were developed and rolled out for different
asset classes and interim targets were set for
2025 and 2030.
In the regular updates provided to the
Supervisory Board on the progress towards
both the non-financial and financial targets
related to the five strategic commitments, a
robust discussion took place on the progress
and challenges in relation to ESG-integrated
Assets under Management, integration of ESG
in underwriting, acceleration of the transition
to a low-carbon economy and the reduction
of the NN direct environment footprint,
among others. During these discussions the
Supervisory Board encouraged the progress
made, but also challenged whether enough is
being done in this regard.
Unit-linked products in the Netherlands
See Note 45 in this Annual Report for a
description of legal proceedings with respect
to unit-linked products in the Netherlands.
The Supervisory Board was periodically
updated on relevant developments in
the collective actions and individual legal
proceedings pending against Nationale-
Nederlanden.
Executive Board and Management
Boardassessment
The Executive Board and Management
Board performance goals reflect both
financial and non-financial objectives to
safeguard the long-term success of the
business. To demonstrate commitment to our
NN values, care, clear, commit the Boards’
performances are also assessed based on the
NN Leadership Profile. In the fourth quarter
of 2021, the Supervisory Board conducted
this assessment of the Executive Board and
Management Board and its members. To this
end, the Supervisory Board members met with
the Executive Board and Management Board
members individually in a series of two-on-one
meetings. The outcomes of the assessments
were discussed during a Supervisory Board
meeting which resulted in follow-up actions.
For a detailed overview of the outcome of the
Executive Board’s performance assessment
against the financial and non-financial
objectives, please refer to page 114 of the
Remuneration Report.
Annual accounts, dividend and share
buyback programme
During 2021 the Supervisory Board discussed
and approved the 2020 annual accounts,
the 2020 proposed final dividend payment
and the share buyback programme which
commenced on 1 March 2021 and NN Group’s
2021 interim dividend.
The Executive Board prepared the 2021
annual accounts and discussed these with the
Supervisory Board. The 2021 annual accounts
will be submitted for adoption by the General
Meeting at the 2022 annual general meeting,
as part of the 2021 Annual Report. NN Group
will propose paying a final dividend of
EUR1.56 per ordinary share, or approximately
EUR476 million in total, based on the number
of outstanding shares on the date of this
Annual Report, excluding the shares held by
NN Group in its own capital in treasury.
Continuous learning
It is essential that the Supervisory Board
members are knowledgeable about how
NN Group and its affiliated businesses are
run, trends in the market and regulations
impacting NN’s business, and have the
specific expertise required for the fulfilment
of their duties. Supervisory Board members
should proactively maintain their expertise
at the required standard and, where
necessary, endeavour to improve their
expertise. The Supervisory Board Induction
Programme and Permanent Education
Programme for Supervisory Board members
therefore cover topics necessary to ensure
the continuous learning of Supervisory
Board members, both at the outset and after
their appointment.
The Supervisory Board members followed
the 2021 NN Group Permanent Education
Programme, which was developed based
on the input received from the 2020 annual
Supervisory Board self-assessment and
requests from the Supervisory Board
members, the Executive Board and
Management Board, and staff.
In total, 21 hours of general knowledge and
deep-dive sessions were arranged by NN
Group. These programmes covered the
relevant developments within NN Group and
in the financial sector, as well as the duty of
care towards the client.
The general knowledge sessions included
(in alphabetical order) Analysis of ESG
ratings (including the DJSI), Diversity &
Inclusion Training, IFRS 9 and 17, IFRS 9 and
17 Programme update, i-LEAD & Meaningful
Conversations, Longevity Risk, Recovery
and Resolution of Insurance Companies,
Risks for Supervisory Board, Executive
Board and Management Board: criminal
liability of companies and management,
2021 SAA Study and DNB SAA Action Plan,
Solvency II 2020 Review, Terrorist financing,
money laundering and sanctions risk (in
May and July), The changing environment
around environment (including changing
stakeholder expectations, climate-related
risks and opportunities), and Unit-linked:
overview proceedings.
Report of the Supervisory Board continued
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The business deep-dive session covered
Netherlands Life, Customer Experience and
Scaling excellence: Building the organisation
and capabilities for digital transformation.
As part of these deep-dive sessions, the
Supervisory Board also focused on gaining
a better understanding of the business in
three themes (i) customer experience,
(ii) operational excellence, and
(iii) performance versus peers.
Aside from the Permanent Education
Programme, the Supervisory Board
members also met with NN Group
colleagues and teams, as well as with
some of the function heads of NN Group’s
Support Functions, in order to learn more
about NN Group’s businesses and activities.
The Supervisory Board members also
participated individually in several education
and knowledge sessions organised by
external organisations and took advantage
of the different learning possibilities online to
ensure that they kept themselves informed.
Self-assessment
As is customary on an annual basis,
the Supervisory Board and committees
evaluated their own performance over the
year 2021. The Nomination and Corporate
Governance Committee discussed the
importance of having a benchmark on the
functioning of the Supervisory Board and its
individual members. In light of the changed
composition of the Supervisory Board, it
was agreed to engage an external advisor
to facilitate the 2021 self-assessment in
reviewing the functioning of the Supervisory
Board as a whole, its committees and
their respective chairs, and the individual
Supervisory Board members, and to support
the Supervisory Board in strengthening
its effectiveness.
The scope of the 2021 self-assessment
included individual interviews with each of
the Supervisory Board, Executive Board and
Management Board members, as well as
a number of group staff members and the
external auditor by the external advisor.
The outcome of the 2021 self-assessment
was discussed during a workshop session
with the full Supervisory Board in February
2022, facilitated by the external party.
The main conclusion from the self-assessment
was that the Supervisory Board is a well-
functioning team of involved and reflective
professionals with relevant knowledge
and expertise. The Supervisory Board and
Committee meetings are perceived as
effective. Areas identified where more value
can be added and effectiveness improved
are (i) striking a more balanced approach
between conformance and performance,
(ii) supervising digital transformation with
supporting mechanisms, (iii) gaining a
better insight into the culture of Insurance
International (which is partly attributed
to the recent Covid-19 restrictions), and
(iv) investing more in relations within the
Group by organising informal meetings with
management, business unit CEOs, employees
and trainees within the organisation, as soon
as Covid-19 allows.
Risk Committee
The Risk Committee assists the Supervisory
Board in performing its duties. To this
end, it prepares items for discussion and
decision-making by the Supervisory Board,
and recommends actions in various areas,
including:
• NN Group’s key risks and risk appetite
statements, risk strategy and policies.
• Risk exposures resulting from the business
strategies and plans of NN Group and its
affiliated businesses.
• The design, operation and effectiveness
of the risk management and internal
control systems of NN Group (the Risk
Control Framework).
• NN Group’s public disclosures on risk and
risk management.
• Any Material Transactions.
The Risk Committee works closely with the
Audit Committee in order to avoid omissions
and duplication in its activities. For this
reason, the chair of the Risk Committee is
also a member of the Audit Committee, and
vice versa.
Composition and attendance
The members of the Risk Committee are
Mr Hauser (chair), Ms Beale, Mr Jenkins, Ms
Reyes, Mr Schoen and Ms Streit. The Risk
Committee met four times in 2021 with a
95% attendance rate. All meetings up to
May 2021 were virtual meetings due to
the Covid-19 pandemic. As from August
2021, meetings were held in hybrid form.
Ms Beale and Ms Reyes were appointed as
members of the Risk Committee per 20 May
2021. Mr Lelieveld and Ms Vletter-van Dort
attended the meeting in November 2021
as observers.
Other attendees were the Chief Executive
Officer, Chief Financial Officer, Chief Risk
Officer, General Counsel, General Manager
Corporate Audit Services (CAS), Head of
Group Enterprise Risk Management and the
external auditor (KPMG).
During 2021, the chair of the Risk Committee
regularly liaised with the Chief Risk Officer
and Chief Compliance Officer, and met with
the external auditor and relevant subject-
matter experts.
Discussion topics
During its meetings, the Risk Committee
discussed, among other things: (i) the Risk
Plan 2021, the Group Legal Operational Plan,
and the Compliance Operational Plan 2021
and the NN Group Systematic Integrity Risk
Assessment (Group SIRA), (ii) the Risk Control
Framework, (iii) the risk management report,
(iv) information technology (IT) and security,
and (v) the performance and appropriateness
of NN Group’s Partial Internal Model (PIM).
These topics are addressed below in turn.
Following the Covid-19 pandemic, its impact on
various aspects of NN Group’s business was
addressed in several Risk Committee topics
and underlying documents.
The Risk Committee discussed the NN Group
Own Risk and Solvency Assessment (ORSA)
Report 2020, which took into account the
new strategy and the impact of the Covid-19
pandemic. The Risk Committee reviewed the
key risks and risk appetite statements 2021,
which were prepared taking into account
both the impact of the Covid-19 pandemic
and the NN Group strategy. The Risk
Committee also regularly addressed the
potential impact of the 2020 Solvency II
review request of the European Commission
to EIOPA to provide technical advice for the
European Commission’s legislative proposal
(Solvency II Review). Furthermore, the Risk
Committee discussed the Preparatory Crisis
Plan 2021, Derivatives Counterparty Risk
report, the Strategic Asset Allocation, the
2020 Actuarial Function Report. The Risk
Committee was regularly updated on
the work performed with respect to the
Report of the Supervisory Board continued
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2021 Annual Report
risks related to FEC, related operational
shortcomings and the progress in addressing
these. The improvements to NN Group’s Risk
Management function with respect to its
organisation and processes as well as the
outcome of the former Risk culture check
ins of the business units, now called the Risk
Framework Maturity Reflections, were also
discussed in the Risk Committee meetings.
Year Plans 2021 Control Functions
The NN Group Risk Plan 2021 outlines the
ex-ante risk priorities for 2021, taking into
account NN Group’s strategic direction and
risk profile, the Risk Control Framework, and
external developments and regulations, and
is consistent with the NN Group Business Plan
2021-2023. The Risk Management function has
the ambition to keep the company safe, ensure
balanced risk taking and support NN’s strategy
through constructive challenge and expertise.
The key focus areas for 2021 to support the
strategy include among others NN Group’s
Solvency position, strengthening capabilities
and procedures of risk management in line
with the strategy to increase investment
risk, customers and distribution, product
strategy, simplification and effectiveness of
support functions, ESG strategy, and IT and
digital transformation.
The Compliance Operational Plan 2021
includes the planned activities supporting
NN Group in reaching its overall objectives.
These activities are also derived from the NN
Group SIRA 2021, which forms the basis for the
Compliance Operational Plan.
The Compliance Operational Plan safeguards
an integrated oversight approach through
close collaboration with Risk and Legal
functions to promote multidisciplinary thinking
and interaction, to enable better alignment
at Group level with clear communication
to business units, to ensure efficient use
of resources and capacity, and to enable
further cooperation under the Risk Control
Framework. The main risks and attention areas
addressed in the Compliance Operational
Plan are based on the SIRAs of NN Bank,
Netherlands Life and Netherlands Non-life, as
well as on the Non-Financial Risk Assessments
of NN Group’s international business units,
and include FEC risks, product customer value
risk, product and client information risk, risk
of conflict of interest and risk of dealing with
confidential information, among others.
The Group Legal Operational Plan 2021
takes into account industry developments,
is aligned with the NN Group strategy
and priorities and reflects the Integrated
Oversight approach as agreed upon
by Risk, Group Compliance and Group
Legal. Group Legal is focused on
supporting management in managing
legal risks, supporting the execution of
the strategic agenda and preserving the
legal integrity of the NN Group holding
operations. The priorities identified for
2021 are to support transformation and
business development, transaction and
regulatory support in NN Group’s strategy
execution, digitalisation and the use of data
and oversight.
Risk Control Framework
The objectives of the Risk Control
Framework include ensuring that the
management boards of the NN Group
business units and function heads at
head office:
• Ensure relevant risks are understood at all
levels of their organisation/department
and mitigated through effective controls.
• Have robust processes in place that
demonstrate effectiveness of controls
and compliance with governance, policies
and standards.
• Are appropriately informed about the
levels of risks and effectiveness of controls.
• Can confirm they operate within the risk
appetite and, if not, are aware of the issues
and necessary mitigating actions.
In 2021, NN Group and its business units
continued to make progress in further
embedding and improving the Risk Control
Framework and in performing their control
tracking and testing activities as an
inextricable part of the business as usual.
The risk management report
The quarterly risk management report of NN
Group to the Supervisory Board reports risks
against the risk appetite of NN Group and
its affiliated businesses. It covers strategic,
financial and non-financial risks.
The report included updates on the current
and forward-looking risks emanating from
the Covid-19 pandemic, including measures
taken and planned. The impact of the
Covid-19 pandemic on NN Group and its
customers remained limited, which shows
strong business resilience in the businesses.
The report further included updates on the
status of the ongoing monitoring and trend-
developments, developments related to the
partial internal model (PIM), developments
around product suitability, and FEC-related
risks throughout the Group. In addition, the
report provides insight into the status of
legal claims and incident reporting.
The Risk Committee periodically discussed
the key strategic challenges facing the
insurance, asset management and banking
businesses of NN Group, NN Group strategy
execution, progress in the operating capital
generation (OCG) reporting, as well as the
implementation of sustainability legislation
by the European Union. It also addressed
development of the balance sheet, the
2020 Solvency II Review, operational and
IT security risks, VIVAT Non-life integration,
risk assessments carried out, for example,
Systematic Integrity Risk Assessments
and Fraud Risk Assessments and specific
measures adopted to mitigate risks, and
customer suitability risk.
Information technology and security
NN Group deems the reliability and security
of IT and IT infrastructure paramount.
Each quarter, the Risk Committee is
therefore updated on developments,
achievements and risks in the field of
IT and security, which include a status
update on current IT change projects, IT
chain availability and the cybersecurity
and risk status of NN Group. In 2021, the
IT team demonstrated continued efforts
and commitment. The main challenges
from an IT perspective in 2021 related
to execution of the IT simplification
programme, improving the availability of
core systems, decreasing the number of
incidents and overdue issues, improving IT
control maturity, improving cybersecurity
capabilities such as ransomware awareness
and protection, cloud security and multi
factor authentication, as well as identity and
access management.
Report of the Supervisory Board continued
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During 2021, progress was made in relation
to the decommissioning plans to simplify NN
Group’s application landscape and the IT
Security Programme. The scaling excellence
programme was launched, which is focused
on ensuring unique customer experience by
investing in skills, knowledge and expertise
in the front-end applications of NN Group.
Work is ongoing with respect to execution
of the IT simplification programme to ensure
a resilient IT with future-proof IT capabilities
and lower costs, with the first results
starting to materialise. The Information
Security Risk Mitigation Plan is close to
reaching the aspired maturity levels as a
result of good progress in strengthening IT
controls. The IT control environment has
also been further integrated into the risk
management reporting.
NN Group’s partial internal model (PIM)
The PIM is used to measure, manage and
report the risks within the Group. It consists
of many components, and is therefore widely
employed for risk management, capital
management and other business decisions
such as product pricing and asset allocation.
Each year an assessment of the PIM takes
place in the first quarter, which covers
all relevant information of the preceding
calendar year. The assessment covers all
risk models which are part of NN Group’s
PIM used for the calculation of the Basic
Solvency Capital Requirement. The outcome
of this assessment is presented to the
Supervisory Board in May each year during
which meeting the key priorities for the year
going forward are also addressed.
The major model change relating to the
inclusion of the risk margin in the interest
rate Solvency Capital Requirement was
approved by the DNB and implemented.
The application for Netherlands Life’s major
model change related to the redesign of the
longevity risk models has been submitted to
the DNB for approval. The application for the
major model change of Netherlands Non-life
related to the inclusion of VIVAT in the PIM
was also submitted to the DNB for approval.
The Risk Committee was regularly apprised
on the progress of these model changes
as well as the outcomes of the reviews and
testing performed on these controls.
The main conclusion of the 2021 report on
the PIM performance is that the internal
model is appropriate for its intended
use and performed well even during
the market turbulences caused by the
Covid-19 pandemic.
Audit Committee
The Audit Committee assists the
Supervisory Board in the performance of
its duties. To this end, it prepares items
for discussion and decision-making by
the Supervisory Board, and recommends
actions in various areas, including:
• The design, operation and effectiveness of
the internal risk management and control
systems related to financial reporting.
• The integrity and quality of the financial
reporting process.
• Periodic financial reports and any ad hoc
financial information.
• The findings and outcomes of any audit work,
by both the external auditor and CAS, the
internal audit department of NN Group (e.g.
as contained in the quarterly audit reports
and yearly management letter/report).
• Establishing a procedure for the
selection and recommendation of the
(re)appointment by the Supervisory Board
of the external auditor.
The Audit Committee works closely with
the Risk Committee to avoid omissions
and duplication in its activities. For this
reason, the chair of the Audit Committee is
also a member of the Risk Committee, and
vice versa.
Composition and attendance
The members of the Audit Committee are
Mr Schoen (chair), Mr Cole, Mr Hauser,
Mr Jenkins and Mr Lelieveld. The Audit
Committee held six meetings during 2021
with a 96% attendance rate. All meetings
up to May 2021 were virtual meetings due
to the Covid-19 pandemic. As from August
2021 meetings were held in hybrid form.
Mr Lelieveld was appointed as a member of
the Audit Committee per 1 September 2021.
Ms Reyes attended the meeting in August
2021 as an observer.
Other attendees were the Chief Executive
Officer, Chief Financial Officer, Chief Risk
Officer, General Counsel, General Manager
CAS, Head of Group Finance & Reporting,
Head of Performance & Analytics and
the external auditor (KPMG). Subject-
matter specialists also regularly attended
the meetings.
During 2021, the chair of the Audit Committee
separately met with the Chief Financial
Officer, General Manager CAS, subject-
matter experts and the external auditor to
discuss topical issues.
In addition to the regular Audit Committee
meetings, the Audit Committee also held
closed sessions, which were only attended
by the Audit Committee members, the
General Manager CAS and the external
auditor. In all its meetings, the Audit
Committee encouraged open and interactive
discussion, and the sharing of critical insights
and observations.
Discussion topics
In 2021 the Audit Committee covered a variety
of topics in its meetings with continued due
consideration of the impact of the ongoing
Covid-19 pandemic. These included recurring
items that the Audit Committee deals with as
a matter of course, typically in relation to the
financial reports, press releases, accounting
and regulatory developments, pending legal
proceedings, interim dividend payment to
shareholders and share buyback programme,
the independence of KPMG, remuneration
and evaluation of both KPMG and the General
Manager CAS, specific financial transactions,
Solvency II developments, IFRS and Solvency
II reporting, including a second line review
opinion on the Reserve Adequacy Test and
on the Own Funds and the Solvency Capital
Requirement (SCR) as part of the NN Group
Own Funds/SCR Report, internal controls on
financial reporting, and changes in financial
reporting processes and systems. Moreover,
NN Group’s financial reporting included an
analysis on OCG and work ongoing to further
improve OCG reporting. The Audit Committee
reflected on the decision to change NN
Group’s external reporting frequency to
semi-annually in 2020 and agreed that
this change positively impacted long-term
value thinking, which supports our strategy.
The quarterly internal reporting process has
been maintained.
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With the chair of the Audit Committee in
the lead, the Audit Committee initiated
the process, in close cooperation with the
Executive Board, to reappoint the external
auditor as of 2023.
During 2021, the Audit Committee was
regularly updated on the status and
implementation of the IFRS 9 and 17
Programme and the key platforms and
other initiatives in the 2021-2023 Finance
Roadmap. The impact of Covid-19 on the
Finance Roadmap has been limited and the
teams and business units adapted well to the
new circumstances.
Annually, the Audit Committee performs a
deep dive into the present position and future
developments in respect of corporate income
tax and any other relevant tax regulations, NN
Group’s tax strategy and tax transparency
developments. Group Tax updates the Audit
Committee on the material tax risks and
mitigating actions taken. In 2021, topics such
as the Dutch Governmental Budget plan
2021, Public country-by-country reporting,
and OECD Pillar Two (minimum taxation
rule) were presented and discussed with the
Audit Committee.
In its meetings, the Audit Committee also
assessed and discussed topics including:
(i) the 2021 Audit Plans of CAS and of KPMG,
(ii) the quarterly reports of CAS, (iii) the
quarterly reports of KPMG, (iv) information
technology and cybersecurity, (v) the annual
KPMG Management Letter and annual
standard of internal control report of CAS, and
(vi) whether there was reasonable assurance
that the financial reporting did not contain any
errors of material importance. These topics
are addressed below in turn.
2021 Audit plans of CAS and of KPMG
The Audit Committee discussed the 2021
audit plans of CAS and KPMG. The main
drivers behind the CAS audit priorities for 2021
were (i) coverage requirements,
(ii) strategic importance and change targets,
and (iii) remediation. The key focus areas
based on these three drivers are centred
around the key value drivers of operations
and IT excellence, data and underwriting
capabilities, asset re-risking and further
optimising client and distribution interaction
and structures. Emphasis on IFRS 9 and 17
was also increased in 2021.
The 2021 KPMG audit plan also showed
continued emphasis on IFRS 9 and 17, OCG
and non-financial information disclosures.
Areas of focus in 2021 included (i) the
Covid-19 pandemic, (ii) cybersecurity,
(iii) ongoing M&A activity, (iv) IT integration
and migrations, (v) assumption and model
updates, and (vi) developments regarding
the Partial Internal Model.
Quarterly reports of CAS
The quarterly reports of CAS included findings
and observations regarding governance, risk
management and internal control, focusing on
significant internal control weaknesses noted
in ongoing audit activities, and follow-up by
the Executive Board and Management Board
on agreed actions and weaknesses.
The reports categorised the findings and
observations into five areas: (i) primary
processes, (ii) information technology,
cyber – and physical security, (iii) financial
risk management and reporting, (iv) the
development of outstanding risks and
their mitigation, and (v) the key internal
developments of CAS. The findings of CAS
are summarised annually in a Report on the
NN Group Standard of Internal Control and
include forward-looking considerations.
During 2021, CAS observed continued
management actions in response
to the Covid-19 pandemic to ensure
workforce safety, business continuity, as
well as continuous customer support.
Throughout 2021, continued progress
in control strengthening activities was
observed. Several key integration milestones
have been achieved throughout 2021 which
enabled the realisation of efficiency targets
and positively contributed to operational
and IT control levels. The progress of the
integration and transformation agenda
remains challenging due to the large number
of change initiatives.
Quarterly reports of KPMG
As from 2020 onwards, NN Group changed
to a semi-annual external financial reporting
frequency but continued to prepare
quarterly financial information for internal
reporting purposes. KPMG continued to
perform quarterly review procedures as part
of the audit of the 2021 annual accounts, but
did not issue a formal review opinion in 1Q21
and 3Q21.
In its quarterly reports, KPMG presented
the outcome of its review of activities and
findings in the areas of attention identified in
its 2021 audit plan.
KPMG’s assessment of the significant risks
of material misstatements compared to
2020 resulted in a few changes, in particular
the risks in valuation of hard-to-value
assets were considered stable, and the
risks in relation to the application of hedge
accounting and the Delta Lloyd integration
were no longer considered significant
audit risks but remained on KPMG’s radar.
The other areas of significant audit risk
which remained stable include the valuation
of insurance contract liabilities and the
reserve adequacy test (RAT), Solvency II
capital and risk management disclosures, as
well as the unit-linked exposure.
The KPMG reports addressed financial,
business and operational impacts of
the Covid-19 pandemic on NN Group.
Observations on internal control and
external developments relevant to NN Group,
including the follow-up on recommendations
in the KPMG Management Letter and
earlier quarterly reports were provided.
Once a year, the findings on internal control
are summarised in the annual management
letter (described below).
Information technology and cybersecurity
Information technology and cybersecurity
were extensively discussed each quarter in
the Risk Committee. These meetings were
attended by the General Manager CAS and
the external auditor (KPMG), as well as by
the chair and several other members of the
Audit Committee. Subsequently, the chair
of the Risk Committee reported any topics
relevant for financial reporting, also on a
quarterly basis, to the Audit Committee.
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To avoid duplication, the Audit Committee
therefore focused on those elements of
information technology and cybersecurity
that (may) impact financial reporting and the
security, reliability, integrity and availability
of data and assets across NN Group and its
affiliated business. This included discussing
the IT and security sections of the quarterly
reports of CAS and KPMG, and the link
between IT developments, in particular, the IT
simplification programme and the IT Control
Framework, and the ongoing programmes
in respect of the Finance Roadmap and the
status and implementation of the IFRS 9 and
17 Programme.
KPMG Management Letter 2021
Each year, KPMG issues a management letter
which contains observations on NN Group’s
internal control over financial reporting.
The letter is based on the audit and the
quarterly review procedures. The KPMG
Management Letter 2021 contains
(i) improvement observations with regard to
the internal control environment of NN Group
and (ii) a follow-up on the KPMG Management
Letter 2020. An appendix to the letter includes
attention points for the year-end closing.
Section (i) of the management letter contains
areas where structural improvements of
internal controls will help drive performance
of NN Group. These relate to eight areas:
Netherlands Life modelling and Solvency II
analysis, IT risk and control, cybersecurity,
(IT) projects/system replacements,
outsourcing, quality controls at Non-life, ESG
reporting and OCG. Section (ii) includes four
observations from the prior year where good
progress was made but further attention is
needed to be fully closed. The management
letter contains a number of concrete
recommendations from KPMG and specific
actions defined by management to address
these recommendations. In its January
2022 meeting, the Audit Committee discussed
the KPMG Management Letter 2021 and the
Executive Board and Management Board’s
response and reflected extensively on the
matters it covered.
Remuneration Committee
The Remuneration Committee assists the
Supervisory Board in the performance of
its duties. To this end, it prepares items for
discussion and decision-making by the
Supervisory Board, and recommends actions
in various areas, including:
• The remuneration policy for the Executive
Board, as well as its implementation
and evaluation
• The remuneration and concrete terms and
conditions of engagement of individual
Executive Board and Management
Board members.
• The remuneration policy of the Supervisory
Board, as well as the remuneration of the
Supervisory Board members.
• The remuneration and remuneration
policies with respect to Identified Staff
(as defined).
• The design and implementation of any
stock-based compensation programmes.
• The application of the remuneration
policies within the company.
• Compliance with statutory and legal
requirements and regulations.
• Performance targets for the Executive
Board and Management Board.
Composition and attendance
The members of the Remuneration Committee
are Ms Vletter-van Dort (chair), Mr Lelieveld, Ms
Reyes, Mr Schoen and Ms Streit. Ms Reyes was
appointed as a member of the Remuneration
Committee per 20 May 2021. Mr Lelieveld who
was nominated for appointment as Supervisory
Board member pursuant to the enhanced
recommendation right of the Central Works
Council, joined the Remuneration Committee
as of 1 September 2021.
The Remuneration Committee met four
times in 2021 and had a 100% attendance
rate. All meetings up to May 2021 were
virtual meetings due to the ongoing
Covid-19 pandemic and as from August
2021 meetings were held in hybrid form.
The Chief Executive Officer and Chief
Organisation & Corporate Relations also
joined the meetings of the Remuneration
Committee, unless the committee
determined otherwise. The Head of
Reward, or a representative, also attended.
The chair and members of the Remuneration
Committee were in regular contact with the
Chief Organisation & Corporate Relations
and the Head of Reward.
In addition to the regular Remuneration
Committee meetings, one combined
meeting with the Nomination and Corporate
Governance Committee (Combined
Meeting) was held in February 2021 with a
100% attendance rate. Mr Jenkins attended
this Combined Meeting as an observer.
Discussion topics
Remuneration policies
The Remuneration Committee reviewed
and evaluated the remuneration policies
of NN Group as laid down in the NN
Group Remuneration Framework, and the
remuneration policy for the Executive Board.
The NN Group Remuneration Framework
was updated to ensure compliance with
the Sustainable Finance package, as
adopted by the European Commission
on 21 April 2021, and the new Regulatory
and Technical Standards included in the
Commission Delegated Regulation 2021/923
on 25 March 2021. Further amendments
related to improving clarity and consistency
and reflecting changes in governance and
processes where applicable to NN Group.
The Remuneration Committee discussed
the Remuneration Benchmark for the
Supervisory Board, Executive Board and
Management Board, which was validated
on the basis of an analysis performed by an
external agency and concluded to be fit for
purpose and in line with the principles as
included in NN’s remuneration policies.
Please refer to page 109 of this Annual
Report for more information on the
remuneration of the Executive Board and
Supervisory Board members.
Equal Pay
The Remuneration Committee discussed
and addressed the outcomes of the
analysis carried out on equal pay within
NN Group, which was based on equal
representation, gender pay gap and equal
pay gap. This analysis was a follow-up of
the equal pay analysis as executed in 2020.
In 2021 the involvement of the international
business units were improved by (i) including
all countries in scope, (ii) involving larger
countries in advanced statistical analysis,
and (iii) having constructive sessions
with country HR Directors to explore the
outcome. Please refer to page 111 for further
insights of the equal pay analysis.
Report of the Supervisory Board continued
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NN Group N.V.
2021 Annual Report
Board objectives
The objectives for the Executive Board and
Management Board for performance year
2021 were discussed and endorsed by the
Remuneration Committee in January 2021.
These objectives, structured around the
five strategic commitments ((i) customers
and distribution, (ii) products and services,
(iii) people and organisation, (iv) financial
strength, and (v) society) were focused on
meeting the strategic ambition and the
related 2021-2023 targets as disclosed
at the Capital Markets Day held on
24 June 2020.
Other topics
The Remuneration Committee was kept
informed on the collective labour agreement
negotiations with the unions and the
related challenges, as well as the working
from home arrangements as a result of
the ongoing Covid-19 pandemic and the
measures implemented. As is required on
an annual basis, a risk assessment was
carried out on the NN Group Remuneration
Framework and related processes, which
focused on the processes designed to avoid
excessive risk-taking by NN Group staff.
No risks with a critical or high managed
risk level were identified. Identified Staff-
related remuneration matters were
reviewed and approved in line with the
NN Group Remuneration Framework
and governance, including the variable
remuneration proposals for Identified Staff
for performance year 2020, compensation
adjustment proposals for the year 2021, and
the 2021 Identified Staff selection.
Topics addressed during the
CombinedMeetings
The Remuneration Committee and the
Nomination and Corporate Governance
Committee, in a combined meeting,
assessed the functioning and performance
of the Executive Board members and
provided input for the Management
Board’s performance assessment.
Individual meetings with Executive Board
and Management Board members formed
part of the assessments. The combined
committees also reviewed and endorsed the
remuneration proposals for the Executive
Board and Management Board.
Nomination and Corporate
Governance Committee
The Nomination and Corporate Governance
Committee assists the Supervisory Board
in the performance of its duties. To this
end, it prepares items for discussion and
decision-making by the Supervisory Board,
and recommends actions concerning
various areas:
• The policy of the Executive Board on
the selection criteria and appointment
procedures for Identified Staff.
• Drafting the selection criteria and
appointment procedures for Supervisory
Board members and Executive
Board members.
• The composition of the Supervisory Board
and Executive Board.
• The succession plan for Supervisory Board
and Executive Board members.
Composition and attendance
The members of the Nomination and
Corporate Governance Committee are
Mr Cole (chair), Ms Beale, Mr Hauser,
Mr Lelieveld and Ms Vletter-van Dort.
Ms Beale was appointed as a member of
the Nomination and Corporate Governance
Committee per 20 May 2021 and Mr
Lelieveld per 1 September 2021.
The Nomination and Corporate Governance
Committee met 11 times in 2021 and had
an attendance rate of 97%. All meetings
up to May 2021 were virtual meetings due
to the ongoing Covid-19 pandemic and as
from August 2021 meetings were held in
hybrid form. The Chief Executive Officer
and the Chief Organisation & Corporate
Relations also joined the meetings of the
Nomination and Corporate Governance
Committee, unless the committee
determined otherwise. The General Counsel
attended the Nomination and Corporate
Governance Committee meeting held on
15 February 2021.
Discussion topics
Succession planning
The Nomination and Corporate Governance
Committee discussed and evaluated the
succession plan for the Executive Board and
Management Board members, and other
key staff (including Identified Staff), and NN
Group’s talent management programme.
Appointment of the Chief Financial Officer
The Nomination and Corporate Governance
Committee followed an extensive process
and played an active role in supporting the
Supervisory Board in the process of drafting
selection criteria and identifying a successor
for Mr Delfin Rueda when he steps down
as a member of the Executive Board and
Chief Financial Officer of NN Group as of
1 July 2022, and in the subsequent
appointment of Ms Annemiek van Melick.
The decision to appoint Ms Van Melick
was a result of having a sound succession
planning process in place. Throughout the
appointment process, the profile of the
Executive Board and the Diversity Policy
were duly observed.
Composition of the Supervisory Board
The rotation and succession plan for the
Supervisory Board was discussed, to ensure
that among others sufficient business
experience, transformation experience and
requirements around gender diversity, and the
Supervisory Board self-assessment process
for 2020 was evaluated. Based on the
outcome of the self-assessment evaluation,
the objective for the Nomination and
Corporate Governance Committee for 2021
was to continue with the Executive Board and
the Supervisory Board succession planning
and prioritising enhancing transformational
competencies within the Supervisory Board in
the succession planning.
With regards to the annual self-assessment
of the Supervisory Board for the year 2021,
the Nomination and Corporate Governance
Committee discussed the importance to
have a benchmark on the functioning of the
Supervisory Board and its individual members.
In light of the changed composition of the
Supervisory Board it was agreed to engage
an external advisor to facilitate the 2021 self-
assessment and to support the Supervisory
Board in strengthening its effectiveness.
The Nomination and Corporate Governance
Committee followed an extensive process
throughout 2020 and 2021, supported by an
external advisor. Based on this process, the
composition of the Supervisory Board and its
committees and individual Supervisory Board
competencies and skills were evaluated,
discussed and recommendations were made
to the Supervisory Board on the composition
of the Supervisory Board and its committees.
Report of the Supervisory Board continued
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NN Group N.V.
2021 Annual Report
NN Group System of Governance Review
Solvency II requires NN Group to have in
place an effective System of Governance
which provides for sound and prudent
management of the business and
which supports its strategic objectives
and operations. NN Group’s System of
Governance incorporates the relevant
requirements stemming from the Solvency II
Directive, Solvency II Regulation (Delegated
Acts) and the EIOPA System of Governance
guidelines. The Nomination and Corporate
Governance Committee was thoroughly
informed on the outcome of this year’s NN
Group System of Governance review and
provided its feedback to the Executive
Board and Management Board.
Other topics
As is required on an annual basis, the
Nomination and Corporate Governance
Committee reviewed and discussed
compliance with the Dutch Corporate
Governance Code for the financial year
2021 in February 2022. The Nomination
and Corporate Governance Committee
was further consulted in relation to the
annual review and proposed changes
in the Charters of the Executive Board,
Management Board, Supervisory Board
and Committees, and the NN Group
N.V. Decision Structure. The Nomination
and Corporate Governance Committee
discussed the extensive review done by
NN Group Compliance on the various
outside positions (other than NN Group
related positions) held by all Supervisory
Board, Executive Board and Management
Board members. It was concluded that
all board members are compliant with
the relevant rules and obligations and in
light of the large number of ad hoc board
meetings scheduled in the course of 2021,
board members have shown flexibility
beyond normal expectation in order to fulfil
their obligations.
In this context, the Nomination and Corporate
Governance Committee prepared the
discussion for (i) the proposal to further
strengthen the composition of the Supervisory
Board and increase the number of members
of the Supervisory Board by two, (ii) the
proposal to nominate Ms Reyes as member
of the Supervisory Board and designate her
as a member of the Risk Committee and of
the Remuneration Committee, and (iii) the
proposal to meet the request of the Central
Works Council to nominate MrLelieveld as the
person recommended by the Central Works
Council on its enhanced recommendation
right (resulting in Mr Lelieveld becoming a
member of the Remuneration Committee)
and to nominate Mr Lelieveld as member of
the Supervisory Board and designate him
as a member of the Audit Committee and of
the Nomination and Corporate Governance
Committee. Based on a later and further
evaluation done in the process the Nomination
and Corporate Governance Committee
prepared the discussion for (i) the proposal
to further increase the number of members
of the Supervisory Board by one, and (ii) the
proposal to nominate Ms Beale as member
of the Supervisory Board and designate
her as member of the Risk Committee
and of the Nomination and Corporate
Governance Committee.
Closing
2021 continued to be an extraordinary and
challenging year, dominated by the effects
of Covid-19 impacting society at large,
customer behaviour and NN’s own way of
working. Nevertheless, NN Group showed
resilience with strong commercial and
financial performance during the year and a
number of successful M&A transactions.
The Supervisory Board is pleased with
the good progress that has been made in
the strategy execution that is focused on
sustainable long-term value creation for
all stakeholders and aims for resilient and
growing long-term capital generation for
shareholders. Transformation in all aspects
remains a priority for all business units and
the first tangible signs of progress became
evident in 2021.
During 2021 the Supervisory Board
welcomed Ms Inga Beale, Mr Rob
Lelieveld and Ms Cecilia Reyes to the
Supervisory Board.
Together with the Executive and
Management Boards, the Supervisory
Board looks forward to continue building
on the solid foundations of the company
and achieve our ambition to be an industry
leader, known for our customer engagement,
talented people, and contribution to society.
At NN, we help people care for what matters
most to them and we are committed to
continue doing business in a way that is
consistent with our values: care, clear,
commit.
Report of the Supervisory Board continued
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NN Group N.V.
2021 Annual Report
General
NN Group N.V. (NN Group) is a public
limited company (naamloze vennootschap)
incorporated under the laws of the
Netherlands and has a two-tier board
structure consisting of an executive board
(Executive Board) and a supervisory board
(Supervisory Board). NN Group also has a
management board (Management Board).
NN Group mandatorily applies the full large
company regime.
Executive Board
Duties
The Executive Board is entrusted with
the management, the strategy and the
operations of NN Group under supervision
of the Supervisory Board. In performing its
duties, the Executive Board must carefully
consider and act in accordance with the
interests of NN Group and the business
connected with it, taking into consideration
the interests of all stakeholders of NN
Group. The organisation, duties and
working methods of the Executive Board
are detailed in the charter of the Executive
Board. This charter is available on the NN
Group website.
Certain resolutions of the Executive Board
require the approval of the Supervisory
Board and/or general meeting of
shareholders of NN Group (General
Meeting). These resolutions are outlined
in the articles of association of NN Group
(Articles of Association), which are available
on the NN Group website, and in the charter
of the Executive Board.
Appointment, removal andsuspension
Under the full large company regime
that is mandatorily applied by NN Group,
the members of the Executive Board are
appointed by the Supervisory Board. Prior to
appointing a member of the Executive
Board, the Supervisory Board must notify
the General Meeting of such an intended
appointment. Only the Supervisory Board
may suspend or remove a member of the
Executive Board. However, the Supervisory
Board is only entitled to remove a member
of the Executive Board after the General
Meeting has been consulted on the
intended removal.
Composition
The Executive Board must consist of two
or more members, with the total number of
members of the Executive Board determined
by the Supervisory Board after consultation
with the Executive Board. Guiding principles
for the appointment of members and the
composition of the Executive Board are
provided in the profile of the Executive Board
and Management Board, which includes the
diversity policy for the composition of these
boards. The profile including the diversity
policy is available on the NN Group website.
As at 31 December 2021, the Executive Board consisted of the following persons:
Name Position Date of birth Gender Nationality Appointment
Termination/
reappointment Tenure
David Knibbe Chair, Chief Executive
Officer(CEO)
15 March 1971 Male Dutch 1 October 2019 2023 2 years
Delfin Rueda Vice-chair, Chief
FinancialOfficer (CFO)
8 April 1964 Male Spanish 1 March 2014,
reappointment
31May 2018
2022* 8 years
* Term of appointment will end at the close of the AGM of NN Group on 19 May 2022. The Supervisory Board intends to reappoint Delfin Rueda as member of the Executive Board as from the close of the AGM up
to 1 July 2022, after notification to the General Meeting of NN Group at the AGM on 19 May 2022. The Supervisory Board also has the intention to designate Delfin Rueda again as CFO and as a result as vice-
chair of the Executive Board for the same term. With the reappointment of Delfin Rueda, his membership and vice-chairmanship of the Management Board of the Company also continues for the same term.
On 12 October 2021, it was announced that the Supervisory Board intends to appoint Annemiek van Melick as Delfin Rueda’s successor for a term of four years. Her appointment will be effective as of 1 July 2022,
after notification to the General Meeting of NN Group at the AGM on 19 May 2022. Annemiek van Melick will join NN Group as of 1 June 2022 as member of the Management Board.
David Knibbe was appointed to the
Executive Board and designated as Chief
Executive Officer of NN Group and chair
of the Executive Board effective 1 October
2019. He is responsible for the business
strategy, performance and day-to-day
operations of NN Group. Mr Knibbe has
been a member of the Management Board
since 7 July 2014. On 1 September 2014,
Mr Knibbe was appointed Chief Executive
Officer Netherlands. In this role Mr Knibbe
was responsible for NN Group’s insurance
and banking business in the Netherlands
and leading the integration of NN and Delta
Lloyd. From 2013 until 2014, he served as
Chief Executive Officer of ING Insurance
International. In 2013, he became member
of the NN Group Operating Committee.
From 2011 to 2013, he served as Chief
Executive Officer of ING Insurance Central
and Rest of Europe. During 2010, Mr Knibbe
was Chief Executive Officer Insurance
Corporate Clients in the Netherlands.
From 2007 to 2008, MrKnibbe was General
Manager of Nationale-Nederlanden
Individual Life (retail life and individual
pensions), which then became Intermediary
Pensions and Retail Life with the addition
of the SME pensions business in 2008.
In 2009, Mr Knibbe became General
Manager Pensions with the addition of
corporate pensions and removal of retail
life from his area of responsibility. Prior to
that, from 2004 to 2007, Mr Knibbe was
Director Disability and Accident Insurance
of Nationale-Nederlanden. From 2002 to
2004, he was Managing Director of ING’s
life insurance and employee benefits joint
venture with Piraeus Bank in Greece.
Mr Knibbe was Head of Investments of
Central-Holland of ING Bank from 2000 to
2002. Mr Knibbe started his professional
career in 1997 when he joined ING,
serving in various positions in investment
management and banking. Mr Knibbe was
chair of the board of the Dutch Association
of Insurers (Verbond van Verzekeraars)
from 9 December 2015 until 20 June 2018.
Corporate governance
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NN Group N.V.
2021 Annual Report
From 20 July 2018 until 18 December 2019, he
was vice-chair of the Dutch Association of
Insurers. Mr Knibbe holds a Master’s degree
in monetary economics from the Erasmus
University in Rotterdam (the Netherlands).
Furthermore, Mr Knibbe is member of the
board and treasurer of the Confederation of
Netherlands Industry and Employers (VNO-
NCW), as well as member of the Federative
Board VNO-NCW and MKB NL. He is also
member of the board of the Johan Cruyff
Foundation and member of the advisory
board of JINC. On 26 April 2021, Mr Knibbe
became member of the Pan European
Insurance Forum. As from 1 July 2021, he is
also member of the World Economic Forum’s
Alliance of CEO Climate Leaders and
Governors meeting Financial Sector, and on
7 December 2021, he joined the supervisory
board of Stichting Erasmus Trustfonds.
Delfin Rueda was appointed to the
Executive Board as Chief Financial Officer
on 1 March 2014. As from 7 July 2014, he
serves as vice-chair of the Executive Board.
On 31 May 2018, he was reappointed as
member of the Executive Board and again
designated Chief Financial Officer of NN
Group and vice-chair of the Executive Board.
Mr Rueda is responsible for NN Group’s
finance departments and investor relations.
From 1 October 2013 until the legal merger
between NN Group and ING Verzekeringen,
which became effective on 1 March 2014, he
was member of the management board and
Chief Financial Officer of ING Verzekeringen.
Mr Rueda served as Chief Financial Officer
and as member of the management board
of ING Insurance Eurasia from 1 November
2012 until 7 July 2014. Prior to joining ING in
November 2012, Mr Rueda served as Chief
Financial and Risk Officer and as member
of the management board at Atradius from
2005 to 2012. From 2000 to 2005, MrRueda
served as Senior Vice-president of the
Financial Institutions Group, Corporate
Finance, at J.P. Morgan. Prior to that, from
1993 to 2000, he was Executive Director of
the Financial Institutions Group, Corporate
Finance, at UBS. Mr Rueda began his career
with Andersen Consulting, which later
became Accenture, where he undertook
different advisory assignments in information
systems and strategic management services
from 1987 to 1991.
Mr Rueda holds a Master’s degree in
economic analysis and quantitative
economics from the Complutense University
of Madrid (Spain) and an MBA with a finance
major from the Wharton School, University
of Pennsylvania (USA). Besides being
member of the Executive Board, Mr Rueda is
supervisory board member and chair of the
audit committee of the supervisory board of
Adyen N.V. and member of the Supervisory
Committee of Alma Mundi Insurtech Fund.
Mr Rueda also serves as chair of the CFO
Forum and is non-executive director of
Allfunds Group Plc and Allfunds Bank S.A.U.
Remuneration
Information on the remuneration policy for
members of the Executive Board and on
their individual remuneration can be found in
the Remuneration Report, on page 112.
Management Board
Role and duties
The Management Board is entrusted with
the day-to-day management and the
overall strategic direction of NN Group.
In performing its duties, the Management
Board must carefully consider and act
in accordance with the interests of NN
Group and the business connected with it,
taking into consideration the interests of all
stakeholders of NN Group. The authority to
manage NN Group is vested in the Executive
Board as a whole, notwithstanding that
each of the members of the Management
Board is responsible and accountable
to the Executive Board and within the
Management Board for the specific tasks as
assigned. Being comprised of the Executive
Board members as well as key leaders with
a divisional or functional responsibility, the
Management Board allows for integral and
holistic decision-making at the highest level
of NN Group with functions, the businesses
and Executive Board members represented.
Besides providing balanced, effective and
timely decision-making, NN Group having
a Management Board also provides for
flexibility in terms of composition, allocation
of tasks and responsibilities and required
knowledge. In supervising the functioning
of NN Group’s corporate governance
structure, including its checks and balances,
the Supervisory Board pays specific
attention to the dynamics and relationship
between the Executive Board and the
Management Board as well as the manner
in which the Management Board operates.
The Supervisory Board will be provided
with all the information necessary for the
proper performance of this duty. In principle,
members of the Management Board are
present at meetings with the Supervisory
Board where topics are discussed that
relate to their area of responsibility.
Next to that, the Supervisory Board
regularly meets with the full Management
Board. The organisation, role, duties and
working methods of the Management
Board are detailed in the charter of the
Management Board, which is available on
the NNGroup website.
Composition, appointment and removal
The Management Board consists of the
members of the Executive Board and
other such members as appointed by the
Executive Board after consultation with the
Supervisory Board. The number of members
of the Management Board is determined
by the Executive Board. Guiding principles
for the appointment of members and the
composition of the Management Board are
provided in the profile of the Executive Board
and Management Board which includes the
diversity policy for the composition of these
boards. The profile including the diversity
policy is available on the NN Group website.
The members of the Management Board
may be suspended and removed by the
Executive Board after consultation with the
Supervisory Board.
Information about the members of the
Management Board who are also members
of the Executive Board, David Knibbe and
Delfin Rueda, can be found under ‘Executive
Board – Composition’, on page 97.
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NN Group N.V.
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As at 31 December 2021, the Management Board consisted of the following persons:
Name Position Date of birth Gender Nationality Appointment Tenure
David Knibbe Chair, Chief Executive Officer
(CEO) (as of 1 October 2019)
15 March 1971 Male Dutch 7 July 2014 7 years
Delfin Rueda Vice-chair, Chief Financial
Officer (CFO)
8 April 1964 Male Spanish 7 July 2014 7 years
Tjeerd Bosklopper CEO Netherlands Non-life,
Banking & Technology
(as of 1 June 2020)
3 March 1975 Male Dutch 1 September 2018 3 years
Bernhard Kaufmann Chief Risk Officer (CRO) 19 April 1969 Male German 1 June 2020 1 year
Dailah Nihot Chief Organisation &
Corporate Relations
12 June 1973 Female Dutch 1 September 2018 3 years
Leon van Riet CEO Netherlands
Life & Pensions
2 September 1964 Male Dutch 1 June 2020 1 year
Fabian Rupprecht CEO International Insurance 22 December 1969 Male German
andSwiss
1 September 2018 3 years
Janet Stuijt General Counsel 26 September 1969 Female Dutch 1 September 2018 3 years
From 1999 to 2001, he participated in the
Global Management Programme (GMP)
at ING Group. Mr Bosklopper holds a
Master of Science in Business Information
Technology from the University of Twente
(the Netherlands). Besides being member of
the Management Board, Mr Bosklopper is
chair of the board of the Dutch Association
of Insurers (Verbond van Verzekeraars)
and member of the Steering Committee
of SchuldenlabNL.
Bernhard Kaufmann was appointed
Chief Risk Officer and member of the
Management Board of NN Group as of
1 June 2020. In this role he is responsible
for the overall risk framework with direct
responsibility for the risk management
departments. He is also responsible for
the Actuarial function, reinsurance and
procurement globally. From 2014 to 2020,
Mr Kaufmann was Group Chief Risk Officer
and Chief Risk Officer Reinsurance at
Munich Re Group. From 2008 to 2013, he
was Chief Risk Officer at ERGO Insurance
Group. From 2000 to 2008, Mr Kaufmann
worked at Munich Re Group holding various
roles. From 2007 to 2008, he was Head of
Treasury, from 2004 to 2007, he was Head
of Asset Liability Management and from
2000 to 2004, he was Senior Consultant
Financial Projects and Credit Risk Manager.
From 1999 to 2000, Mr Kaufmann was
Credit Risk Manager at HypoVereinsbank
(UniCredit). From 1995 to 1999, he worked
as a researcher in the Physics Department
at the Technical University of Munich
Satish Bapat was appointed to the
Management Board as CEO NN Investment
Partners on 1 April 2017 and stepped down
on 19 August 2021.
Tjeerd Bosklopper was appointed
CEO Netherlands Non-life, Banking &
Technology as of 1 June 2020. In this role
he is responsible for the Dutch Non-life and
Banking business segments, Customer &
Commerce, the Strategic Transformation
Office and IT. Mr Bosklopper was CEO
Netherlands ad interim from 17 December
2019 until 1 June 2020. Mr Bosklopper was
appointed to the Management Board as
Chief Transformation Officer on 1 September
2018. In 2018, Mr Bosklopper was Head
of Integration of Nationale-Nederlanden
Netherlands and Belgium. From 2015 to 2018,
Mr Bosklopper was Head of Individual Life
at NN Group in the Netherlands. From 2012
to 2015, Mr Bosklopper was Chief Executive
Officer at Nationale-Nederlanden Life &
Pensions in Poland. From 2010 to 2012, he
was Chief Information & Transformation
Officer at Nationale-Nederlanden
Netherlands. From 2006 to 2010, he was
Director Product Management at Nationale-
Nederlanden Non-life Netherlands.
From 2004 to 2006, Mr Bosklopper was
Executive Vice-president and Chief
Marketing Officer at ING Life South Korea.
From 2003 to 2004, he was Project Manager
at ING Aetna Life Indonesia. From 2001 to
2003, he was Regional e-business Manager
at ING Group’s regional office in HongKong.
(Germany). Mr Kaufmann holds a PhD (Dr.
rer. nat.) in theoretical physics, from the
Technical University of Munich (Germany),
an intermediate diploma in economics from
the University of Hagen (Germany), and
a diploma in theoretical physics from the
Technical University of Munich (Germany).
Besides being member of the Management
Board, Mr Kaufmann is member of the CRO
Forum and member of the Supervisory
Committee of Alma Mundi Insurtech Fund.
As from 26 January 2022, he participates
in the CRO Roundtable of the European
Central Bank.
Dailah Nihot was appointed Chief
Organisation & Corporate Relations
and member of the Management
Board as of 1 September 2018. Ms Nihot
is responsible for human resources,
corporate communications, sustainability
and corporate citizenship, branding and
sponsorship, public and government affairs,
and facility management. From 2013 to 2018,
she was Managing Director of Corporate
Relations for NN Group. Prior to this, from
2006 to 2013, she was Global Head of
Sustainability, and Director of the former
ING for Something Better Foundation at
ING Group, which focused on ING Group’s
global ethical, social and environmental
strategy and performance. Ms Nihot started
her professional career in the external
communications department of ING Group,
and was a corporate spokesperson and
strategic communications advisor from 2001
to 2006. Ms Nihot serves as management
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NN Group N.V.
2021 Annual Report
representative in the Central Works Council
of NN Group (Central Works Council).
She holds a Master’s degree in European
Studies from the University of Amsterdam
(the Netherlands) and an Executive Master
in Corporate Communication from the
RSM Erasmus University in Rotterdam
(the Netherlands).
Leon van Riet was appointed CEO
Netherlands Life & Pensions and member
of the Management Board of NN Group as
of 1 June 2020. In this role, he is responsible
for the Life and Pension businesses in
the Netherlands. Mr Van Riet was CEO
of Nationale-Nederlanden Non-life in
the Netherlands from 2017 to May 2020.
From 2016 to 2017, he was a member of
the Board of Directors of Delta Lloyd,
responsible for Delta Lloyd Life Insurance,
BeFrank N.V., Information Technology &
Services, Concern Relations, Delta Lloyd
Asset Management, KMD (Digital) and
Delta Lloyd Life Belgium. From 2010 to
2016, he was Chief Executive Officer Delta
Lloyd Life in the Netherlands. From 2007
to 2010, he was Chief Information Officer
and Chief Information Technology at Delta
Lloyd Group. From 1999 to 2007, Mr Van
Riet was Chief Information Officer, Chief of
Information Communications Technology
and E-Business at Delta Lloyd Insurance.
From 1997 to 1999, he was Director of
Information Technology and Chain Logistics
for Brocacef. From 1994 to 1997, he was a
senior manager at KPMG Management
Consulting. From 1993 to 1994, he was
a project manager and consultant at
Encompass Europe NV. From 1986 to 1993,
he was a Senior Organisation Advisor at
KPMG Management Consulting. Mr Van Riet
holds a degree in electrical engineering from
Delft University of Technology (TU Delft,
the Netherlands).
Fabian Rupprecht was appointed as CEO
International Insurance and member of
the Management Board as of 1 September
2018. Mr Rupprecht is responsible for NN
Group’s insurance businesses outside the
Netherlands: Insurance Europe, Japan Life
and Japan Closed Block VA businesses.
From 1996 to 2018, Mr Rupprecht worked
for AXA. From 2016 to 2018, he was Chief
Executive Officer Middle East & Africa,
and Regional Chief Financial Officer
and member of the regional executive
committee at AXA Emerging Markets (CEE,
MEA, LATAM). From 2013 to 2016, he was
Regional Chief Financial Officer at AXA
Mediterranean Holding, and member of the
regional executive committee. From 2010
to 2013, he was Head of AXA Global Life,
and member of the Global Life & Health
board. From 2008 to 2010, he was Head of
Individual Life, and member of the executive
board of AXA-Winterthur. From 2001 to 2007,
he was Head of Life & Annuity Offer at AXA
Germany. From 1998 to 2000, Mr Rupprecht
was Head of EquiVest Product Management
at The Equitable Life Assurance (AXA) USA.
From 1996 to 1998, he served as Head of
Accounting for Health & Life Insurance at
Colonia Konzern AG (AXA/UAP). From 1994
to 1996, he was assistant to the executive
board at Colonia Konzern AG (UAP).
Mr Rupprecht holds a Diploma in Business
Administration, with majors in finance and
controlling, from the WHU Otto Beisheim
School of Management (Koblenz, Germany).
Janet Stuijt was appointed to the
Management Board as General Counsel as
of 1 September 2018. Ms Stuijt is responsible
for NN Group’s legal function and
compliance function and holds the position
of Company Secretary. Ms Stuijt joined ING
Verzekeringen in 2011 in that same capacity.
From 2008 to 2010, she was General
Counsel Commercial Banking at ING Group.
From 1998 to 2008, Ms Stuijt held various
senior (global) management positions
within ABN AMRO’s legal department,
primarily relating to ABN AMRO’s corporate
strategic and investment banking activities.
In 1998, she was Regional Legal Counsel at
ABN AMRO’s regional office in Singapore.
From 1993 to 1997, Ms Stuijt practised law
as an associate at Loeff Claeys Verbeke/
Allen Overy, Singapore office (1997)
and De Brauw Blackstone Westbroek
(1993–1997). Ms Stuijt holds a Master’s in
Civil law, from the University of Leiden (the
Netherlands). Since 2016, she has been
member of the supervisory board of N.V.
Nederlandse Spoorwegen and member of
its risk & audit committee and chair of its
nomination & remuneration committee.
Supervisory Board
Duties
The Supervisory Board is responsible
for supervising the management of the
Executive Board and the general course
of affairs of NN Group and its businesses.
The Supervisory Board may, on its own
initiative, provide the Executive Board with
advice and may request any information
from the Executive Board that it deems
appropriate. In performing its duties, the
Supervisory Board must carefully consider
and act in accordance with the interests
of NN Group and the business connected
with it, taking into consideration the relevant
interests of all stakeholders of NN Group.
The organisation, duties and working
methods of the Supervisory Board are
detailed in the charter of the Supervisory
Board. The charter is available on the NN
Group website.
Appointment, removal andsuspension
The members of the Supervisory Board are
appointed by the General Meeting upon
nomination of the Supervisory Board. The
General Meeting and the Central Works
Council may recommend candidates for
nomination to the Supervisory Board. The
Supervisory Board must simultaneously
inform the General Meeting and the
Central Works Council of the nomination.
The nomination must state the reasons
on which it is based. The Supervisory
Board is required to nominate one-third
of the Supervisory Board members on the
enhanced recommendation (versterkt
aanbevelingsrecht) of the Central Works
Council, unless the Supervisory Board
objects to the recommendation on the
grounds that the recommended candidate
is not suitable to fulfil the duties of a
member of the Supervisory Board or that
the Supervisory Board will not be properly
composed if the nominated candidate is
appointed.
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NN Group N.V.
2021 Annual Report
The General Meeting may reject the
nomination of a Supervisory Board member
by an absolute majority of the votes cast by
shareholders representing at least one-
third of NN Group’s issued share capital.
If the General Meeting resolves to reject
the nomination by an absolute majority of
the votes cast, but this majority does not
represent at least one-third of NN Group’s
issued share capital, a new meeting can
be convened in which the nomination can
be rejected by an absolute majority of the
votes cast, irrespective of the part of NN
Group’s issued share capital represented.
If the General Meeting resolves to reject
the recommendation, the Supervisory
Board will then prepare a new nomination.
If the General Meeting does not appoint
the person nominated by the Supervisory
Board and does not resolve to reject the
nomination, the Supervisory Board will
appoint the person nominated.
A member of the Supervisory Board is
appointed for a maximum period of four
years. A Supervisory Board member can
be reappointed once for a term of four
years. A Supervisory Board member can
subsequently be reappointed again for a
period of two years, which appointment
can be extended by at most two years.
In the event of a reappointment after an
eight-year period, such reappointment
shall be adequately motivated in the
Supervisory Board Report. The members
of the Supervisory Board retire periodically
in accordance with a rotation schedule
drawn up by the Supervisory Board.
The rotation schedule is available on
the NN Group website.
The Supervisory Board may suspend
a member of the Supervisory Board.
The suspension will lapse by law if NN
Group has not submitted a petition to
remove the suspended member of the
Supervisory Board to the Enterprise
Chamber of the Amsterdam Court of Appeal
(Ondernemingskamer van het Gerechtshof
te Amsterdam) within one month after
commencement of the suspension.
The General Meeting can, by an absolute
majority of votes cast, representing at
least one-third of the issued share capital,
resolve to abandon its trust (het vertrouwen
opzeggen) in the entire Supervisory Board.
A resolution to remove the Supervisory
Board for lack of confidence cannot be
adopted until the Executive Board has
notified the Central Works Council of
the proposal for the resolution and the
reasons therefore.
If the General Meeting removes the
Supervisory Board members for lack of
confidence, the Executive Board must
request the Commercial Division of the
Amsterdam Court of Appeal to temporarily
appoint one or more Supervisory
Board members.
Composition
The Supervisory Board must consist of
three or more members, with the total
number of members of the Supervisory
Board determined by the Supervisory Board.
As at 31 December 2021, the Supervisory
Board consisted of nine members, who
are all independent within the meaning of
best practice provision 2.1.8. of the Dutch
Corporate Governance Code.
The profile of the Supervisory Board is
available on the NN Group website.
As at 31 December 2021, the Supervisory Board consisted of the following persons:
Name Position Date of birth Gender Nationality Appointment
Termination/
reappointment Tenure
Inga Beale Member 15 May 1963 Female British 20 May 2021 2025 less than
1 year
David Cole Chair (as of the close of
the AGM on 29 May 2019)
2 October 1961 Male Dutch and
American
1 January 2019 2022 3 years
Heijo Hauser Member 23 June 1955 Male German 7 July 2014,
reappointment
31May 2018
2022 7 years
Robert Jenkins Member 17 January 1951 Male American 2 February 2016,
reappointment
28May 2020
2024 6 years
Rob Lelieveld Member (recommended
by Central Works Council)
29 September 1962 Male Dutch 1 September 2021 2025 less than
1 year
Cecilia Reyes Member 3 February 1959 Female Filipino
andSwiss
20 May 2021 2025 less than
1 year
Hans Schoen Member (recommended
by Central Works Council)
2 August 1954 Male Dutch 7 July 2014,
reappointment
31May 2018
2022 7 years
Clara Streit Member 18 December 1968 Female German and
American
1 June 2017,
reappointment
28May 2020
2024 4 years
Hélène Vletter–van
Dort
Vice-chair (as of the close
of the AGM on 28 May
2020) (recommended by
Central Works Council)
15 October 1964 Female Dutch 6 October 2015,
reappointment
29May 2019
2023 6 years
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Inga Beale was appointed to the Supervisory
Board on 20 May 2021. From 2014 until 2018,
Ms Beale served as chief executive officer
of Lloyd’s of London. From 2012 until 2013,
she worked for Canopius Group Ltd as
group chief executive officer. Other previous
positions include member of group
management of Zurich Insurance Group Ltd,
chief executive officer of (former) Converium
Holding AG and chief executive officer of
continental Europe at GE Insurance Solutions.
Ms Beale also served as chair of the UK HIV
commission, as an advisor for NTT data UK
ltd and as non-executive deputy chair of
London First. In addition to being member of
the Supervisory Board, Ms Beale is non-
executive chair of the board at Mediclinic
International plc and non-executive director
of Crawford & Company. As from January
2022, she is also member of the Board of
Willis Towers Watson.
David Cole was appointed tto the
Supervisory Board on 31 May 2018, which
became effective on 1 January 2019. As of
the close of the AGM on 29 May 2019, he
serves as chair of the Supervisory Board.
Mr Cole was chief financial officer and chief
risk officer of Swiss Re Ltd., chief financial
officer and chief risk officer of (former)
ABN AMRO Holding (Bank) N.V., member
of the board of directors of FWD Group
Management Holdings Ltd and member of
the board of directors of Swiss Re Corporate
Solutions Brazil. Besides being member of
the Supervisory Board, Mr Cole’s positions
include member of the board of directors of
Vontobel Holding AG (Zürich), member of
the board of directors of Swiss Re Asia Pte.
Ltd (Singapore) and chair of the supervisory
board of IMC B.V.
Heijo Hauser was appointed to the
Supervisory Board as of 7 July 2014.
He was reappointed on 31 May 2018.
From January 1991 until June 2011, Mr Hauser
was managing director of Towers Watson
in Germany. He specialised in providing
consulting services to insurance companies
in areas such as strategy, distribution,
product and risk management. He also
managed Towers Watson’s businesses in
the German-speaking, Nordic and Central
European countries. From September
1987 until December 1990, Mr Hauser was
managing director of the travel and financial
services subsidiaries of Metro in Germany.
Other previous positions include sales
director of Deutsche Krankenversicherung
and marketing actuary of Victoria
Lebensversicherung. Mr Hauser holds a
Master’s degree in mathematics from the
Ruhr University of Bochum (Germany).
Besides being member of the Supervisory
Board, Mr Hauser is chair of the board of
Freundeskreis Elisabeth-Hospiz e.V.
Robert Jenkins was appointed to the
Supervisory Board on 6 October 2015,
which became effective on 2 February
2016. He was reappointed on 28 May 2020.
Since 2009, he is adjunct professor of
finance at London Business School where
he teaches investment management. He is
also member of the CFA Institute’s the Future
of Finance Advisory Council. From 2014
to 2016, he was founding chair of the
AQR Asset Management Institute at LBS.
From September 2013 through September
2019, Mr Jenkins was member of the board
of governors of CFA Institute. During his
tenure he served as chairman of the board,
chair of the audit and risk committee, chair
of the remuneration committee and chair of
the nominations committee. From 2009 until
2014, Mr Jenkins was a senior advisor to CVC
Capital Partners and from 2011 until 2013,
he was an external independent member
of the interim Financial Policy Committee of
the Bank of England. Mr Jenkins has served
as chair of the Investment Management
Association, UK, chair of the board of F&C
Asset Management, plc (non-executive)
and chief executive officer of the F&C
Group. Other former positions include chief
operating officer of Credit Suisse Asset
Management Holding, UK, chief investment
officer and head of asset management
at Credit Suisse, Japan, and senior vice-
president at Citigroup with executive
assignments in the Middle East, Switzerland,
United States and Japan. He was senior
fellow at Better Markets, Washington,
D.C. and strategic advisor to Carbon Cap
Mgt LLP.
Rob Lelieveld was appointed to the
Supervisory Board on 20 May 2021,
effective 1 September 2021. He was
appointed pursuant to the enhanced
recommendation right of the Central Works
Council. From September 1980, Mr Lelieveld
worked at EY, becoming partner in 1996.
He served as external auditor for many
corporates across different sectors, with
a primary focus on the insurance industry.
Until 30 June 2021, Mr Lelieveld chaired
the managing board of EY Accountants in
the Netherlands and was member of the
board of directors of EY in the Netherlands.
Mr Lelieveld holds a degree in accountancy
but deregistered as a chartered accountant
from the register of accountants held by the
Koninklijke Nederlandse Beroepsorganisatie
van Accountants (NBA) when he left EY in
June 2021. From 1996 to 2004, Mr Lelieveld
was member of supervisory board of the
Richard Krajicek Foundation. In addition
to being member of the Supervisory
Board, Mr Lelieveld is supervisory board
member and chair of the audit committee
of the supervisory board of the Mauritshuis
(The Hague).
Cecilia Reyes was appointed to the
Supervisory Board as of 20 May 2021.
From January 2001 until February 2018, Ms
Reyes worked at Zurich Insurance Group
Ltd. where she served as group chief
investment officer and more recently as
group chief risk officer. In both roles, Ms
Reyes was member of the group executive
committee from April 2010 until her
retirement from the company in February
2018. From 1997 to 2000, Ms Reyes held
several risk positions at ING Groep N.V.
From August 1995 to 1996, she worked as
a consultant in financial engineering and
risk. From April 1990 to July 1995, Ms Reyes
worked for Credit Suisse in a variety of
roles in asset management, global treasury
and securities trading. Ms Reyes holds a
bachelor of science in Industrial Engineering
from the University of Manila, an MBA in
Finance from the University of Hawaii, and
a PhD in finance from London Business
School. In addition to being member of
the Supervisory Board, Ms Reyes is non-
executive director and member of the risk
and capital committee and the remuneration
committee at Standard Life Aberdeen plc.
She also serves as managing director of
PIONEER Management Services GmbH.
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Hans Schoen was appointed to the
Supervisory Board as of 7 July 2014.
He was reappointed on 31 May 2018. He is
considered as appointed pursuant to the
enhanced recommendation right of the
Central Works Council as of 12 April 2020.
From September 1977 until October 2008,
Mr Schoen worked at KPMG Accountants
and was a partner as of January 1989.
He specialised in providing audit and
advisory services to domestic and foreign
insurance companies. Other former
significant positions of Mr Schoen include
member and chair of several insurance
industry committees of the NIVRA and
the Dutch Accounting Standards Board,
member of the governmental advice
committee Traas in respect of the financial
and prudential reporting obligations of
Dutch insurance companies, member of
several advisory committees of the IASC/
IASB on insurance company financial
reporting requirements and member and
part-time acting director of research of
the Technical Expert Group of EFRAG
in Brussels (Belgium). Until 27 April 2016,
Mr Schoen served as chair of the EFRAG
Insurance Accounting Working Group.
Mr Schoen holds a degree in economics
and a postdoctoral degree in accountancy
from the University of Amsterdam (the
Netherlands). In September 2015, he
received a PhD from the Vrije Universiteit
(VU) Amsterdam (the Netherlands).
Clara Streit was appointed to the
Supervisory Board on 1 June 2017. She was
reappointed on 28 May 2020. Mr Streit is
former member of the supervisory board
of Delta Lloyd N.V. She was senior partner
at McKinsey & Company Inc. in Munich
and Frankfurt. Until 12 April 2018, she
was member of the board of directors of
Unicredit S.p.A (Milan). Positions currently
held by Ms Streit include membership of the
board of directors of Vontobel Holding AG
(Zürich) and membership of the supervisory
board of Vonovia SE (Düsseldorf). Ms Streit
is also a member of the board of directors
of Jerónimo Martins SGPS S.A. (Lisbon),
member of the supervisory board of
Deutsche Börse AG (Frankfurt).
Hélène Vletter-van Dort was appointed to
the Supervisory Board on 6 October 2015
pursuant to the enhanced recommendation
right of the Central Works Council. She was
reappointed on 29 May 2019. As of the close
of the AGM on 28 May 2020, Ms Vletter-van
Dort serves as vice-chair of the Supervisory
Board. In addition to being member of the
Supervisory Board, Ms Vletter-van Dort’s
positions include professor of financial
law & governance at the Erasmus School
of Law, chair of the supervisory board
of Intertrust N.V., chair of the board of
Stichting Luchtmans and member of the
supervisory board of the Netherlands Public
Broadcasting (NPO). As from 21 April 2021,
Vletter-van Dort also serves as supervisory
board member of Anthos Fund & Asset
Management B.V. Ms Vletter-van Dort is
a former non-executive board member
of Barclays Bank plc. Ms Vletter-van Dort
also served as member of the supervisory
board of the Dutch Central Bank (DNB)
and chair of its committee on supervisory
policy. Other previous positions include
visiting research professor at New York
University, professor of securities law at
the University of Groningen, judge at the
Enterprise Chamber of the Amsterdam
Court of Appeal, lawyer at Clifford Chance
in Amsterdam, member of the supervisory
board of Fortis Bank Nederland (Holding)
N.V. and Fortis Bank (Nederland) N.V., chair
of the Appeal Panel of the Single Resolution
Board and member of the Monitoring
Committee Corporate Governance Code.
More information on the composition of
the Supervisory Board can be found in
the Report of the Supervisory Board, on
page 85.
Remuneration
Information on the remuneration of the
members of the Supervisory Board can
be found in the Remuneration Report, on
page 122.
Committees of the Supervisory Board
The Supervisory Board has established four
committees: the Audit Committee, the Risk
Committee, the Remuneration Committee,
and the Nomination and Corporate
Governance Committee.
The organisation, duties and working
methods of the Supervisory Board
committees are detailed in a separate
charter for each committee. These charters
are available on the NN Group website.
Information on the duties and responsibilities
of the respective committees and their
composition can also be found in the Report
of the Supervisory Board on pages 90-96.
Sustainability governance
The Executive Board’s responsibilities
include the formulation and execution of
the company’s strategy in line with its view
on long-term value creation. In 2020/2021
NN has further disclosed more detailed
strategic commitments and financial and
non-financial targets as part of the overall
strategy (see Our strategy and performance)
that also include environmental, social and
governance (ESG) matters.
The strategy pursued by the Executive
Board is supervised by the Supervisory
Board. Each Supervisory Board Committee
covers the sustainability matters that
fall within its responsibilities and area of
expertise, which is included in the reporting
of the main points of discussion and resulting
recommendations to the Supervisory
Board. In this way an integrated approach
with regards to sustainability matters at
Supervisory Board level is safeguarded.
The Management Board’s responsibility for
NN Group’s day-to-day management and
overall strategic direction includes the setting
and achievement of NN Group’s objectives,
and the ESG aspects that are relevant to NN
Group. Within the Management Board, the
Chief Organisation & Corporate Relations
(COCR), who reports to the CEO, has
Corporate Citizenship, including sustainability,
in her portfolio. The COCR is the sponsor
for any sustainability, climate or responsible
investment related topics that are discussed in
the Management Board. The Chief Risk Officer
(CRO), also a member of the Management
Board and reporting to the CEO, is entrusted
with the day-to-day responsibility for NN
Group’s risk management function. The CRO
is tasked to ensure both the Management
Board and the Supervisory Board are at all
times informed of and understand the material
risks to which NN is exposed. This includes
risks related to sustainability matters, including
climate change.
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NN Group N.V.
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He is the sponsor of the NN Group
annual Own Risk & Solvency Assessment
(ORSA), in which outcomes of scenario
analyses including climate change are
evaluated. In addition to this, each of the
other Management Board members are
responsible for promoting and integrating
sustainability into their respective
businesses or functions where relevant.
In order to ensure that NN Group adheres
to regulation in the field of ESG, the Risk
and Compliance functions are tasked to
oversee proper implementation and monitor
ongoing compliance.
To advise the Management Board on the
implementation of the overall sustainability
approach, NN Group employs a dedicated
Corporate Citizenship team. This team
works closely together with the different
businesses and functions to steer and advise
on the embedding of ESG aspects as part of
the implementation of the overall strategy.
NN Group also has a Purpose Council,
consisting of several Management
Board members, heads of relevant staff
departments and business representatives,
which is chaired by the COCR, and
sponsored by the CEO. The Purpose
Council supports the Management Board
in steering, measuring and reporting on
non-financial issues. The performance
on the non-financial KPIs, including those
related to our strategic commitments on
Customers and distribution, People and
organisation and Society, is reported via a
Strategy dashboard which is discussed in
the Purpose Council and subsequently in
the Strategy and Transformation meetings
of the Management Board on a quarterly
basis. The Purpose Council performs an
advisory, consultative and preparatory role
with regard to purpose-related areas such
as sustainability and ESG matters.
As a large international financial services
company, NN Group believes that it can
make a real contribution to the transition to
a sustainable economy through investing
its assets responsibly. The company’s
approach to integrate ESG factors in its
investment process is described in NN
Group’s Responsible Investment Framework
policy. For a description of the Responsible
Investment governance structure, reference
is made to the TCFD report on page 66.
Diversity and inclusion
NN Group aims to have an adequate and
balanced composition of its Executive
Board, Management Board and Supervisory
Board. In order to ensure such composition
at all times, several relevant selection criteria
are balanced and (re)appointments to these
boards are made on the basis of harmonised
policies and visions of the various corporate
bodies of NN Group and in accordance
with legal and regulatory requirements.
Both the profile of the Executive Board and
Management Board and the profile of the
Supervisory Board include a diversity policy.
The guiding principles included in the profiles
are taken into account when (re)appointing
board members.
NN Group aims to have a gender balance
of at least 40% women and 40% men for
its Executive Board. Given the fact that
this board consists of only two members,
this target requires an Executive Board
consisting of one female and one male.
In 2021, the Executive Board consisted
of two male members. However, with the
intended succession of Delfin Rueda as
Executive Board member and CFO of
NN Group by Annemiek van Melick, the
composition of the Executive Board will be
50% female and 50% male, effective as
from 1 July 2022.
For the Management Board, NN Group aims
to have a gender balance of at least 40% of
both women and men. Since 19 August 2021,
the composition of the Management Board
is 25% female and 75% male. As from 1 July
2022, this composition will be 37.5% female
and 62.5% male.
In 2021, the composition of the Supervisory
Board already met the statutory diversity
quota of at least one-third for both women
and men on supervisory boards of listed
companies, which is effective as from
1 January 2022. As from 1 September 2021,
the composition of the Supervisory Board is
44% female and 56% male.
In future appointments of board members,
NN Group will continue to take into account
all applicable laws and regulations and
relevant selection criteria including but not
limited to executive experience, experience
in corporate governance of large stock-
exchange listed companies, and experience
in the political and social environment in
which such companies operate. In the
selection of the members of the Executive
Board and the Management Board, whether
or not considered as a whole, and in the
selection of the members of the Supervisory
Board, there will be a balance in terms
of nationality, gender, age, experience,
education and work background. In addition,
there will be a balance in the affinity with
the nature and culture of the business of the
company and its subsidiaries.
NN Group has also set a target to have at least
40% women in senior management positions
by 2023. In 2021, these positions included the
Management Board and managerial positions
reporting directly to a Management Board
member. In 2022 we will extend the scope of
the target group by including more positions in
the Dutch and Insurance International business
units to further improve and strengthen the
impact of our gender diversity ambition.
The target group will therefore be extended
to include all managerial positions reporting
directly to the business unit CEOs.
Talent management, succession planning
and the NN Group Statement on Diversity
and Inclusion are key instruments in our
approach and are part of the Human Capital
Development processes of NN Group.
We believe our company is strongest
when we embrace the full spectrum of
humanity. Regardless of what we look
like, where wecome from, or who we love.
That is why NNGroup takes a stand for
diversity, inclusion and equal opportunities
for all. When people inside of our company
represent the people outside our company,
we can be more responsive to what they
expect, want and need, also in changing
circumstances. After all, change is a constant
factor in our lives, also in the financial sector,
Apart from a diverse composition of our
Executive, Management and Supervisory
boards, the members of these boards
attended a Diversity & Inclusion training
as part of the 2021 NNGroup Permanent
Education Programme, in order to be able to
knowledgeably contribute to the company’s
diversity and inclusion efforts.
More information can be found in the
Diversity and inclusion section on page 38 of
the 2021 Annual Report.
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Conflicts of interest
No transactions were entered into in 2021
in which there were conflicts of interest
with Executive Board members and/or
Supervisory Board members that are of
material significance to NN Group and/or to
the relevant board members.
General meeting
Frequency, notice and agenda
Each year, no later than the month of June,
NN Group holds its annual general meeting.
Its general purpose is to discuss the Report
of the management board, advise on the
Remuneration Report, adopt the annual
accounts, release the members of the
Executive Board and the members of the
Supervisory Board from liability for their
respective duties, appoint and reappoint
members of the Supervisory Board,
decide on the dividend to be declared,
if applicable, and decide on other items
that require shareholder approval under
Dutch law. Extraordinary general meetings
are held whenever the Supervisory Board
or the Executive Board deems such to
be necessary. In addition, one or more
shareholders who jointly represent at least
10% of the issued share capital of NN Group
may, on application, be authorised by the
court in interlocutory proceedings of the
district court to convene a general meeting.
General meetings are convened by a public
notice via the NN Group website no later
than on the 42nd day before the day of
the general meeting. The notice includes
the place and time of the meeting and the
agenda items. Shareholders who, alone or
jointly, represent at least 3% of the issued
share capital of NN Group may request to
place items on the agenda, provided that the
reasons for the request are stated therein
and the request is received by the chair
of the Executive Board or the chair of the
Supervisory Board in writing at least 60 days
before the date of the general meeting.
Admission to the general meeting
Each holder of shares in the share capital of
NN Group entitled to vote, and each other
person entitled to attend and address the
general meeting, is authorised to attend the
general meeting, to address the general
meeting and to exercise voting rights.
For each general meeting, a statutory record
date will, in accordance with Dutch law,
be set on the 28th day prior to the date of
the general meeting, in order to determine
whose voting rights and rights to attend and
address the general meeting are vested.
Those entitled to attend and address
a general meeting may be represented
at a general meeting by a proxy holder
authorised in writing.
In view of the Covid-19 pandemic and
pursuant to the Temporary Act COVID-19
Justice and Security (Tijdelijke Wet
COVID-19 Justitie en Veiligheid), the 2021
AGM of NN Group was held virtually.
Shareholders were able to follow the
meeting via a live webcast. Questions could
be submitted in advance as well as during
the meeting via a video connection.
Voting rights could be exercised during the
meeting by electronic means or by providing
an electronic proxy with voting instructions
in advance.
Voting and resolutions
Each share in the share capital of NN Group
confers the right on the holder to cast one
vote. At a general meeting all resolutions
must be adopted by an absolute majority
of the votes cast, except in those cases in
which the law or the Articles of Association
require a greater majority. If there is a
tie in voting, the proposal concerned will
be rejected.
Powers of the General Meeting
The most important powers of the General
Meeting are to:
• Appoint members of the Supervisory
Board upon nomination of the
Supervisory Board
• Recommend persons to the Supervisory
Board for nomination as a member of
that board
• Abandon its trust in the Supervisory Board
• Release the members of the Executive
Board and the members of the
Supervisory Board from liability for their
respective duties
• Advise on the Remuneration Report
• Adopt the remuneration policy for the
members of the Executive Board and
the remuneration policy for the members
of the Supervisory Board, including
the remuneration for the Supervisory
Board members, upon a proposal of the
Supervisory Board
• Adopt the annual accounts
• Appoint the external auditor
• Approve resolutions of the Executive
Board regarding important changes in
the identity or character of NN Group or
its business
• Issue shares, restrict or exclude pre-
emptive rights of shareholders and
delegate these powers to the Executive
Board, upon a proposal of the Executive
Board which has been approved by the
Supervisory Board
• Authorise the Executive Board to
repurchase shares
• Reduce the issued share capital, upon a
proposal of the Executive Board which has
been approved by the Supervisory Board
• Dispose the profit remaining after the
payment of dividend on any outstanding
preference shares and after a decision has
been taken on the addition of all or part of
the profits to the reserves, upon a proposal
of the Executive Board which has been
approved by the Supervisory Board
• Amend the Articles of Association, upon a
proposal of the Executive Board which has
been approved by the Supervisory Board.
Shares and share capital
Classes of shares and NN Group Continuity
Foundation
The authorised share capital of NN Group
consists of ordinary shares and preference
shares. Depositary receipts for shares
are not issued with the cooperation of
NN Group.
Currently, only ordinary shares are issued,
while a call option to acquire preference
shares is granted to the foundation Stichting
Continuïteit NN Group (NN Group Continuity
Foundation). The objectives of NN Group
Continuity Foundation are to protect the
interests of NN Group, the business maintained
by NN Group and the entities with which NN
Group forms a group and all persons involved
therein, in such a way that the interests of NN
Group and those businesses and all persons
involved therein are protected to the best of its
abilities, and by making every effort to prevent
anything which may affect the independence
and/or the continuity and/or the identity
of NN Group and of those businesses in
violation of the interests referred above.
NN Group Continuity Foundation shall pursue
its objectives, inter alia, by acquiring and
holding preference shares in the share capital
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NN Group N.V.
2021 Annual Report
of NN Group and by enforcing the rights, in
particular the voting rights, attached to those
preference shares. To this end, NN Group
Continuity Foundation has been granted a
call option by NN Group. According to the call
option agreement concluded between NN
Group and NN Group Continuity Foundation,
NN Group Continuity Foundation has the
right to subscribe for preference shares in the
share capital of NN Group, consisting of the
right to subscribe for such preference shares
repeatedly. This may happen each time up to
a maximum corresponding with 100% of the
issued share capital of NN Group in the form of
ordinary shares, as outstanding immediately
prior to the exercise of the subscribed rights,
less one share (which equals a maximum
of 50% less one share after dilution), from
which maximum shall be deducted any
preference shares already placed with NN
Group Continuity Foundation at the time
of the exercise of the subscribed rights.
NN Group Continuity Foundation qualifies as
a legal entity independent from NN Group,
within the meaning of section 5:71, paragraph
1, subparagraph c of the Dutch Financial
Supervision Act.
As at 31 December 2021, the board of
NNContinuity Foundation consisted of
three members who are independent
from NN Group: Marc van Gelder (chair),
HesselLindenbergh (treasurer) and
StevenPerrick (secretary).
Issuance of shares and pre-emptive rights
The General Meeting may resolve to issue
shares in the share capital of NN Group, or
grant rights to subscribe for such shares, upon
a proposal of the Executive Board which has
been approved by the Supervisory Board.
The Articles of Association provide that the
General Meeting may delegate the authority
to issue shares, or grant rights to subscribe
for shares, to the Executive Board, upon a
proposal of the Executive Board which has
been approved by the Supervisory Board. If the
Executive Board has been designated as the
body authorised to resolve upon an issue of
shares in the share capital of NN Group, the
number of shares of each class concerned
must be specified in such designation.
Upon such designation, the duration of the
designation shall be set, which shall not exceed
five years. A resolution of the Executive Board
to issue shares requires the approval of the
Supervisory Board.
Upon the issue of new ordinary shares
(or the granting of rights to subscribe for
ordinary shares), each holder of ordinary
shares in the share capital of NN Group
has a pre-emptive right in proportion to
the aggregate nominal value of his or her
shareholding of ordinary shares. Holders of
ordinary shares have no pre-emptive right
upon (a) the issue of new ordinary shares
(or the granting of rights to subscribe for
ordinary shares): (i) against a payment in
kind, (ii) to employees of NN Group or of a
group company, or (iii) to persons exercising
a previously granted right to subscribe
for ordinary shares, and (b) the issue of
preference shares.
Upon a proposal of the Executive Board
which has been approved by the Supervisory
Board, the General Meeting may resolve
to limit or exclude the pre-emptive rights.
According to the Articles of Association,
the General Meeting may designate the
Executive Board as the competent body
to do so upon a proposal of the Executive
Board which has been approved by the
Supervisory Board. Both resolutions
require a majority of at least two-thirds of
the votes cast, if less than one-half of the
issued share capital is represented at the
general meeting. The designation to the
Executive Board to resolve to limit or exclude
the pre-emptive rights may be granted
for a specified period of time of not more
than five years and only if the Executive
Board has also been designated or is
simultaneously designated the authority to
resolve to issue shares. A resolution of the
Executive Board to limit or exclude the pre-
emptive rights requires the approval of the
Supervisory Board.
Designation of the Executive Board
at the 2019 and 2021 AGMs
Share issuance in the context of issuing
Contingent Convertible Securities
On 29 May 2019, the General Meeting
designated the Executive Board for a term of
five years, from 29 May 2019 up to and including
28 May 2024, as the competent body to resolve,
subject to the approval of the Supervisory
Board, on the issuance of ordinary shares in
the share capital of NN Group (including the
granting of rights to subscribe for ordinary
shares) upon conversion of any Contingent
Convertible Securities (CCS) instruments in
accordance with its terms and conditions during
the term of the CCS instruments.
This authority of the Executive Board
is limited to a maximum of 30% of the
issued share capital of NN Group as at
29 May 2019. This designation enables the
Executive Board to issue CCS instruments
and to set the terms and conditions for any
CCS instrument, including the limitation
or exclusion of pre-emptive rights, the
mechanism for the conversion and the
conversion price.
Share issuance and limitation of pre-
emptive rights
On 20 May 2021, the General Meeting
designated the Executive Board for a
term of 18 months, from 20 May 2021 up to
and including 19 November 2022, as the
competent body to resolve, subject to the
approval of the Supervisory Board, on the
issuance of ordinary shares in the share
capital of NN Group and on the granting of
rights to subscribe for such shares; and to
limit or exclude the pre-emptive rights of
existing shareholders with respect to such
issue of ordinary shares in the share capital
of NN Group and such granting of rights to
subscribe for ordinary shares.
The authority of the Executive Board
is limited to a maximum of 10% of the
issued share capital of NN Group as at
20 May 2021.
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NN Group N.V.
2021 Annual Report
Rights issue
On 20 May 2021, the General Meeting
designated the Executive Board for a
term of 18 months, from 20 May 2021 up to
and including 19 November 2022, as the
competent body to resolve, subject to the
approval of the Supervisory Board, on the
issuance of ordinary shares in the share
capital of NN Group and on the granting of
rights to subscribe for ordinary shares by
way of a rights issue. This authority of the
Executive Board is limited to a maximum
of 20% of the issued share capital of NN
Group as at 20 May 2021. This authority to
issue shares may be used for any purpose,
including but not limited to safeguarding or
conserving the capital position of NN Group
and mergers or acquisitions.
Acquisition of own shares
NN Group may acquire fully paid-up shares
in its own share capital for no consideration
(om niet) or if: (a) NN Group’s shareholder’s
equity less the payment required to make
the acquisition does not fall below the sum of
called-up and paid-in share capital and any
statutory reserves, and (b) the nominal value
of the shares which NN Group acquires,
holds or holds as pledge, or which are held
by a subsidiary, does not exceed half of the
issued share capital. The acquisition of its
own shares by NN Group for consideration
requires authorisation by the General
Meeting. The authorisation is not required
for the acquisition of shares for employees
of NN Group or of a group company under
a scheme applicable to such employees.
The Executive Board may resolve, subject
to the approval of the Supervisory Board, to
alienate the shares acquired by NN Group
in its own share capital. The resolution of
the Executive Board to acquire shares in its
own share capital for consideration requires
the prior approval of the Supervisory Board.
No voting rights may be exercised in the
general meeting with respect to any share or
depositary receipt for such share held by NN
Group or by a subsidiary, and no payments
will be made on shares which NN Group
holds in its own share capital. On 20 May
2021, the General Meeting authorised the
Executive Board for a term of 18 months,
from 20 May 2021 up to and including
19 November 2022, to acquire in the name
of NN Group, subject to the approval of the
Supervisory Board, fully paid-up ordinary
shares in the share capital of NN Group.
This authorisation is subject to the condition
that following such acquisition the par value
of the ordinary shares in the share capital
of NN Group which are held by NN Group or
for which NN Group holds a right of pledge,
or which are held by its subsidiaries for
their own account, shall not exceed 10% of
the issued share capital of NN Group as at
20 May 2021. Shares may be acquired on
the stock exchange or otherwise, at a price
not less than the par value of the ordinary
shares in the share capital of NN Group and
not higher than 110% of the highest market
price of the shares on Euronext Amsterdam
on the date of the acquisition or on the
preceding day of stock market trading.
Cancellation of own shares
On 20 May 2021, the General Meeting
adopted the proposal to reduce the issued
share capital of NN Group by cancellation
of ordinary shares held by NN Group in
its own share capital up to a maximum
of 20% of the issued share capital of NN
Group as at 20 May 2021. The cancellation
may be executed in one or more tranches.
The number of ordinary shares to be
cancelled shall be determined by the
Executive Board. Capital reduction shall take
place with due observance of the applicable
statutory provisions and the articles of
association of NN Group.
Transfer of shares and transfer restrictions
The transfer of ordinary shares in the share
capital of NN Group included in the Statutory
Giro System must take place in accordance
with the provisions of the Dutch Securities
Giro Act (Wet giraal effectenverkeer).
The transfer of shares in the share capital
of NN Group not included in the Statutory
Giro System requires an instrument intended
for that purpose. To become effective, NN
Group has to acknowledge the transfer,
unless NN Group itself is a party to the
transfer. The Articles of Association do not
restrict the transfer of ordinary shares in the
share capital of NN Group, while the transfer
of preference shares in the share capital of
NN Group requires the prior approval of the
Executive Board. NN Group is not aware of
the existence of any agreement pursuant to
which the transfer of ordinary shares in the
share capital of NN Group is restricted.
Significant shareholdings
Substantial shareholdings, gross and net
short positions
Under the Dutch Financial Supervision Act
each legal and natural person having a
substantial holding or gross short position
in relation to the issued share capital and/
or voting rights of NN Group that reaches,
exceeds or falls below any one of the
following thresholds: 3%, 5%, 10%, 15%,
20%, 25%, 30%, 40%, 50%, 60%, 75% and
95%, must immediately give written notice
to the Dutch Authority for Financial Markets.
These notifications will be made public
via the Register substantial holdings and
gross short positions (Register substantiële
deelnemingen en bruto short posities) of the
Dutch Authority for Financial Markets.
Pursuant to EU regulation No 236/2012,
each legal and natural person holding a
net short position representing 0.2% of
the issued share capital of NN Group must
report this position and any subsequent
increase by 0.1% to the Dutch Authority for
Financial Markets. Each net short position
equal to 0.5% of the issued share capital
of NN Group and any subsequent increase
of that position by 0.1% will be made public
via the short selling register of the Dutch
Authority for Financial Markets.
In 2021, no legal or natural person held
at least 10% of the shares in NN Group,
therefore NN Group did not enter into any
transaction with any such person.
Information on shareholders with an
(indirect) holding and/or gross short position
of 3% or more can be found in the Annual
Report on page 43 and is deemed to be
incorporated by reference herein.
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NN Group N.V.
2021 Annual Report
Dutch Corporate Governance Code
NN Group is subject to the Dutch Corporate
Governance Code (Code). The application of
the Code by NN Group during the financial
year 2021 is described in the publication
Application of the Dutch Corporate
Governance Code by NN Group, dated
9 March 2022, which is available on the
website of NN Group. This publication is
to be read in conjunction with this chapter
and is deemed to be incorporated by
reference herein. The Code is available
on the website of the Dutch Corporate
Governance Code Monitoring Committee
(www.commissiecorporategovernance.nl).
Articles of Association
The General Meeting may pass a resolution
to amend the Articles of Association with an
absolute majority of the votes cast, but only
on a proposal of the Executive Board, which
has been approved by the Supervisory
Board. NN Group’s Articles of Association
were last amended on 28 May 2020.
Change of Control
NN Group is not party to any material
agreement that takes effect, alters or
terminates upon a change of control of NN
Group following a takeover bid as referred
to in article 5:70 of the Dutch Financial
Supervision Act, other than a revolving
credit facility agreement entered into with
a syndicate of lenders. The revolving credit
facility agreement includes a change of
control provision which entitles the lenders to
cancel the commitment under the facility and
declare any outstanding amounts under the
facility immediately due and payable.
The assignment contracts with the members
of the Executive Board provide for severance
payments, which are to become due in case
of termination of the contract in connection
with a public bid as defined in article 5:70
of the Dutch Financial Supervision Act.
Severance payments to the members of the
Executive Board are limited to a maximum of
one year’s fixed salary, in line with the Code
and the Dutch Financial Supervision Act.
External auditor
The external auditor is appointed by the
General Meeting upon nomination of the
Supervisory Board, after recommendation
by the Audit Committee. On 28 May 2015,
the General Meeting appointed KPMG
Accountants N.V. (KPMG) as the external
auditor of NN Group for the financial years
2016 through 2019. On 29 May 2019, KPMG
was reappointed as the external auditor of NN
Group for the financial years 2020 through
2022. It is intended to propose to the general
meeting to reappoint KPMG as external
auditor of NN Group with the instruction to
audit the annual accounts for the financial
years 2023 through 2025 at the 2022 AGM.
The external auditor may be questioned at
the annual general meeting in relation to
its audit opinion on the annual accounts.
The external auditor will therefore attend and
be entitled to address this meeting. In 2021,
the external auditor attended the annual
general meeting and during this meeting,
he answered questions from shareholders.
The external auditor also attended the
meetings of the Audit Committee and the
Risk Committee of the Supervisory Board in
2021, as well as the part of the meeting of the
Supervisory Board in which the 2020 Annual
Accounts were approved.
More information on NN Group’s policy on
external auditor independence is available
on the website of NN Group (NN Group –
Auditor information (nn-group.com).
Risk management and control systems
A description of the main characteristics of
the risk management and control systems
of NN Group and its group companies can
be found in Note 52 ‘Risk management’
to the Consolidated annual accounts,
which is deemed to be incorporated by
reference herein.
The Executive Board is responsible for
establishing and maintaining adequate
internal control over financial reporting to
provide reasonable assurance regarding
the reliability of financial reporting and
the preparation of the annual accounts
in accordance with generally accepted
accounting principles. Internal control over
financial reporting includes those policies
and procedures that:
• Pertain to the maintenance of records that,
in reasonable detail, accurately and fairly
reflect the transactions and dispositions
of assets.
• Provide reasonable assurance that
transactions are recorded as necessary to
permit preparation of the annual accounts
in accordance with generally accepted
accounting principles (International
Financial Reporting Standards as
endorsed by the European Union and Part
9 of Book 2 of the Dutch Civil Code).
• Provide reasonable assurance
regarding prevention or timely detection
of unauthorised acquisition, use or
disposition of assets that could have a
material effect on the annual accounts.
Because of its inherent limitations, internal
control over financial reporting may not
prevent or detect all misstatements.
Also, projections of any evaluation of
effectiveness to future periods are
subject to the risk that controls may
become inadequate because of changes
in conditions, or that the degree of
compliance with the policies or procedures
may deteriorate.
Corporate Governance Statement
This chapter, including parts of this Annual
Report incorporated by reference, together
with the separate publication ‘Application
of the Dutch Corporate Governance Code
by NN Group’, dated 9 March 2022, which
is available on the NN Group website,
also serves as the corporate governance
statement referred to in section 2a of the
Decree contents of the management report
(Besluit inhoud bestuursverslag).
Corporate governance continued
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NN Group N.V.
2021 Annual Report
Introduction by the chair of the
Remuneration Committee
As chair of the Remuneration Committee,
I am pleased to present NN Group’s 2021
Remuneration report. The year 2021
was another eventful year, in which the
Remuneration Committee addressed
a wide range of relevant topics. In this
opening statement, you will be provided
with information on topics that highlighted
the year and that are relevant to underline,
given the importance for NN Group and
its stakeholders.
Societal and business context
During 2021 good progress has been made
in executing the strategy. The year was
also marked by various acquisitions and
divestments. The Supervisory Board has
been closely involved in these strategic
initiatives. Remuneration and social aspects
have been addressed appropriately, with a
clear intention to always carefully consider
the interests of employees, and to ensure
smooth and orderly transition processes.
Remuneration decisions have been taken in
the context of the Covid-19 pandemic, taking
into account societal aspects and relevant
regulatory guidance as applicable to NN
Group and its subsidiaries.
Leadership changes
During the course of 2021, several
leadership changes took place. Inga Beale,
Rob Lelieveld and Cecilia Reyes were
appointed as Supervisory Board members
of NN Group. By appointing Rob Lelieveld
and Cecilia Reyes as members of the
Remuneration Committee, its composition
was further strengthened.
On 12 October 2021, the Supervisory Board
announced its intention to appoint Annemiek
van Melick as Chief Financial Officer (CFO)
and vice-chair of the Executive Board of
NN Group for a term of four years after
notification to the General Meeting of
NNGroup at the annual general meeting,
to be held on 19 May 2022. Annemiek van
Melick will succeed Delfin Rueda, who
will leave NN Group as of 1 July 2022 after
being CFO and vice-chair of the Executive
Board of NN Group since 2014. We are
pleased to have found a strong successor
for Delfin Rueda. Annemiek van Melick
joins NNGroupwith extensive executive
experience in the financial industry, and
is well-placed to help drive our strategy
in the years to come. At the same time,
we are extremely grateful for Delfin’s
commitment to NNGroup over many years.
The Remuneration Committee has been
closely involved in the process leading up to
this Executive Board leadership change.
Important observations resulting from
stakeholder consultation sessions
We were pleased with the General
Meeting’s positive advice on the 2020
Remuneration report at the 2021 annual
general meeting. The proposal was
adopted with 96.53% of the votes granted
in favour. The Remuneration Committee
engages in regular dialogue with our
shareholders and other stakeholders with
the aim to continuously improve NN Group’s
Remuneration Report.
On behalf of the Remuneration
Committee, I have engaged in an extensive
stakeholder consultation to understand
their perspectives and views. Input was
obtained from investors, a proxy advisor, a
shareholder representative body, our Central
Works Council and representatives of
Dutch trade unions. During the consultation
sessions, a wide range of topics were
addressed. The Remuneration Committee is
committed to continuing these stakeholder
consultation sessions on a recurring basis.
Linking the NN Group strategy to
performance objectives and remuneration
High on the agenda for many stakeholders
is a clear link between the financial and
non-financial ambitions underpinning the
company’s strategy, the performance
objectives of the Executive Board
members and their remuneration awards.
The Remuneration Committee has a strong
belief that the objectives and remuneration
of Executive Board members should be
linked to the overall long-term strategy of
NN Group, and our strategic commitments
in the area of our customers and distribution,
products and services, our people, society,
and the aim to remain financially strong
and seek solid long-term value creation for
shareholders. As outlined in the remainder
of this Remuneration Report, we have
developed a clear framework which
demonstrates the way we translated the
strategy into objectives that underpin our
annual variable remuneration awards.
Increased focus on Environmental, Societal
and Governance aspects, including climate
ambitions
Embedding Environmental, Societal and
Governance (ESG) aspects throughout
the organisation and governance is key
to achieving our ambition. During the
stakeholder consultation sessions, we
also observed increased focus on ESG
objectives, and the belief that these should
be incorporated in the objective setting and
linked to variable remuneration. Related to
this, stakeholders indicated that they would
like to see more explicit climate-related
objectives, given that the urgency for such
objectives has increased in line with the
public debate. ESG targets have formed
part of the objectives of our Executive
Board members, and were linked to their
variable remuneration for many years.
In 2021, environmental targets were more
prominently represented and explicitly
linked to the Executive Board’s variable
remuneration. These targets related to
the contribution to the transition to a
low-carbon economy and the reduction
of our direct environmental footprint.
Careful consideration has been given by the
Remuneration Committee to ensure that
we continue to deliver on our responsible
investing ambitions, also in light of the
announced sale of NN Investment Partners
to Goldman Sachs.
Remuneration report
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2021 Annual Report
In line with our commitment towards
sustainable long-term value creation, NN
Group aims to further raise the bar by
introducing clear and measurable targets
for the Executive Board members related
to ESG, with an emphasis on climate.
To support the Paris Climate Agreement,
we have set a clear ambition to support
the global transition towards net-zero
greenhouse gas (GHG) emissions by 2050,
in line with efforts to limit global warming
to 1.5°C. In 2022, we will further develop
the strategy to transition the proprietary
portfolio to achieve net-zero GHG emissions
by 2050. This will be underpinned by targets
set in 2021 to decarbonise our corporate
investment portfolio where we aim to reduce
emissions by 25% by 2025 and 45% by
2030, compared with 2019 levels, and to
increase investments in Climate Solutions
by at least EUR 6 billion by 2030. We aim to
further integrate ESG criteria in underwriting
with focus on (acceptance) policies, product
approval processes, and risk management
for ESG-related risks. In addition, we are
developing action plans to align insurance
activities, policies and target setting with
commitment and timelines of the Net-Zero
Insurance Alliance, which NN Group joined
in 2021. Furthermore, objectives will be in
place in relation to reducing the carbon
emissions of our facilities/offices and
business travel by at least 35% in 2025 and
at least 70% in 2030 (versus 2019), and
to further embed sustainability aspects in
our operations (e.g. procurement, facility
management) and products and services
with a focus to address societal and
environmental challenges.
Quality of disclosures on performance
objectives
Stakeholders indicate that they find it
increasingly important to understand
the logic and measurements in relation
to determined performance objectives,
and encourage transparency thereof
in the Remuneration Report. We have
made further steps this year to provide
clear and useful information in relation to
the performance of the members of our
Executive Board against 2021 financial and
non-financial objectives and this will remain
a focus area in the coming years.
Importance of the internal pay ratio
Another important topic addressed during
the stakeholder consultation sessions is
the consideration of the internal pay ratio
developments when deciding on executive
remuneration. Further reference has
been made to acknowledging the wage
progression for other groups of employees,
including those covered under the Dutch
Labour Agreement that is subject to
negotiations with the Dutch Trade Unions.
The Supervisory Board is committed to
closely monitoring the development of
the pay ratio, and it is one of the factors
taken into account while deciding on
the remuneration of the members of the
Executive Board, along with a wider range of
other relevant factors such as the external
market perspective and interests of various
stakeholders. Furthermore, the pay ratio,
and its historic development is provided for
in this Remuneration Report.
On behalf of the Remuneration Committee,
I would like to thank all stakeholders who
were willing to openly share their views,
provide valuable recommendations, fuel our
thinking, and help shape the steps to take.
H.M. (Hélène) Vletter-van Dort
Chair of the Remuneration Committee
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Introduction
This remuneration report describes
NN Group’s remuneration policy and
methodology. Furthermore, details are
provided on the remuneration of the
Supervisory Board and the Executive
Board. This Report is divided into the
following subsections:
I Remuneration in general
II Remuneration of the Executive Board
III Remuneration of the Supervisory Board
Reference is made to Note 49 ‘Key
management personnel compensation’
in the Consolidated annual accounts for
more information on the remuneration of
the Executive Board, Management Board
and Supervisory Board, including loans and
advances provided to the members of these
Boards. This remuneration report serves as
the report referred to in article 2:135b of the
Dutch Civil Code and Best Practice Provision
3.4.1 of the Dutch Corporate Governance
Code. The information provided in this
remuneration report is based on the current
applicable remuneration policies of NN
Group, applicable in 2021.
I Remuneration in general
NN Group has an overall remuneration
policy, as described in the NN Group
Remuneration Framework, which sets out
guidelines and principles for all country
and business unit remuneration policies
within NN Group. NN Group aims to apply
a clear and transparent remuneration
policy that is adequate to attract and
retain expert leaders, senior staff and other
highly qualified employees. The NNGroup
strategy sets out our goals and how we
will achieve them through our shared
purpose, our ambition and our five strategic
commitments. These strategic commitments
are embedded in the remuneration policies
within NN Group. The remuneration policy
is also designed to support NN Group’s
employees to act with integrity and to
carefully balance the interests of our
stakeholders. It supports doing business
with the future in mind, and aims to focus on
creating long-term value for all stakeholders.
At the same time, NN Group is conscious
about its role in society, which is considered
and embedded in the remuneration policies
and practices as applicable to NN Group
employees. These policies promote robust
and effective risk management, including
risk management of sustainability risks (such
as environment, society, governance and
employee related matters) in the integration
thereof in the risk management system
and procedures. This will, amongst others
be supported by performance objective
setting processes.
NN Group’s remuneration policy for
executives and senior staff is based on
a total compensation approach, and is
benchmarked on a regular basis with
relevant national and international peers,
both within the financial sector and outside
the financial sector. Clear financial and non-
financial performance objectives are set
which are aligned with the overall strategy
of NN Group, both in the short term and
the long term, to ensure that remuneration
is properly linked to individual, team and
NN Group performance. The remuneration
policy supports a focus on the company’s
long-term interests and the interests of its
customers and various stakeholders by
ensuring that there is careful management
of risk and that staff are not encouraged,
via remuneration, to take excessive risk.
In addition, the remuneration policy ensures
that NN Group complies with all the relevant
(inter)national regulations on remuneration,
such as the Act on the Remuneration
Policies of Financial Undertakings (Wet
beloningsbeleid financiële ondernemingen),
as relevant to our business.
Gender equality contributes to an inclusive
working environment by ensuring equal
opportunities, working conditions and equal
pay for equal work. NN Group constantly
strives to promote and achieve equal pay
for equal work, or work of equal value, for
all employees, as this is a key component
of supporting equal opportunities for
all genders. To this end, NN Group has
implemented remuneration policies that
do not differentiate for gender. This means
that, in principle, all aspects of NN Group’s
remuneration policies and processes
are aimed to be gender neutral, such as
the determination of salary levels for our
employees and the process in relation to
setting the award and pay-out levels for
variable remuneration. In this respect, we
are proud to be included in the Bloomberg
Gender Equality Index for the fourth time in
a row, given that equal pay and gender pay
parity are topics that are taken into account
in the Bloomberg assessment.
NN Group’s pay is analysed annually with a
focus on gender equality. When comparing
similar compensation grades and job
profiles, it can be concluded that we offer
equal pay for equal work. Our equal pay
analyses are conducted on an annual
basis, each year across more countries.
More information on our actions and efforts
in relation to gender diversity, and the key
findings resulting from our latest equal pay
analysis can be found on page 39 (header:
Gender diversity and equal pay). Equal pay
will remain under continuous attention, as
we believe equal pay is a key component
of supporting equal opportunities for
everyone. Together, we will continue on our
path of building and fostering a diverse,
inclusive, healthy, and safe workplace for
all colleagues.
With respect to performance in 2021, the
total number of staff of NN Group eligible
for variable remuneration is 5,984. The total
approved variable remuneration budget is
EUR93.8 million, which will be paid in March
or April 2022. In 2021, six persons employed
within NN Group and NN Investment
Partners received a total remuneration of
more than EUR1 million. For this calculation,
the individual base salary, awarded variable
remuneration and, where applicable, life
course savings schemes, individual saving
allowances and pension contributions
were included.
Remuneration report continued
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performance
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II Remuneration of the
Executive Board
The Executive Board members have
an assignment contract (in Dutch:
overeenkomst van opdracht
) with NNGroup
N.V. David Knibbe was appointed as
member and chair of the Executive Board
and CEO of NN Group by the Supervisory
Board on 1 October 2019, after notification
to the General Meeting of NN Group at
an extraordinary general meeting (EGM)
on 26 September 2019. The term of
appointment of David Knibbe will end at the
close of the annual general meeting to be
held in 2023. Delfin Rueda was appointed
to the Executive Board as Chief Financial
Officer (CFO) and vice-chair on 1 March
2014 and as vice-chair of the Management
Board on 7 July 2014. He was reappointed
as member of the Executive Board and
again designated as CFO of NN Group
and as vice-chair of the Executive Board
Composition EB remuneration
Remuneration elements Portion Split Awarded Retention period
Base salary in cash 80%
Base salary in shares 20% 5 years
Total base salary 100%
Variable remuneration Min 0%
Target 16%
Max 20%
50% in cash 60% deferred
40% upfront
50% in shares 60% deferred 5 years
40% upfront 5 years
Total direct remuneration Min 100%
Target 116%
Max 120%
on 31 May 2018 for a term of four years.
His term of appointment will end at the close
of the annual general meeting to be held on
19 May 2022. Subject to notification to the
General Meeting of NN Group at the annual
general meeting to be held on 19 May 2022,
NN Group’s Supervisory Board intends to
reappoint Delfin Rueda until 1 July 2022,
and as per that date to appoint Annemiek
van Melick as vice-chair of the Executive
Board and CFO of NN Group for a term
of four years. Executive Board members
can be reappointed by the Supervisory
Board for consecutive periods of up to
four years after notification to the General
Meeting of NN Group. The remuneration
policy for the Executive Board members
was adopted by the General Meeting on
28 May 2020, effective as from 1 January
2020. The data presented in this report
relates to remuneration awarded to the
Executive Board members in respect of the
whole of 2021. The 2021 total remuneration
as provided to the members of the
Executive Board is in line with the applicable
remuneration policy. The Supervisory Board
has not applied any deviation or derogation
from the remuneration policy of the
Executive Board.
The remuneration of the Executive Board
members consists of a combination of fixed
remuneration (‘base salary’; of which 80%
is paid in cash and 20% in shares) and base
salary allowances, variable remuneration
(of which 50% is paid in cash and 50% in
shares), pension arrangements and other
emoluments as described below. To support
the long-term value creation, a retention
period of five years starting from the date
of award is applicable to all share awards.
The detailed composition of the Executive
Board remuneration is illustrated below.
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The total compensation of the Executive
Board members is benchmarked on a
regular basis against market data that
includes peers both inside and outside
the financial sector in the Netherlands
and abroad. The peers are selected
with reference to asset base, market
capitalisation, revenue and number of
employees. For 2021, the peer group consists
of ABN AMRO Bank, Achmea, Aegon,
Ageas, Akzo Nobel, Aviva, CNP Assurances,
Koninklijke DSM, Legal & General Group,
Munich Re, Rabobank, Randstad, Swiss
Life Holding, Talanx and Wolters Kluwer.
The Supervisory Board has determined to
continue with this peer group in 2022.
In line with the remuneration policy as
adopted by the General Meeting on 28 May
2020, the Supervisory Board aims to set the
remuneration levels below market median.
If, based on the annual benchmark, the
remuneration level is not in line with the
approved policy, appropriate measures will
be considered. The Supervisory Board also
takes into account all stakeholders’ interests,
including social context, before finalising
executive pay levels.
Only in the event of an involuntary exit
(e.g. a mutual agreement at NN Group’s
initiative where the Executive Board
member has been requested to leave),
Executive Board members are eligible to
an exit arrangement limited to a maximum
of one year base salary. Exit arrangements
will in no way qualify as reward for failure
(within the meaning of the applicable
regulatory requirements).
Executive Board base salary
The Executive Board base salary is based
on the remuneration policy of the Executive
Board, and aims to reflect the balanced
interests of stakeholders. No changes in
the base salary of the Executive Board
members of NN Group have been adopted
throughout 2021.
Executive Board variable
remuneration
The remuneration policy for the Executive
Board members combines the short- and
long-term variable components into one
structure. This structure supports both long-
term value creation and short-term company
objectives. Performance objectives reflect
NN Group’s medium-term strategic priorities
and targets as communicated to the market
and as such contribute to the long-term
strategy of NN Group. Variable remuneration
is based on both the financial and non-
financial performance of the individual
and the company. The Supervisory Board
annually determines the performance
objectives at the start of the performance
year and defines the relevant ‘at target’
level. Following the performance year, the
Supervisory Board determines the extent to
which the financial performance objectives
are met based on the full-year financial
results. The extent to which non-financial
performance objectives are met is also
assessed by the Supervisory Board.
The emphasis on long-term performance
indicators within the variable component
of the compensation package is realised
by means of deferral of 60% of the total
variable remuneration. Furthermore, an
annual re-evaluation by the Supervisory
Board takes place with the option to hold
back (i.e. prevent from ever vesting)
and/or claw back vested and paid
variable remuneration. The Supervisory
Board has the authority to reclaim any
variable remuneration allocated to an
40% upfront
shares
60%
deferred
shares
1,3
40% upfront
cash
60%
deferred
cash
1,2
Variable
remuneration
Deferral period
Deferral period Retention period
Retention period
Retention period
Retention period
Deferral period
Deferral period
Deferral
Deferral
50%
shares
50%
cash
Performance year
Award
moment
Vesting
year 1
Vesting
year 2
Vesting
year 3
Vesting
year 4
Vesting
year 5
1 One-third of the deferred cash and deferred shares awards vest each year.
2 Subject to ‘Hold-Back and Claw-Back’ clauses and leaver provisions during the deferral period up to the third anniversary award moment.
3 Subject to ‘Hold-Back and Claw-Back’ clauses and leaver provisions during the deferral period. Subsequently, the retention period applies until the 5th anniversary award moment.
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Executive Board member based on the
clauses as included in the Executive Board
Remuneration Policy as adopted by the
General Meeting of NN Group on 28 May
2020, which may for example be the case
in the event of specific conduct which has
led to the material re-statement of NN
Group’s annual accounts and/or significant
(reputational) harm to NN Group or any of its
subsidiaries or affiliates, and/or conduct or
performance of acts which are considered
malfeasance or fraud.
The maximum variable remuneration of the
Executive Board members for performance
year 2015 onwards has been capped at
20% of the base salary and the on target
level of the annual variable remuneration
has been set at 16% of the base salary.
This is in line with the requirements of the
Dutch regulatory regime as applicable to
NN Group.
Additionally, the short-term component
of variable remuneration (the so called
‘Upfront Portion’) is 40% of the total variable
remuneration and is equally divided between
an award in cash and an award in stock.
The Deferred Portion is also equally divided
between an award in deferred cash and an
award in deferred stock. Both the deferred
cash and the deferred stock awards are
100% 100%
Target
CEO CFO
Weighting Outcome
20% 20%
10% 25%
15% 15%
40% 25%
15% 15%
Customers and distribution
We see our customers as the
starting point of everything we do
Products and services
We develop and provide attractive
products and services
Society
We contribute to the well-being
of people and the planet
People and organisation
We empower our colleagues
to be their best
Financial strength
We are financially strong and seek
long-term returns for shareholders
subject to a tiered vesting on the first,
second and third anniversary of the grant
date (one-third per annum). Similar to the
shares awarded as fixed remuneration, a
retention period of five years starting from
the date of award is applicable to all stock
awards (both upfront and deferred), with
the exception that part of the stock will
be withheld at the relevant date of vesting
to cover any income tax liability arising
from the vested share award (withhold-
to-cover). In addition to the general
principles described above, more specific
details on the 2021 variable remuneration
of the Executive Board members are
provided below.
Performance for the year 2021 was assessed
based on a number of objectives, as outlined
in the paragraph below. Estimated risks
and capital adequacy were also taken into
account when determining the award of
variable remuneration.
Performance objectives of the
Executive Board members
The performance of the Executive Board
members is assessed annually against their
financial and non-financial objectives as
set by the company’s Supervisory Board.
When determining the objectives for a
specific performance year, the Supervisory
Board takes into account the medium-
term financial, as well as the non-financial
company targets. When determining
relative weighting between the financial
and non-financial performance objectives,
the Supervisory Board takes into account
the requirements of the Dutch regulatory
regime as applicable to NN Group and the
Executive Board remuneration policy as in
place per 2020. At the end of the year, the
Supervisory Board executes a performance
assessment to determine to what extent the
objectives have been met. The Supervisory
Board is supported by various departments,
such as Finance, Corporate Development,
Compliance, Corporate Relations, Risk and
HR, to provide relevant input.
The ambition of our company describes
what we aim to achieve in the years to come.
We want to be an industry leader, known for
our customer engagement, talented people,
and contribution to society. All our different
business entities are expected to contribute
to the delivery of our ambition.
To realise this ambition, we identified the
following five strategic commitments, and
structured the performance objectives
of the Executive Board members around
these commitments:
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Customers and distribution
We see our customers as the starting
point of everything we do
Weighting CEO Weighting CFO
20% 20%
We engage with our customers to meet their real needs and to offer solutions that create long-term value. We use our digital
capabilities and leverage our strong distribution footprint to further enhance our customer experience.
i. At least 6 of 11 insurance business units scoring above market average on NPS
NPS score of NN Investment Partners in a range between +10 and +25
One of the key metrics of our NN Global Brand Health Monitor (GBHM) is the internationally recognised NPS system to measure how
likely it is that the customers recommend products and services to colleagues, friends, or family. There are different sorts of NPS. The
relational NPS (NPS-r) is used to measure the strength of our relationship with customers, and to gain understanding of long-term customer
satisfaction over time. In 2021, 5 (out of 11) insurance business units scored above market average on NPS-r, and 3 business units scored
on par with market average (page 36). The number of insurance business units that scored above market average on NPS-r increased
in comparison with 2020 (4 units), and ended slightly below target (6 units). The NPS score of NN Investment Partners was +44 in 2021.
Overall the objective with regard to NPS-r scores was not met.
ii. Brand consideration of ≥ 22% for the Netherlands, ≥ 25% for Insurance International and ≥ 24% for NN Group
Brand preference for NN Investment Partners in top 50 and social responsibility/sustainability ranking in top 10
At least twice a year, key brand indicators are measured, such as brand consideration and brand preference. Brand consideration is
measured to monitor the preferences of our customers. In 2021, the overall brand consideration of NN Group improved to 23% from 21%
at the end of 2020, mainly driven by an increase of brand consideration for the Netherlands (23%). While brand consideration for the
Netherlands was slightly higher than the target, the brand consideration for Insurance International and for NN Group were slightly below
target (page 36).
NN Investment Partners had a brand preference of 52 and continues to be recognised as a sustainable asset manager with a #15 rank of
its brand on sustainable investing at the end of 2021.
Overall the objective with regard to brand consideration was not met.
More elaborate information on the outcome of the performance objectives of the Executive Board members is provided in the overview below.
Remuneration report continued
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Products and services
We develop and provide attractive
products and services
Weighting CEO Weighting CFO
10% 25%
We excel in developing and providing attractive products and services, and operate with efficiency, agility and speed.
To continue to do so, we will make use of digital and data capabilities.
i. Netherlands Life: expand DC capabilities, both in accumulation and decumulation
The total Defined Contributions AuM of Netherlands Life increased from EUR24.6 billion at year-end 2020 to EUR29.9 billion at year-end
2021, driven by positive market performance and net inflows. There was a positive result on decumulation in 2021 with more retention and
new business than expected. Overall the objective with regard to expanding the DC capabilities of Netherlands Life was met.
ii. Netherlands Non-life: complete VIVAT Non-life integration and successfully implement strategic initiatives around pricing,
underwriting, claims analytics, data and digital
The integration of VIVAT Non-life has reached a final stage with the completion of the migration of 1.8 million policies to NN systems. The
cost savings target of EUR40 million has been achieved one year earlier than planned. We are working towards finalising the integration
in the first half of 2022. Overall the objective with regard to the VIVAT integration and strategy implementation of Netherlands Non-life was
met.
iii NN Bank: originate high-quality mortgages and broaden retail offering
NN Bank and Woonnu originated a total of EUR9.9 billion of new mortgages in 2021, breaking last year’s record by EUR1.7 billion. The
launch of Woonnu was successful, with EUR1.4 billion of mortgages originated in 2021. Furthermore, NN Bank’s new mid-office system
went live in December and successfully processed the first mortgage applications. The first results show applications are processed
automatically with a very short lead time. Overall the objective with regard to the origination of mortgages and broadening of NN Bank’s
retail offering was met.
iv. Insurance Europe: continue to shift to protection products for higher customer relevancy and margins, and continue to invest in our
main banking partnerships
The Gross Written Premiums in-force protection for Insurance Europe increased which was driven by most business units and supported
by the roll out of new strategic initiatives such as digitalising processes for lead generation. New products were launched, based on
customer needs.
Several successful partnerships were achieved in 2021, and we continued to build reciprocal relationships with our banking partners. In
Belgium and Spain we extended our strategic partnership with ING, accelerating our digital propositions in these markets. Overall the
objective with regard to the continued shift to protection products and investing in our main banking partnerships of Insurance Europe
was met.
v. Japan: continued focus on COLI protection and adapt COLI Financial Solutions product offering to new tax regime
The VNB of COLI protection products in Japan increased significantly. Income Protection Insurance was launched in June to meet our
customer needs. Furthermore, we are progressing well in improving our technical capabilities in protection and advancing with strategic
initiatives on data and customer engagement. Overall the objective with regard to the focus on COLI protection and adapting to the new
tax regime in Japan was met.
vi. NN Investment Partners: Top quartile investment performance for third party alpha strategies based on Assets under Management
(AuM) weighted average (3Y) peer rank. Generate net inflows for third party customers
At the end of 2021, the AuM weighted peer scores ended at the 35%-tile for the three year period, which means that on an AuM weighted
basis NN Investment Partners performed better than 65% of its peers. The outperformance versus the benchmark for third party alpha
strategies was 190 bps for the three year period, which is higher than the AuM weighted target outperformance. Notwithstanding the
divestment process, NN Investment Partners attracted new mandates, with net third party inflows of EUR5.2 billion in 2021. Overall the
objective with regard to investment performance and net inflows for NN Investment Partners was met.
vii. Product performance reviews executed on a quarterly basis to ensure they continue to add value to our customers; frameworks to
be developed for business lines (CEO only)
The framework for product performance reviews was finalised in the first half of 2021, providing the required data on products reviewed
and adapted in favour of customers, and a qualitative update was provided by product management and reviewed by the CRO of each
business unit. Overall the objective with regard to product performance reviews was met.
Remuneration report continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
117
NN Group N.V.
2021 Annual Report
People and organisation
We empower our colleagues to
be their best
Weighting CEO Weighting CFO
15% 15%
We are committed to empower our employees to bring our values, purpose and ambition to life for our customers. We
encourage diversity of thinking and invest in new capabilities and personal development. We nurture a culture aligned
with our purpose, values and ambitions, which supports continuous learning, collaboration, and diversity of thinking.
We consider all colleagues to be talents and invest in an inclusive and inspiring environment so we are together best
equipped to take our business into the future.
i. Employee engagement of ≥ 7.6 for NN Group for each of the MB members. Each MB member to define and execute 3 personal
actions following up the 2020 year end survey results
The most recent employee engagement survey in November 2021 resulted in an engagement score of 7.7 for NN Group. While this is
0.2 lower than year-end 2020 (7.9), it is 0.1 better than the target (7.6). The outcome of the survey shows that we can cope well with the
continuous change and uncertainty of the pandemic. Colleagues feel empowered to fulfil their role, and have room for professional growth,
but a point of attention is process efficiency. 83% of our colleagues gave their opinions through the survey, providing meaningful insights to
make NN an even better place to work. Overall the objective with regard to employee engagement was met.
ii. Women in senior management positions ≥ 36%
In December 2020, NN’s Statement on Diversity and Inclusion (D&I) was launched to explain what NN Group stands for, including the move
towards a more inclusive work environment. The D&I approach focuses on different dimensions, of which gender diversity is one. A D&I
target was set for gender diversity, aiming to reach 40% women in senior management positions by 2023. The male/female ratio across
the company is well-balanced, but less so within senior management positions. The percentage of women in senior management positions
increased to 34% at the end of 2021 from 33% at the end of 2020.
There is still work to be done to reach the target of 40% by 2023, and is not an overnight target to meet. It is important to take a close
look at the succession base for these positions and to set a balanced pool of successors per position if movement occurs, also from
a development and/or executive search point of view. Awareness, discussion and focus regarding (gender) diversity improved, e.g. in
Bi-Annual Talent Reviews, Talent Forums and Succession Sessions.
NN Group believes remaining focused on equal pay is key to driving D&I. It is therefore a recurring topic on the agenda of the Management
Board and Supervisory Board. Overall the objective with regard to women in senior management positions was not met.
iii. Succession plans in place for every MB-1 position
NN Group started working according to the key talent management process. At the end of 2021, 100% of the MB-1 managerial positions
had an updated succession plan in place. The completion of succession plans also improved the quality of the succession plans. In addition,
it encourages a culture of meaningful conversations and transparency (e.g. open on potential, ambition and development) and to deliver
on strategic commitments (e.g. diversity) by leveraging on potential and internal mobility of talent, and decrease key man risk. Overall the
objective with regard to succession plans for MB-1 positions was met.
Remuneration report continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
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accounts
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118
NN Group N.V.
2021 Annual Report
Financial strength
We are financially strong and seek long-
term returns for shareholders
Weighting CEO Weighting CFO
40% 25%
We are committed to achieve a strong financial and commercial performance in our operating units, maintain a strong
capital position, and deliver attractive and growing capital returns to shareholders. We are focused on maintaining a
strong balance sheet and creating solid financial returns for our shareholders by using our financial strength, scale and
international footprint, and by efficiently managing our customers’ assets, and our own insurance portfolios.
i. Operating capital generation
The operation capital generation of NN Group for the full year 2021 increased to EUR1,584 million from EUR993 million in 2020. The
increase mainly reflects higher Non-life underwriting results, positive contribution from Banking, the positive impact of higher rates and the
higher investment return driven by changes in the asset portfolio and higher equity and real estate valuations. Overall the objective with
regard to Operating Capital Generation was met.
ii. Free cash flow
The free cash flow of NN Group for the full year 2021 increased to EUR 1,472 million from EUR 1,070 million in 2020. This mainly reflects
remittances from subsidiaries, including relatively modest remittances from the Non-life business which considered the expected
consequence of the Dutch Central Bank (DNB) guidance related to the treatment of contract boundaries for individual disability contracts.
Overall the objective with regard to free cash flow was not met.
iii. Demonstrate through NN’s risk control framework that the business operates within NN’s risk appetite and where not, initiate
necessary remediation measures
The 2021 annual risk control framework cycle was materially completed, the position relative to risk appetite was made transparent, and
relevant remediation actions were initiated. It was concluded that NN operates within its cash capital risk appetite. Overall the objective
with regard to NN’s risk appetite was met.
iv. Department budgets for Control Functions (CFO only)
For the CFO, additional consideration has been given to the budget discipline of the Finance department. This objective was met.
Remuneration report continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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figures
About
NN
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119
NN Group N.V.
2021 Annual Report
Society
We contribute to the well-being
of people and the planet
Weighting CEO Weighting CFO
15% 15%
We do business with the future in mind, as it is our aim to contribute to the well-being of people and the planet, and to a
world where people can thrive for many generations to come.
i. Contribute to the transition to a low-carbon economy
We have a clear ambition to support the global transition towards net-zero greenhouse gas (GHG) emissions by 2050. NN endorsed the
Institutional Investors Group on Climate Change (IIGCC) net-zero investment framework in March 2021 and is participating in phase II of the
development. NN Group and NN Investment Partners each joined new IIGCC net-zero carbon commitment platforms. With respect to our
proprietary asset portfolio we made further progress with the development and implementation of Paris Alignment strategies per asset class.
We now have a strategy in place for Sovereign Bonds, Corporate Investment (listed equities and corporate fixed income) and Real Estate, as
well as for investments in Climate Solutions.
In 2021, we set reference targets for the reduction of Greenhouse Gas (GHG) emissions for our Corporate Investment portfolio: we aim to
decrease GHG emissions by 25% by 2025 and 45% by 2030, compared with 2019 levels, and increase investments in Climate Solutions by at
least EUR6 billion by 2030. The Sustainable Finance Regulation programme was implemented to ensure adherence to current and upcoming
regulations, such as the EU Taxonomy, Sustainable Finance Disclosure Regulation and Corporate Sustainability Reporting Directive.
To transparently report on our progress, we describe our performance in the Annual Report sections Our response to the TCFD (pages 66-77) and
Carbon footprint proprietary assets (pages 131-134). It is critical to note that carbon footprint measurement and reporting remains an area for
ongoing development. The carbon footprint, which covers 80% of the total asset portfolio, is based on the best available data and methodologies;
new insights may lead to changes in the future. Additionally, a portfolio carbon footprint provides a snapshot of historical performance and does
not consider future plans or goals of the underlying portfolio holdings. Institutional investors including NN are therefore looking to capture forward-
looking data to assess the degree of ‘Paris alignment’ of their investment portfolio, but this also presents challenges around data quality and
availability. Furthermore, it is still challenging to assess the credibility of net-zero plans, whereas this is critical for real-world decarbonisation impact.
Overall the objective with regard to the progress in developing strategies and targets to contribute to the transition to a low-carbon economy
was met.
ii. Continue efforts to reduce direct environmental footprint and set science based target
In 2021, NN Group committed to reducing the CO
2
emissions of its own operations by at least 35% by 2025 and at least 70% by 2030,
compared to 2019 levels, with the aim to become net-zero by 2040. This covers CO
2
emissions from our buildings, lease cars and business air
travel. In 2021, our CO
2
emissions decreased by 15% compared to 2020, and 67% of our electricity use came from renewable sources. The
fraction of renewable electricity decreased steadily due to less electricity consumed in the Netherlands (which is 100% renewable) compared
to international business units with a lower fraction of renewable electricity.
Steps have been made to better measure emissions. Most reductions are likely to be achieved in the Netherlands. The biggest challenge
lies with the international business units, also because most of our offices are not owned by NN. In the Netherlands, NN Group signed an
agreement with the ambition to move towards a fossil free lease car fleet by 2025, and has implemented a fossil free lease car policy. Overall
the objective with regard to the reduction of our direct environmental footprint was met.
iii. Contribute 0.4% of the operating result to our communities, including cash donations and hours of volunteering
The total contributions to our communities were EUR8.0 million in 2021, reaching our target of 0.4% of the operating result of 2021. NN Group
scaled up and started new non-profit partnerships (e.g. Research Centre for Longevity Risk with University of Amsterdam, Opportunities for all
with Junior Achievement Europe, Networking with JINC and many partnerships in the area of debt relief). The volunteer initiatives (e.g. Cleanup,
charity run) during the first ever ‘Your community matters week’ in June was successful, with 1,599 colleagues participating. The Charitable
Donations policy was updated to better reflect the community investment strategic focus and bring it in line with B4SI guidelines. Overall the
objective with regard to the contribution to our communities was met.
iv. Increased % of ESG-integrated NN Investment Partners AuM, in line with the 80% target by 2023 (CEO only)
The ESG-integrated AuM of NN Investment Partners increased significantly to 91% at the end of 2021 from 74% at the end of 2020. The increase
was mainly driven by the inclusion of the mortgage portfolios and the qualification of other portfolios of Alternative Credit as ESG-integrated.
Netinflows and positive market performance also contributed to the growth of ESG integrated funds and sustainable and impact strategies.
Overall the objective with regard to the increase of ESG-integrated NN Investment Partners AuM in line with the 80% target by 2023 was met.
v. Further steps taken to integrate ESG risks and opportunities in insurance underwriting (CFO only)
In October 2021, we extended our net-zero ambition to our insurance activities, committing to also develop an approach for the underwriting
business to set targets and help facilitate the transition to global net-zero emissions. NN Group joined forces with other large insurers in the
UN-convened Net-Zero Insurance Alliance (NZIA) to start developing a framework for strategies and target-setting for the insurance industry.
A Sustainability task force was started at NN Non-life and adopted a roadmap to integrate risk and opportunities in underwriting. Overall the
objective on further steps taken to integrate ESG risks and opportunities in insurance underwriting was met.
Remuneration report continued
Our operating
environment
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performance
Corporate
governance
Safeguarding
value creation
Creating value for
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120
NN Group N.V.
2021 Annual Report
2021 Variable Remuneration award
The Supervisory Board concluded that
the Executive Board delivered a strong
performance throughout the year 2021.
The overall outcome on the objectives
related to the Financial strength
commitment was above target. The overall
outcome on the objectives related to the
Financial strength commitment was above
target. The overall outcome in relation to
the non-financial objectives is also positive,
with the overall score of the objectives
related to the Customers and distribution
commitment being slightly below target,
while the other nonfinancial objectives
related to the Products and services, People
and organisation and Society commitments
being above target. This is all achieved in
the context of an eventful year, in which the
Executive Board members showed strong
leadership. They navigated the organisation
through a year that was marked by, among
others, acquisitions, divestments and the
ongoing Covid-19 pandemic.
On the basis of the overall assessment, the
Supervisory Board concluded to award
the CEO a variable remuneration of 115%
of target, which is EUR326,600 and the
CFO a variable remuneration of 115% of
target, which is EUR261,426. In 2021, there
was no hold back applied to unvested
deferred variable remuneration nor was
claw back applied to paid or vested variable
remuneration for any of the Executive
Board members.
Executive Board pension
arrangements
The pension arrangement for the Executive
Board members is the same as the pension
arrangement that is applicable to all staff of
NN Group in the Netherlands and comprises
a collective defined contribution (CDC) plan
up to the annual tax limit (EUR112,189 as
from 1 January 2021) and a taxable individual
savings allowance on pensionable fixed
remuneration exceeding the tax limit.
The table to follow provides details on the
amount of contribution that was paid by NN
Group to the pension arrangement of the
Executive Board members.
Executive Board other emoluments
The Executive Board members were
eligible for a range of other emoluments,
such as health care insurance, life cycle
saving scheme, transportation, external
tax advice and expat allowances (CFO
only). The Executive Board members were
also able to obtain banking and insurance
services from NN Group in the ordinary
course of business and on terms that
apply to all employees of NN Group in the
Netherlands. As at 31 December 2021, the
Executive Board members did not have
loans outstanding with NN Group regulated
entities. No guarantees or advanced
payments were granted to the Executive
Board members. The table below provides
details on the amount of emoluments that
was paid by NN Group to the benefit of the
Executive Board members.
Remuneration of the Executive Board members (in EUR1,000 and gross)
David Knibbe Delfin Rueda
2021 2020 2021 2020
Base salary in cash 1,420 1,420 1,137 1,137
Base salary in shares 355 355 284 284
Total base salary 1,775 1,775 1,421 1,421
Variable remuneration 327 284 261 248
Total direct remuneration 2,102 2,059 1,682 1,669
Employer contribution to pension fund 24 24 24 24
Individual savings allowance
1
387 388 305 305
Other emoluments 122 146 228 221
Employer cost social security
2
72 72 59 59
Relative proportion base salary versus variable remuneration
84.5% /
15.5%
86.2% /
13.8%
84.5% /
15.5%
85.1% /
14.9%
1 The individual saving allowance scheme is applicable for both the Executive Board and staff of NN Group in the Netherlands.
2 The employer social security contributions do not impact the overall remuneration received by Executive Board members.
The total remuneration as disclosed in the table above (for 2021: EUR5.0 million) includes all variable remuneration related to the
performance year 2021. Under IFRS-EU, certain components of variable remuneration are not recognised in the profit and loss account
directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses in 2021 and therefore
included in ‘Total expenses’ in 2021, relating to the fixed expenses of 2021 and the vesting of variable remuneration of 2021 and earlier
performance years, is EUR5.1 million.
Remuneration report continued
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environment
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NN Group N.V.
2021 Annual Report
2021 Variable remuneration of the Executive Board members (in EUR1,000 and gross)
Upfront
cash paid
Deferred
cash granted
Upfront
shares granted
Deferred
shares granted Total
David Knibbe 65 98 65 98 327
Delfin Rueda 52 78 52 78 261
Long-term incentives awarded in previous years and in 2021 to the Executive Board members
The Executive Board members receive deferred cash and upfront and deferred share awards under NN Group’s Aligned Remuneration Plan
(ARP). The table below provides a summary of the number of NN Group shares awarded and vested for the Executive Board members during
2021 under the ARP.
Overview of number of NN Group shares awarded and vested for the Executive Board members during 2021
Plan Award Date
Outstanding and
unvested per
1 January
2021
Awarded
during
2021
Vested
during
2021
Outstanding and
unvested per
31 December
2021
Vesting
Price in
euros
David Knibbe Deferred Shares Plan 15 March 2018 1,058 1,058 - 40.55
Deferred Shares Plan 18 March 2019 2,473 1,236 1,237 40.12
Deferred shares plan 16 March 2020 3,439 1,146 2,293 40.32
Deferred Shares Plan 15 March 2021 2,352 2,352
Upfront Shares Plan 15 March 2021 1,568 1,568 - 40.55
Delfin Rueda Deferred Shares Plan 15 March 2018 608 608 - 40.55
Deferred Shares Plan 18 March 2019 1,416 707 709 40.12
Deferred Shares Plan 16 March 2020 2,379 793 1,586 40.32
Deferred Shares Plan 15 March 2021 2,052 2,052
Upfront Shares Plan 15 March 2021 1,368 1,368 - 40.55
The table below shows a summary of the (vested) NN Group shares held by the Executive Board members on 31 December 2021 (including
the shares vested during 2021) and 31 December 2020.
NN Group shares held by the Executive Board members
2021 2020
David Knibbe 39,340 31,920
Delfin Rueda 56,641 50,988
NN Group is dedicated to align the interests of the members of the Executive Board with those of the company and its shareholders. This is
realised through various ways, including awarding 50% of the variable remuneration in NN Group shares and applying a five-year retention
period as from the award date, during which period the shares cannot be sold. Furthermore, 20% of the base salary of the Executive Board
members is delivered in the form of NN Group shares, again with a mandatory retention period of five years as from the award date. This way,
the Executive Board members build up a substantial interest in NN Group shares, without introducing formalised share ownership guidelines.
As at 31 December 2021, the total value of the shares, based on the year-end share price, held by the Chief Executive Officer, equals
13 months of his gross base salary.
Remuneration report continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
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figures
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NN
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122
NN Group N.V.
2021 Annual Report
Remuneration of the Executive Board members, company performance and average employee remuneration
(amounts in EUR1,000 and gross)
2021 2020 2019 2018 2017
Executive Board remuneration
Total direct remuneration David Knibbe 2,102 2,059 515
Total direct remuneration Lard Friese
1
1,061 1,970 1,713
Total direct remuneration Delfin Rueda 1,682 1,669 1,705 1,586 1,292
Company performance
Operating capital generation 1,584 993 1,349
Operating result 2,036 1,889 1,794 1,626 1,586
Solvency II ratio 213% 210% 224% 230% 199%
Average remuneration
Average employee remuneration 95.5 96.6 94.6 91.4 91.4
Pay ratio 31:1 30:1 25:1 29:1 29:1
1 Lard Friese stepped down as member and chair of the Executive Board and CEO of NN Group as of 12 August 2019. His remuneration in the capacity of CEO of NN Group is shown in the table above.
Pay ratio
The pay ratio compares the total CEO
compensation and the remuneration of
all staff (‘Pay ratio’) as stated in the Dutch
Corporate Governance Code. For the CEO,
the total remuneration used in the pay ratio
is the total remuneration as disclosed in the
Remuneration report. For the staff members,
the total remuneration used in the pay
ratio is the total remuneration as disclosed
in the Consolidated annual accounts
Note 28 ‘Staff expenses’, combined with
the staff expenses paid to employees of
NN Investment Partners BV. In order to
provide a meaningful comparison, the
total remuneration of the staff population
excludes the remuneration of the CEO of
NN Group. NN Group aims to align with the
pay ratio calculation method as prescribed
by the Dutch Monitoring Commission
Corporate Governance. This has led to
an adjusted pay ratio calculation method.
Compared with previous years, the new
pay ratio calculation includes external staff
costs for Dutch hourly workers. This method
has been applied for all previous years to
create a comparable basis. The Supervisory
Board considers trends in the pay ratio in
its assessment of the compensation of the
members of the Executive Board, while
Human Resources closely monitors the
pay ratio.
III Remuneration of the
Supervisory Board
The Supervisory Board was comprised of
the following members in 2021: Mr Cole, Ms
Beale, Mr Hauser, Mr Jenkins, Mr Lelieveld,
Ms Reyes, Mr Schoen, Ms Streit and Ms
Vletter-van Dort. More information on the
composition of the Supervisory Board and
its Committees can be found in the Report
of the Supervisory Board, on pages 83-96.
The 2021 total remuneration as paid to
each of the members of the Supervisory
Board is in line with the Supervisory Board
Remuneration Policy.
NN Group does not grant variable
remuneration, shares or options to the
Supervisory Board members. This ensures
the independence of the Supervisory
Board, contributes to NN Group’s long-
term performance and is in line with the
Dutch Corporate Governance Code.
Supervisory Board members may obtain
banking and insurance services from NN
Group in the ordinary course of business
and on terms that are customary in the
sector. As at 31 December 2021, the
Supervisory Board members did not have
loans outstanding with NN Group regulated
entities. No guarantees or advanced
payments were granted to Supervisory
Board members.
In line with market practice, a distinction is
made between chair, vice-chair and other
Supervisory Board members. A fixed annual
expense allowance is payable to cover all
out-of-pocket expenses. Travel and lodging
expenses in relation to meetings are paid by
NN Group.
Remuneration report continued
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NN Group N.V.
2021 Annual Report
The remuneration for the members of the Supervisory Board (in EUR)
Chair Vice-chair Member
Fixed Annual fee Supervisory Board 110,000 72,500 65,000
Fixed annual fee for position in Committee 17,000 n/a
1
13,500
Fixed annual expense allowance to cover out of pocket expenses (travel and lodging will be paid) 9,000 9,000 9,000
1 There are no Vice-chair positions in Supervisory Board Committees.
Fees and allowances of Supervisory Board members
1
Fixed annual fees
Total fixed gross
expense allowance VAT Total (including VAT)
In EURand gross 2021 2020 2021 2020 2021
2
2020 2021 2020
D.A. (David) Cole (Chair)
3
140,500 147,794 9,000 9,000 7,849 32,927 149,500 189,721
H.M. (Hélène) Vletter-van Dort
(Vice-chair) 103,000 107,133 9,000 9,000 5,880 24,388 112,000 140,521
I.K. (Inga) Beale
4
56,615 n/a 5,538 n/a n/a n/a 62,153 n/a
D.H. (Dick) Harryvan
5
47,0 83 3,750 10,675 61,508
H.J.G. (Heijo) Hauser 109,000 101,778 9,000 9,000 6,195 23,263 118,000 134,041
R.W. (Robert) Jenkins 92,000 92,036 9,000 9,000 5,303 21,218 101,000 122,254
R.J.W. (Rob) Lelieveld
6
38,542 n/a 3,000 n/a n/a n/a 41,542 n/a
C.G. (Cecilia) Reyes
3, 7
56,615 n/a 5,538 n/a n/a n/a 62,153 n/a
R.A. (Robert) Ruijter
8
26,067 2,550 6,010 34,627
J.W. (Hans) Schoen 109,000 105,175 9,000 9,000 6,195 23,977 118,000 138,152
C.C.F.T. (Clara) Streit 92,000 92,036 9,000 9,000 5,303 21,218 101,000 122,254
1 This table shows the fixed fees and expense allowances for the members of the Supervisory Board of NN Group for 2021 and 2020. In addition, Mr Hauser was appointed as Supervisory Board member
of Nationale-Nederlanden Schadeverzekering Maatschappij N.V., NN Non-life Insurance N.V., as from 21 January 2020 and NN Re Netherlands N.V. as from 1 March 2020 and Mr Schoen was appointed
as Supervisory Board member of Nationale-Nederlanden Levensverzekering Maatschappij N.V. as from 21 January 2020 and Nationale-Nederlanden ABN AMRO Verzekeringen Holding B.V., ABN AMRO
Levensverzekering N.V. and ABN AMRO Schadeverzekering N.V. as from 15 September 2021. The total fees (including VAT) for these roles were EUR92,614.
2 The Dutch State secretary has issued a new VAT policy stating that a Supervisory Board member does not qualify as a VAT-taxable person. This confirms the decision by the European Court of Justice of
13 June 2019. During 2021, VAT is no longer invoiced from the Supervisory Board members to NN regulated entities.
3 Mandatory Swiss social security and occupational disability contributions in relation to the NN Group Supervisory Board fees are due for Mr Cole and for Ms Reyes on the basis of specific local
requirements as applicable to the Supervisory Board members. The compulsory employer contributions in relation to 2021 that are made to relevant Swiss local institutions amount to EUR18,986 for Mr
Cole and EUR4.776 for Ms Reyes. The relevant employee contributions are fully borne by Mr Cole and Ms Reyes themselves, and the Supervisory Board members are not compensated for that in any way.
Comparable contributions have been applicable for Mr Cole for the years 2020 and 2019, where the mandatory employer contributions have ranged between 12% and 12,5% of the Annual NN Group SB fees
as disclosed in the respective Remuneration Reports. Given the appointment of Ms Reyes during the course of 2021, this was the first year where the mandatory contributions were applicable. In the process
of calculating the local mandatory contributions, and to ensure that all appropriate administrative procedures are fulfilled in accordance with all applicable Swiss requirements and standards, NN Group is
supported by our trusted external tax advisor (PwC).
4 Ms Beale was appointed as member of the Supervisory Board as per 20 May 2021.
5 The term of appointment of Mr Harryvan ended at the close of the annual general meeting on 28 May 2020.
6 Mr Lelieveld was appointed as member of the Supervisory Board on 20 May 2021, effective 1 September 2021.
7 Ms Reyes was appointed as member of the Supervisory Board as per 20 May 2021.
8 The term of appointment of Mr Ruijter ended on 12 April 2020.
Remuneration report continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
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124
NN Group N.V.
2021 Annual Report
The Executive Board is required to prepare
the annual accounts and the Report of
the management board (bestuursverslag)
of NN Group N.V. for each financial year
in accordance with applicable Dutch law
and the International Financial Reporting
Standards (IFRS) as endorsed by the
European Union.
As required by section 5:25c paragraph 2(c)
of the Dutch Financial Supervision Act, each
of the signatories hereby confirms that to
the best of his knowledge:
• The NN Group N.V. 2021 annual accounts,
as referred to in section 2:361 of the Dutch
Civil Code including the relevant additional
information as referred to in section 2:392
paragraph 1 of the Dutch Civil Code, give
a true and fair view of the assets, liabilities,
financial position and profit or loss of NN
Group N.V. and the enterprises included in
the consolidation taken as a whole.
• The NN Group N.V. 2021 Report of the
management board (bestuursverslag), as
referred to in section 2:391 of the Dutch
Civil Code, gives a true and fair view of
the position at the balance sheet date,
and the development and performance
of the business during the 2021 financial
year of NN Group N.V. and the enterprises
included in the consolidation taken as
a whole, together with a description
of the principal risks NN Group N.V.
is confronted with.
With reference to best practice provision
1.4.3(i), (iii) and (iv) of the Dutch Corporate
Governance Code, the Executive Board
hereby confirms that, to the best of
its knowledge:
• The NN Group N.V.’s description of its
risk management organisation and
framework as described in the Report of
the management board (bestuursverslag)
including Note 52 ‘Risk management’
to the Consolidated annual accounts
provides sufficient insights into any
material failings in the effectiveness
of the internal risk management and
control systems,
• Based on the current state of affairs, it
is justified that the financial reporting is
prepared on a going concern basis, and
• The NN Group N.V. 2021 Report of the
management board (bestuursverslag)
includes those material risks and
uncertainties that are relevant to the
expectation of NN Group N.V.’s continuity
for the period of 12 months after the
preparation of the report.
The Executive Board of NN Group N.V.
assessed the effectiveness of the internal
control over financial reporting during 2021.
Based on the Executive Board’s assessment,
with reference to best practice provision
1.4.3(ii) of the Dutch Corporate Governance
Code, the Executive Board of NN Group
N.V. concluded that the risk management
and control systems provide reasonable
assurance that the financial reporting does
not contain any material inaccuracies.
The Hague, 9 March 2022
David Knibbe
CEO, Chair of the Executive Board
Delfin Rueda
CFO, Vice-chair of the Executive Board
Statements Dutch Financial Supervision Act and Dutch Corporate Governance Code
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2021 Annual Report
Key financial indicators (in EURmillion)
2021 2020 2019
Operating result 2,036 1,889 1,794
Net result (after minority interests) 3,278 1,904 1,962
Operating capital generation 1,584 993 1,349
Solvency II ratio1 213% 210% 224%
Value of new business 428 266 358
Assets under Management (end of period, in EURbillion) 301 300 276
Dividend (per ordinary share, in EUR) 2.49
2
2.33
3
2.16
4
NN Group share price (last trading day of the year, in EUR) 47.61 35.53 33.82
1 As from 2020 NN Bank is included.
2 Pro-forma 2021 full-year dividend proposal per share of EUR2.49, comprising the 2021 interim dividend of EUR0.93 plus the proposed 2021 final dividend of EUR1.56.
3 Pro-forma 2020 full-year dividend per share of EUR2.33, comprising the 2020 interim dividend of EUR0.86 plus the proposed 2020 final dividend of EUR1.47.
4 Pro-forma 2019 full-year dividend per share of EUR2.16, comprising the 2019 interim dividend of EUR0.76 plus the suspended final dividend of EUR1.40.
Key non-financial indicators
2021 2020 2019
Customer engagement and brand consideration
– insurance business units scoring above market average NPS 5/11 4/11 4/11
– brand consideration5 23% 21% 25%
Employee engagement score 7.7 7.9 7.4
− participation in the engagement survey
6
83% 82% 82%
Women in senior management positions
7
34% 33% 36%
ESG-integrated Assets under Management (% of total AuM) 91% 74% 68%
Contributions to our communities (x EUR1,000)
8
8,000 4,704 3,200
5 Percentage for 2019 is based on the average brand consideration score from 2017 to 2019.
6 Employee engagement score and the percentage of participation consists of internal and external employees (2019 and 2018 data are adjusted to this scope).
7 In 2020, the target group for this indicator was adjusted to Management Board and Management Board minus one managerial position (instead of the composition of our Senior Leaders Group).
8 Hours of volunteering, in-kind giving (both monitised) and management costs have been included as of 2021, in line with B4SI standards.
Sustainability indices and ratings
2021 2020 2019
Indices
Dow Jones Sustainability Index (out of 100) 80 (Included) 84 (Included) 78 (Included)
FTSE4Good Included Included Included
VigeoEiris Euronext: 120 Not included Not included Included
Bloomberg Gender-Equality Index Included Included Included
Ratings and benchmarks
Sustainalytics
9
15.2/100
(low risk)
18.6/100
(low risk)
16.0/100
(low risk)
MSCI AA AA A
ISS ESG research C+ C+ C (Prime)
CDP (Carbon Disclosure Project) B A- C
Transparency Benchmark Netherlands
10
60% 50%
9 Since 2019 Sustainalytics provides ESG Risk Ratings scoring companies on their ESG risks from negligible (0-10), low (10-20), medium (20-30), high (30-40) to severe risk (40-100).
10 The Transparency Benchmark takes place every two years. The 2021 score of 60% represents a 68th position out of 236 companies. The 2019 score of 50% represents a 78th position out of 240 companies.
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Responsible investment indicators (in EURbillion)
2021 2020 2019
Total investment strategies integrating ESG factors (end of period) 273.7 223.4 188.8
– as part of total Assets under Management NN Investment Partners 91% 74% 68%
ESG-integrated strategies 235.8 194.3 166.1
Sustainable strategies 30.2 22.8 19.3
Impact strategies 7.7 6.3 3.5
Voting
Shareholders meetings where we voted 3,307 3,053 2,752
– as % of total votable meetings 97% 98% 99%
Agenda items on which we voted 35,985 35,015 31,775
How we voted on agenda items (%)
– for 83% 82% 83.2%
– against 15% 16% 14.5%
– abstain/other 2% 2% 2.3%
Countries where we voted 61 60 61
Shareholder resolutions on which we voted by topic 568 683 706
– environmental 68 57 74
– social 112 151 147
– governance 388 475 485
GRESB Real Estate Assessment scores
1
Private real estate – portfolio average (vs. benchmark average) 87 (78) 83 (70) 85 (77)
1 NN calculates the GRESB scores on a value-weighted basis, and compares these to the relevant benchmark average. Scores are on a scale of 1 to 100. The real estate portfolios are part of NN Group’s
proprietary assets. Due to fundamental changes to the 2020 GRESB Assessment structure, the 2020 scores cannot be compared with previous years.
Investments in climate solutions (in EUR million)
2021
Renewable energy investments 566
- of which: Infrastructure equity 44
- of which: Infrastructure debt 523
Certified green buildings
1
3,817
- of which: Equity investments 3,236
- of which: Debt investments 581
Green bonds 637
Other 41
Total
5,062
1. Buildings within NN’s non-listed real estate portfolio; the residential mortgage portfolio of NN Group not covered in this category.
To support our Paris Alignment strategy, NN Group has developed an internal framework to define ‘climate solutions investments’ as part of
its proprietary investments portfolio. We have defined climate solutions as investments in economic activities that contribute substantially to
climate change mitigation or adaptation.
As an initial step in classifying climate solutions investments, and in line with guidance from the IIGCC Paris Aligned Investment Initiative,
we focused on SDG 7-related areas of energy efficiency and renewable energy. Furthermore, we supported our definitions with external
certifications, asset labels, and environmental standards where possible and relevant. Our definitions are as follows:
• Green bonds: the green bonds we invest in meet the minimum standards specified in the ICMA’s Green Bonds Principles and the Climate
Bonds Initiative Taxonomy and Standards. Furthermore, to qualify as a green investment, it also has to meet additional criteria according to
NN Investment Partner’s proprietary Green Bond Assessment Methodology to confirm the actual ‘greenness’ of the projects and the issuer.
• Renewable energy infrastructure: Investments in projects (equity/debt) for renewable energy infrastructure in solar PV, offshore and onshore wind.
• Certified green buildings: within our real estate portfolio (equity/debt), our definition is limited to assets with an Energy Performance
Certificate (‘EPC’) of class A, or if EPC is not available a high level of building certification (BREAAM or HQE certification of at least
‘Excellent’, or LEED or DGNB of at least ‘Gold’).
• Other: Investments that do not fall into any of the categories above, including investments in unlisted entities. For example, impact private
equity funds that target and report on clearly defined climate impact KPIs, or funds that have a broader ESG focus, but where clean and
renewable energy projects account for a substantial part of the fund’s total assets.
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In setting our definitions, we have tried to align as much as possible with the EU Taxonomy criteria. Currently, it still proves to be challenging
to assess the extent of alignment because the taxonomy requires very detailed information. Furthermore, it is still uncertain what is accepted
as evidence for alignment. For instance, for the acquisition and ownership of buildings, the EU has defined that existing buildings should
have at least an EPC class A to qualify for EU Taxonomy alignment. As an alternative, it has to qualify in the top 15% of national stock’s most
sustainable properties. In our climate solutions definition, buildings are considered when holding an EPC label A, or if an EPC label is not
available a building certification above defined thresholds. However, official guidance is needed on whether building certifications can be
used to demonstrate EU Taxonomy alignment.
Human capital indicators
2021 2020 2019
Workforce (end of year)
1
Total full-time equivalents (FTEs)
2
15,16 8 14,9 42 14,913
Total number of employees (headcount) 15,417 15,118 15,194
– Netherlands Life 2,152 2,261 2,485
– Netherlands Non-life 3,668 3,182 3,109
– Netherlands Bank 971 947 894
– Insurance Europe 4,698 4,740 4,975
– Japan Life 888 883 868
– Asset Management 952 975 978
– Other 2,088 2,130 1,885
Part-time employees
3
17.0 % 16.0% 17.0%
Temporary employees 6.0% 6.0% 5.9%
Average years of service 12.1 12.3 12.2
Male/female ratio 52/48 52/48 52/48
Male/female ratio managers 63/37 63/37 63/37
Male/female ratio in senior management group3 66/34 67/33 64/36
Well-being and engagement
Sick leave 3.3% 3.1% 3.5%
Engagement score 7. 7 7.9 7.4
Participation in engagement survey4 83% 82% 82%
Grievances on labour practices 6 12 14
Employee participation
Employees covered by Collective Labour Agreement (CLA) 71.% 75% 75.5%
Employees represented by an employee representative body 84.8% 84% 80%
Formal meetings held with employee representative bodies 200 188 173
Talent development
Total spending on training and development (in EURmillion) 14.7 12.9 18.9
Spending/average FTE 959 874 1,291
Human capital return on investment
5
2.5 2.4 2.4
Employees with completed standard performance process 96.7% 92.8% 96.8%
1 Figures do not include NN’s share in Heinenoord.
2 Different number in FTE reflects changes due to the CLA in the Netherlands; Delta Lloyd used to count for 38 hours per week as FTE (instead of 36 hours per week as FTE).
This also has an impact on the (lower) number of part-time employees.
3 In 2020, the target group for this indicator was adjusted to Management Board and Management Board minus one managerial position (instead of the composition of our Senior Leaders Group).
4 Employee engagement score and the percentage of participation consists of internal and external employees.
5 Human capital ROI is calculated as: (operating result + employee expenses)/employee expenses.
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2021 Annual Report
Human capital indicators continued
2021 2020 2019
Employee turnover
New hires 1,963 1,768 2,314
Employee turnover 12.4% 10.2% 13.4%
– voluntary employee turnover 6.9% 5.3% 7.7%
– involuntary employee turnover 5.5% 4.9% 5.6%
Open positions filled by internal candidates 27.6% 36.2% 34.9%
Whistleblower cases 124
– of which investigated by Corporate Security & Investigations 1 1 3
Other incidents and concerns 41 66 95
Measures taken, related to: 266
– fraud (and alleged fraud) 001
– unethical behaviour 265
– conflict of interest 000
Employee compensation
Total employee wages and benefits (in EURmillion) 1,607 1,608 1,545
Ratio of CEO compensation to the average employee compensation
1
31:1 30:1 25:1
1 NN Group aims to align with the pay ratio calculation method as prescribed by the Dutch Monitoring Commission Corporate Governance. This has led to an adjusted pay ratio calculation method. Compared with
previous years, the new pay ratio calculation includes external staff costs for Dutch hourly workers. This method has been applied for all previous years to create a comparable basis. For more information, refer to
the Remuneration Report on page 122.
Community investment indicators
2021 2020 2019
Total number of people reached (through NN Future Matters) 21,525 15,834 25,421
Total contribution to our communities (x EUR1,000)
2
8,000 - -
% of operating result
3
0.4 - -
Total hours of volunteering
4
13,586 7,991 12,481
Total cash contributions (x EUR1,000)
5
6,200 4,700 3,200
2 New indicator as of 2021.
3 New indicator as of 2021.
4 As of 2021 includes other areas than only NN Future Matters.
5 In 2021, the definition of the indicator is aligned with the B4SI definition.
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Environmental indicators
2021 2020 2019
CO
2
emissions of our direct operations
1
% of CO
2
emissions offset annually 100% 100% 100%
CO
2
emissions (kilotonnes) 8918
CO
2
emissions from energy consumed on NN sites 4 4 6
– of which electricity 334
– of which natural gas 111
– of which district heating 111
CO
2
emissions from air travel 1 1 6
CO
2
emissions from car travel 3 4 6
CO
2
emissions (tonnes)/FTE 0.5 0.6 1.3
Business travel
Air travel (km x 1 million) 2426
Car travel (km x 1 million) 32 36 44
Energy consumption
Total energy consumption (MWh x 1,000) 29 32 46
Non-renewable electricity 658
Renewable electricity 12 16 23
– renewable electricity as % of total electricity 67% 74% 75%
Natural gas 346
District heating 879
Paper
Total paper use (kg) 122,905 107,472 281,138
– sustainable paper (i.e. FSC) (kg) 76,504 65,279 182,257
– sustainable paper as % of total paper 62% 61% 65%
Waste
Total waste (kg) 276,057 427,777 630,303
– recycled waste (kg) 209,693 157,488 363,758
– recycled waste as % of total waste 76% 37% 58%
1 Certain figures for 2020 and 2019 have been restated due to revised emission factors and the sale of the Bulgarian business. In 2021, NN Group completed the sale of our Bulgarian Pension and Life
businesses. This has also been reflected in the years 2019-2021 for consistent reporting and comparison purposes in line with the GHG protocol.
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Carbon footprinting can help us understand
carbon and climate change-related risks
within our investment portfolio, and can also
be useful to inform corporate engagement.
In the context of an investment portfolio, a
carbon footprint measures the amount and
intensity of greenhouse gas (GHG) emissions
associated with the underlying portfolio
holdings. Emissions are expressed in tonnes
of carbon dioxide equivalents (CO
2
e).
We started measuring and reporting
the carbon footprint of our proprietary
investments in 2017. The December 2021
analysis includes all of our main asset
categories; government bonds, corporate
investments, residential mortgages, and
real estate investments. Taken together
the assessed AuM is EUR161 billion.
This represents 80% of the asset portfolio
on our balance sheet, which comprises
general account assets of the insurance
entities, and the assets of NN Bank and NN
Group. The main asset types that were not
included in this carbon footprint analysis are
cash, derivatives, asset-backed securities,
non-corporate loans and private equity.
In our methodology, we aim to be consistent
with internationally recognised standards,
such as the GHG Protocol and the ‘Global
GHG Accounting and Reporting Standard
for the Financial Industry’ from the Platform
Carbon Accounting Financials (PCAF).
The PCAF is a sector-led initiative that
aims to develop a standard that enables
financial institutions to measure carbon
emissions consistently.
Methodology changes
We have made several changes in our 2021
carbon footprint measurement. Firstly, we
changed the asset categorisation to improve
alignment with our asset-class specific Paris
Alignment strategies. Going forward we will
present the carbon footprint for ‘corporate
investments’ (i.e. listed equity, corporate
bonds/loans) and ‘government bonds’.
Previously, government bonds and corporate
bonds/loans were shown together as ‘fixed
income’ next to ‘listed equities’. We also
no longer include asset-backed securities
and non-corporate loans in the assessed
assets; this change had very limited impact
on our carbon footprint due to limited data
availability. We made a further methodology
change by introducing a new attribution
factor for the mortgages, changing to a LTV
approach. This step increases alignment
with the global PCAF standard. Finally,
for real estate, there was a correction in
reported data of one of the real estate funds
in GRESB.
The prior-year figures for several asset
classes have been restated for all of these
changes to ensure comparability.
Carbon footprint measurement and
reporting remains an area for ongoing
development. As such data improvements
and refinements of our methodology may
affect our carbon footprint analysis in future
years. As an active member of the PCAF,
we help to advance industry standards
and harmonisation of both measuring and
reporting financed emissions.
Carbon footprint of NN Group’s proprietary assets
1
2021 2020 2019
Assessed Assets under Management (in EURbillion) 161 167 156
Government bonds 68 74 76
Corporate investments 34 37 34
Residential mortgages 52 49 47
Real estate investments 77 n/a
Carbon footprint (tCO
2
e/EURm invested) 55 67 72
Government bonds 60 64 62
Corporate investments 125 159 175
Residential mortgages 10 13 13
Real estate 34 n/a
Weighted average carbon intensity (tCO
2
e/EURm of revenue) – excl. mortgages and real estate 103 106 106
Government bonds 40 42 39
Corporate investments 229 249 276
1 The figures for previous years have been restated for a variety of reasons. Refer to the text above for more detail.
Facts and figures – Carbon footprint proprietary assets
Breakdown of assessed assets
Corporate investments 21%
Government bonds 42%
Residential mortgages 32%
Real estate 5%
Carbon footprint proprietary assets
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Carbon footprint of corporate
investments
We account for the scope 1 and 2
emissions of corporates, retrieved from
external data provider ISS Ethix-Climate
Solutions. In line with PCAF methodology,
NN’s financed emissions for corporates is
based on our investment value relative to
the issuer’s enterprise value. The coverage
or the percentage of (assessed) portfolio
assets for which emissions and financial
data were available is 89%. However, the
data availability differs between security
types. At present, the data availability is the
lowest for corporate loans, but represents
a relatively small portion of the corporate
investments portfolio. For the assessed
portfolio assets where no data is available,
we assumed carbon footprint and intensity
to be in line with the portfolio average.
The carbon footprint was 125 tonnes of
CO
2
per million EURinvested at the end
of December 2021. We have seen a clear
downwards trend for corporates over the
past three years. To gain a better sense of
the emissions performance of the underlying
companies, we examined our top 25
contributors in terms of financed emissions.
These companies decreased their absolute
scope 1 and 2 emissions by 13% since 2019.
These top emitters account for 60% of our
portfolio financed emissions. When looking
at the top 5, the absolute emissions
reductions ranged from 15 to 39%.
The highest emitting sectors in our
portfolio are Utilities and Basic Materials.
Combined, these sectors account for
64% of the corporate portfolio’s carbon
footprint, whereas in terms of portfolio
weight, they only account for 15% of the
corporate portfolio. In the utilities sector,
we are implementing a phase-out strategy
for thermal-coal exposed corporate bond
investments which will reduce the carbon
intensity of our sector exposure over time.
We also calculate the portfolio’s Weighted
Average Carbon Intensity metric.
This normalises each company’s emissions
by its sales. The weighted average is then
calculated by portfolio weight.
It should be noted that the temporary drop
in global emissions caused by the Covid-19
pandemic is not yet reflected in the analysis.
This is because the carbon emissions data
we obtain from our data provider reflect the
year 2019. We are engaging with our data
provider to see if the reporting time lag can
be reduced.
Limitations and next steps
The analysis helps to understand carbon
and climate change-related risks,
identifying the high-carbon securities in our
investment portfolio. It also helps to inform
our engagement with investee companies.
However, there are limitations with respect
to the quality and availability of emissions
data, especially for private companies and
for scope 3. Furthermore, carbon footprint
provides a snapshot of today’s emissions,
but is limited in what it can say about how
companies are making the transition to a
low-carbon economy. In our investment
process, we therefore aim to capture
broader ESG assessment and analyses
of companies including forward-looking
climate strategies.
Carbon footprint of government
bonds
We account for the emissions directly
caused by governments’ own activity
(scope 1 and 2) as well as emissions from
government financing in other sectors
within a country (scope 3). NN calculates
the amount of carbon emissions (using data
provided by ISS-Ethix) that we financed
as an investor based on how much of the
country’s debt we own, relative to the
total debt outstanding of the country.
For intensity, the same approach is applied
as for corporate issuers, but instead of
revenues we use gross domestic product
(GDP) as the denominator.
The results show that carbon footprint and
intensity for government bonds remained
stable over the past three years. Within the
portfolio, Germany has the highest amount
of financed emissions, followed by the
Netherlands, and Austria. This is in line with
our relatively large portfolio allocations to
Eurozone countries.
Limitations and next steps
There is still much debate on the
methodology of carbon calculations for
government bonds. Our approach to
consider the emissions that governments
generate by the public sector is in line with
guidance from the 2019 report by the Dutch
PCAF members. The approach limits double
counting and is consistent with the ‘follow-
the-money’ principle.
An alternative approach is to quantify
a country’s emissions more broadly by
considering all emissions generated
within its territorial boundary, also called
the ‘territorial approach’. This broader
assessment of government emissions
acknowledges the broader impact of a
government on the other sectors of the
economy through regulation and taxation.
The main downside of the ‘broad’ approach
is that it increases double counting of
these emissions generated by the private
sector, since these are also attributed to
investments in other asset classes.
A public consultation was launched in
December 2021 by the global PCAF on
various methodology options to come to a
globally consistent carbon measurement
framework for government bonds. It intends
to publish its final recommendations over the
course of 2022. We will evaluate these final
PCAF recommendations when available.
Given the large weight of government
bonds in our portfolio, a potential change in
methodology could significantly impact the
reported carbon footprint figures.
Carbon footprint of mortgages
The total amount that we included in
our 2021 carbon measurement was
EUR51.5 billion, or 228,817 houses.
This represents the total portfolio on the NN
Group balance sheet of Dutch mortgages
originated and/or serviced by our own
banking business. Within this portfolio, the
large majority of mortgages were originated
under the Nationale-Nederlanden or
former Delta Lloyd brands. NN also has
approximately EUR6.7 billion of residential
mortgages on the balance sheet from
external mortgage originators which are not
included in this analysis.
Facts and figures – Carbon footprint proprietary assets continued
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We account for the scope 1 and 2 emissions
of each house (i.e. the natural gas used
to heat the house and the purchased
electricity by the occupant of the house
= the energy consumed by the building
occupant). In 2021, we have updated the
carbon footprint methodology to align with
the global PCAF Standard by including a
new attribution approach in calculating
financed emissions. This means that from
reporting year 2021 onwards we attribute
the emissions associated with a residential
mortgage to NN using a loan-to-value
(LTV) ratio. Previously, we attributed the
associated emissions in full. We have
adjusted the reported financed emissions of
prior years to ensure comparability.
The LTV used is the portfolio’s weighted
average current loan-to-value ratio,
which is the net outstanding mortgage
amount divided by the indexed property
market value. The global PCAF Standard
recommends to use the original property
value. This method brings several challenges
as the valuation at origination may not
always be available, for instance, where a
mortgage was originated a long time ago, or
may no longer be appropriate, for example
where improvements have been made to the
property. We are evaluating this further with
other Dutch financial institutions in the PCAF.
The chart below shows the energy label
distribution of NN’s mortgage portfolio.
Compared to two years ago (2019), the
share of label A in our portfolio increased
to 29% from 25%, labels B remained
unchanged, labels C declined to 25% from
26%, labels D, E, F and G taken together
declined to 33% from 36%, and 0.1%
remained unknown.
Since the start of 2021, the energy
performance of a building is determined
using the new NTA8800 determination
method. The method is based on the
European CEN standards and an energy
label can only be obtained if an energy
consultant visits the house to inspect
the specifications for an energy label.
Because of these changes, the Netherlands
Enterprise Agency (RVO) has stopped
reporting the so-called provisional labels
and is currently investigating options to
report new provisional labels that are
more aligned with NTA8800 methodology.
Approximately half of the houses in the
Netherlands currently have a definitive
energy label, so removing the provisional
energy labels from our analysis would
result in a major loss of data and insights.
A
NN Portfolio: Energy label distribution
(based on number of houses)
BCDEFG
25%
29%
13% 13%
26%
25%
2019
9% 9%
8% 8% 8%
7%
9%
10%
2021
Facts and figures – Carbon footprint proprietary assets continued
Therefore, we have kept the provisional
labels in our analysis as best estimate
to ensure a complete overview of our
mortgage portfolio.
As shown in the pie chart, about 49%
of matched addresses have a definitive
energy label. If no definitive energy label is
present, we looked at the building year of the
property. For houses with a building year of
2002 or later, we assume the energy label is
A. For the rest of the mortgage portfolio, we
matched the addresses with a provisional
label as this currently is the best estimate
available. If no label exists, we assumed that
the energy label is the same as the average
of the zip code. For a very small part (0.1%)
we could not make a match at all due to
missing information. These mortgages were
not assessed in this analysis.
As a next step, we obtained the average
gas and electricity consumption per
energy label in the Dutch market from the
WoonOnderzoek Netherlands, an initiative
from the Dutch government. These figures
can be converted into CO
2
emissions
using emission factors as published by
www. co2emissionfatoren.nl. For 2021, the
following emission factors are used: 0.369kg
CO
2
/kWh for electricity of unknown origin,
and 1.788kgCO
2
/m
3
for natural gas.
We calculate the emissions associated with
the NN mortgage portfolio by multiplying
the number of houses with each energy
label by the average CO
2
emissions per
energy label. In 2021, the absolute portfolio
emissions amounted to 917,982 tonnes CO
2
which is 1% lower than in 2020 mainly due
to a decline in the electricity grid factor.
If the grid factor had remained the same,
the total emissions would have increased by
2% mainly reflecting the larger number of
houses due to portfolio growth.
NN Portfolio:
Basis of label choice
Provisional label 39%
Definitive label 49%
Building year (>= 2002) 10%
Zip code 2%
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NN Group N.V.
2021 Annual Report
The portfolio ‘financed emissions’ are
calculated by multiplying the calculated
emissions with the LTV attribution factor
to align with the global PCAF Standard.
In 2021, the attribution factor was 59%,
resulting in financed emissions of 539,292
tonnes of CO
2
. This was 14% lower than
the financed emissions in 2020, which we
calculated based on an attribution factor
of 67%. Evidently, introducing an LTV ratio
in the attribution approach brings volatility
to the financed emission figures which
may reflect changes in outstanding loans
or house prices that are not related to
the underlying emissions of the houses in
our portfolio.
We also calculated relative portfolio
emissions. This metric declined to 10
tonnes of CO
2
per EURmillion invested
(2020: 13), reflecting the aforementioned
methodology change.
Limitations and next steps
The method we used is based on theoretical
average consumption data and not on
actual consumption data. As such, the PCAF
prefers institutions to work with actual
consumption data. The Dutch financial
institutions that are part of the PCAF,
including NN, are presently exploring ways to
either obtain this actual consumption data
or improve the estimation method.
Looking towards the future, we will further
engage with our customers to facilitate
them in dealing with climate change-related
impacts and to support them as they
make their lives more sustainable. As we
continue to explore this important topic,
we will further optimise our strategy, risk
management and measurement.
Facts and figures – Carbon footprint proprietary assets continued
Carbon footprint of real
estate investments
This is the second year that we reported the
emissions of NN’s investments in non-listed
real estate. This portfolio consists of directly
managed properties (approx. 26% of our
total real estate portfolio) and non-listed real
estate funds. The portfolio is spread over
sectors and regions in Europe.
Our reporting covers scope 1 and 2
emissions. NN requires all its real estate
asset managers to participate in the GRESB
Real Estate assessment, and as such we
gather the emissions data from GRESB.
The total amount for which we were able
to assess emissions was EUR7.5 billion,
or approximately 82% of the total non-
listed real estate investment portfolio.
The remaining 18% non-assessed assets
represent indirect or fund investments
that either did not report to GRESB or
reported data dit not include scope 1 and
2 emissions. Non-disclosure in GRESB
disclosure may occur due to a grace period
for first-year reporting or no reporting due to
wind-down.
For the calculation of the carbon footprint
of our real estate investments portfolio,
we attribute a real estate fund’s annual
emissions based on NN’s share in the fund.
To determine this attribution factor, we used
the outstanding investment amounts (Net
Asset Value or NAV) for the numerator and
Gross Asset Value (GAV) of the funds as
reported to us by our real estate managers
for the denominator. All investment amounts,
fund values and emissions are trailing by one
year and are per year-end 2020.
The resulting portfolio emissions amounted
to 22,238 tonnes of CO
2
, or 3 tonnes of
CO
2
per EURmillion invested which is a
decrease of 1.2 tonnes compared to the
previous year. The decline was mainly in our
directly managed portfolio, whereas the
financed emissions from the indirect real
estate portfolio remained relatively stable.
The main contributors to this reduction
are the measures implemented to improve
energy efficiency in the direct portfolio.
Limitations and next steps
In the carbon footprint analysis of our real
estate investment portfolio, three scopes are
relevant. Scope 1 and 2 emissions are under
the control of the owner of the buildings (i.e.,
the landlord). The owners have the ability
to introduce and implement operating and/
or environmental policies and measures.
However, in some cases the energy
contracts are held directly by the tenants.
In that case, the energy consumption of the
tenants falls under scope 3 where the owner
or landlord has no ‘operational control’.
Considering that the energy consumption
of tenants is dominant in the overall energy
consumption of a building, scope 3 is
especially important for real estate but
not all fund managers have access to this
information yet. As a consequence, in our
emission scope, we have initially included
scope 1 and 2 and aim to include scope 3 in
the future when reporting develops further.
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NN Group N.V.
2021 Annual Report
Insurance assets
Monetary
amount
(in EURmillion)
Proportion in
covered assets
Proportion in
total assets
Investments that are directed at funding, or are associated
with Taxonomy-eligible activities:
- Loans secured by mortgages and loans related to savings mortgages 64,947 38% 25%
- Other investments (voluntary disclosure) 14,785 9% 6%
Investments that are directed at funding, or are associated with
Taxonomy-non-eligible activities 62,774 36% 25%
Exposure to derivatives 6,374 4% 2%
Exposures to undertakings that are not obliged to publish non-financial information
pursuant to Article 19a or 29a of Directive 2013/34/EU 23,583 14% 9%
Total covered assets 172,462 100% 67%
Exposures to central governments, central banks and supranational issuers 65,914 26%
Other assets 17,606 7%
Total assets 255,982 100%
In order to meet the EU’s climate and energy
targets for 2030 and reach the objectives
of the European Green Deal, it is important
to direct investments towards sustainable
projects and activities. To achieve this,
the EU has created ‘the EU Taxonomy’ a
common language and a clear definition
of what is ‘sustainable’ and a classification
system for sustainable economic activities.
The EU Taxonomy Regulation requires
NN Group to disclose, starting from its
Annual Report 2021, information such
as the proportion of our total assets
exposed to Taxonomy-eligible and non-
eligible economic activities, as well as
the proportion of Taxonomy-eligible and
Taxonomy non-eligible non-life insurance
economic activities. Eligible economic
activities are those economic activities
that are considered in scope of the EU
Taxonomy. For economic activities to be
aligned with the EU Taxonomy, it needs
to be substantiated that those activities
substantially contribute to any of the
Taxonomy’s environmental objectives
(currently these focus on climate change
mitigation and climate change adaptation).
In addition, these activities should do no
significant harm to any of the other EU
Taxonomy environmental objectives, while
respecting minimum social safeguards.
NN Group’s strategy includes our
commitment to accelerate the transition to
a low-carbon economy across our business
activities. Our ambition to transition our
investment portfolio to net zero in 2050
includes an interim target to increase the
allocation to investments in climate solutions
by EUR6 billion by 2030. In setting our
climate solution definitions, we consider, and
where possible include the EU Taxonomy
alignment criteria (read more on page 72).
Furthermore, in October 2021, NN joined the
Net-Zero Insurance Alliance through which
we will be working on developing metrics
and targets for insurance underwriting in
2022 (read more on page 44).
The quantitative and qualitative information
presented in this chapter is disclosed on a
best effort basis. We consider this to be a
baseline and the first step towards reporting
on taxonomy alignment in 2024 (over 2023).
At this point in time, externally reported data
from (investee) companies for EU Taxonomy
reporting is not yet available. We are
working on solutions to collect the relevant
data to be able to report on taxonomy
alignment in 2024.
Insurance assets
This is the first year NN Group has had
to report on EU Taxonomy eligibility.
Eligibility data that is externally reported
by other financial and non-financial
undertakings in scope of the EU Taxonomy
Regulation is not yet available. We have
calculated eligibility using internally
available information for mortgages and
using estimates for other investments.
The estimated eligibility is reported
voluntarily and is therefore not part of
the mandatory disclosures. Based on
the information currently available to us,
the table below reflects the proportion
of assets that are EU Taxonomy-eligible.
We refer to the paragraphs below for a
further explanation on data sources and
associated limitations.
The mandatory disclosure (‘Loans secured
by mortgages and loans related to savings
mortgages’) relates to our exposure to
retail mortgages. The activities related to
providing retail customers with mortgage
loans can be linked with the taxonomy-
eligible economic activities as defined in the
Taxonomy Regulation, Climate Delegated
Act and its Annexes I and II. Residential real
estate lending is described in section 7.7 of
Annex I to the Climate Delegated Act and
explicitly mentioned in section 1.2.1.3.1.1 of
Annex V to the Art. 8 Delegated Act.
Facts and figures - EU Taxonomy disclosures
EU Taxonomy disclosures
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NN Group N.V.
2021 Annual Report
Applicable Solvency II Lines of Business
Climate-related
policy terms
Use of climate-
related margin
Type of climate-
related peril
Medical expense No No Not applicable
Income protection No No Not applicable
Workers' compensation No No Not applicable
Motor vehicle liability No No Not applicable
Other motor Yes No Not applicable
Marine, aviation and transport Yes No Not applicable
Fire and other damage to property Yes Yes Windstorm
Assistance Yes No Not applicable
To supplement our mandatory EU Taxonomy
disclosure, NN Group voluntarily discloses
eligibility for assets, based on estimates
(Other investments). The non-eligible
proportion of the voluntary disclosure is
included in ‘Investments that are directed at
funding, or are associated with Taxonomy-
non-eligible activities’. Assets in scope of
the voluntary disclosures include, among
others, debt securities, equity securities and
real estate investments. These investments
include allocation to various industries and
sectors. NN Group marked its investments in
real estate exposure as eligible.
Exposures to derivatives and undertakings
that are not obliged to publish non-financial
information pursuant to Article 19a or 29a of
Directive 2013/34/ EU (‘NFRD’) are excluded
from the numerator of the eligibility KPI and
can therefore not be eligible. Exposure to
central governments, central banks and
supranational issuers (sovereign entities) are
excluded from both the numerator and the
denominator of the eligibility KPI.
NN Group has obtained data from its data
vendor for all assets where the vendor has
taxonomy eligibility data available. The data
vendor has estimated eligibility based
on research conducted at the level of a
company’s business activities.
For investment funds where look-through-
information is available from the data
vendor, NN Group calculated the eligibility
of the fund based on the weighted average
exposure to taxonomy-eligible economic
activities of the investments in the fund.
Furthermore, we calculated the weighted
average exposure to derivatives and
sovereign entities in the fund.
For the remaining exposures (including both
investment funds and direct investments),
we assessed eligibility based on the NACE
codes of the issuer. The Climate Delegated
Act includes NACE codes in the description
of economic activities. If the NACE code
of the issuers for the remaining exposures
matches those included in the Climate
Delegated Act, these are considered eligible.
Consequently, the exposures for which the
NACE code does not match are considered
non-eligible.
NN Group uses the EU Taxonomy Compass
for this assessment. This tool aims to
make the content of the EU Taxonomy
easier to access for a variety of users by
enabling us to check which NACE codes are
included in the EU Taxonomy (taxonomy-
eligible activities).
Limitations to these approaches are,
among others, that the NACE code of the
issuer is binary and does not consider
an issuer’s multiple economic activities.
The data obtained from our data vendor
does consider multiple economic activities
but is still an estimate and is not based on
externally reported information.
Furthermore, limited information is
available on whether undertakings are
subject to Art 19a/29a of the NFRD.
NN Group has estimated its exposure to
non-NFRD issuers based on country of
incorporation and several other indicators,
such as foundations, municipalities etc.
For investment funds there was no look-
through-information available regarding the
exposure to non-NFRD issuers, therefore
the investment funds are not included in
the non-NFRD bucket. Consequently, non-
NFRD exposure is included in the exposures
analysed for taxonomy-eligible economic
activities. We expect that data availability
will improve in the coming years when NFRD
entities start reporting eligibility data.
The amounts presented in the table on the
previous page differ from the amounts in
the 2021 Annual Account as the amounts in
the table represent market value, whereas
certain amounts in the balance sheet in
the Annual Accounts represent amortised
cost values.
EU Taxonomy disclosures continued
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NN Group N.V.
2021 Annual Report
Insurance underwriting
The scope of the current EU Taxonomy
related activities covered by the
underwriting disclosures are determined
by the Climate Delegated Act and relate to
non-life insurance and reinsurance activities
consisting of the underwriting of climate-
related perils. Based on the Solvency II
Lines of Business in scope, NN Group first
identified the Lines of Business containing
policies with terms related to the treatment
of ‘climate perils’ in view of Appendix A to
Annex II to the Climate Delegated Act in
order to be taxonomy-eligible. Secondly,
NN Group selected the Solvency II Lines
of Business for which one or more climate-
related perils are priced separately.
The table below shows the results for the
financial year 2021.
The table below shows that climate-related
policy terms are used in the underlying
products of the Solvency II Lines of Business,
which have a direct correlation with
weather-related events, such as windstorms
and mainly refer to properties like buildings,
vehicles and personal belongings. Currently,
climate-related perils are only priced
separately by using a climate-related
margin when historical losses have affected
the reinsurance programme. This is only
the case for windstorms covered by the
underlying products of Solvency II Line
of Business Fire and other damage to
property. In this respect, separate windstorm
margins are used for pricing damage to
buildings, content and business interruption
if applicable. The quantification of the EU
Taxonomy on climate-related peril level (i.e.,
only windstorms) and on product level is
shown in the table below.
The table shows that the total share of the
margin priced for windstorms, being the only
climate-related peril priced separately, in
absolute amounts is EUR49 million for the
financial year 2021, representing 2% of the
total Non-life insurance and reinsurance
underwriting activities. The total absolute
premium amount of products containing
specific climate-related terms results in
EUR1,693 million for financial year 2021,
being 45% of the total Non-life insurance
and reinsurance underwriting activities.
As different interpretations of the regulation
for the EU Taxonomy disclosures are
observed in the market, NN Group discloses
the indicators on Line of Business level - in
addition to the indicators on climate-related
peril level.
NN Group monitors whether (more) climate-
related perils of the possible products
involved should be priced separately on
an annual basis taking into account the
(expected) loss developments due to the
impact of climate change.
Economic activities
On climate-related peril level
On line of business level (products with
climate-related peril included in policy)
Absolute premiums Proportion of premiums Absolute premiums Proportion of premiums
Currency (in million) % Currency (in million) %
Non-life insurance and reinsurance underwriting
Taxonomy-eligible activities
59 2 1,693 45
Non-life insurance and reinsurance underwriting
Taxonomy-non-eligible activities
3,739 98 2,106 55
Total Non-life insurance and reinsurance
underwriting activities
3,799 100 3,799 100
EU Taxonomy disclosures continued
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NN Group N.V.
2021 Annual Report
Assurance report of the independent auditor
Assurance report of the independent auditor
To: the General Meeting of Shareholders and the Supervisory Board of NN Group N.V.
Our conclusion
We have reviewed the non-financial information in the annual report for the year ended
31 December 2021 (hereafter: the non-financial information in the annual report) of
NN Group N.V. (hereafter: NN Group) based in Amsterdam and headquartered in The Hague. A
review is aimed at obtaining a limited level of assurance.
Based on our procedures performed, nothing has come to our attention that causes us to believe
that the non-financial information in the annual report is not prepared, in all material respects, in
accordance with the reporting criteria as described in the section ‘Reporting criteria’ of our report.
The non-financial information in the annual report comprises a representation of the performance
of NN Group on its non-financial KPIs, and the thereto related business operations, events and
achievements during the year. NN Group is the parent company of a group of entities. The
annual report incorporates the consolidated information of this group of entities to the extent as
specified in ‘Approach to reporting' in the annual report.
The non-financial information on the annual report in scope of our review consists of the sections
‘About NN’, ‘Our operating environment’, ‘Our strategy and performance’, ‘Creating value for our
stakeholders’, ‘Safeguarding value creation’, ‘Facts and figures’ with the exclusion of the section
‘EU Taxonomy Disclosures’ and ‘Approach to reporting’.
Basis for our opinion
We have performed our review in accordance with Dutch law, including Dutch Standard 3810N:
‘Assurance-opdrachten inzake maatschappelijke verslagen’ (Assurance engagements relating to
sustainability reports), which is a specific Dutch Standard that is based on the International
Standard on Assurance Engagements (ISAE) 3000 ‘Assurance engagements other than audits
or reviews of historical financial information’.
We are independent of NN Group N.V. in accordance with the ‘Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore, we have complied with the
‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).We believe
that the assurance evidence we have obtained is sufficient and appropriate to provide a basis for
our conclusion.
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global organization of
independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
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NN Group N.V.
2021 Annual Report
Assurance report of the independent auditor continued
Reporting criteria
The non-financial information in the annual report needs to be read and understood together with
the reporting criteria. NN Group is solely responsible for selecting and applying these reporting
criteria, taking into account applicable law and regulations related to reporting.
The reporting criteria used for the preparation of the non-financial information are the
Sustainability Reporting Standards of the Global Reporting Initiative (GRI) core option and the
applied internal reporting criteria as disclosed in the section ‘Approach to reporting' of the annual
report.
Materiality
Based on our professional judgement we determined materiality levels for each relevant part of
the non-financial information and for the non-financial information in the annual report as a
whole. When evaluating our materiality levels, we have taken into account quantitative and
qualitative considerations as well as the relevance of information for both stakeholders and the
company.
Limitations to the scope of our review
The non-financial information in the annual report includes prospective information such as
ambitions, strategy, plans, expectations and estimates, and risk assessments. Inherently the
actual future results are uncertain. We do not provide assurance on the assumptions and
achievability of prospective information in the non-financial information.
References to external sources or websites in the non-financial information in the annual report
are not reviewed by us. We therefore do not provide assurance on this information.
Responsibilities of the Executive Board and the Supervisory Board for the non-
financial information in the annual report
The Executive Board of NN Group is responsible for the preparation of the non-financial
information in the annual report in accordance with the GRI Standards and the applied
supplemental reporting criteria as disclosed in the section ‘Approach to reporting'of the annual
report, including the identification of stakeholders and the definition of material matters (see the
section ‘Determining material topics’ of the annual report). The choices made by the Executive
Board regarding the scope of the non-financial information in the annual report and the reporting
policy are summarised in the section ‘Approach to reporting’ of the annual report. The Executive
Board is also responsible for such internal control as it determines is necessary to enable the
preparation of the non-financial information in the annual report that is free from material
misstatement, whether due to fraud or error.
The Supervisory Board is, amongst others, responsible for overseeing NN Group’s reporting
process.
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NN Group N.V.
2021 Annual Report
Assurance report of the independent auditor continued
Our responsibilities for the review of the non-financial information in the annual
report
Our objective is to plan and perform the review in a manner that allows us to obtain sufficient and
appropriate assurance evidence for our conclusion.
Procedures performed to obtain a limited level of assurance are aimed to determining the
plausibility of information and vary in nature and timing from, and are less in extent, than for an
audit engagement. The level of assurance obtained in review engagements with a limited level of
assurance is therefore substantially less than the assurance obtained in audit engagements.
Misstatements can arise from fraud or errors and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the decisions of users taken on the
basis of the non-financial information. The materiality affects the nature, timing and extent of our
review procedures and the evaluation of the effect of identified misstatements on our conclusion.
We apply the ‘Nadere voorschriften kwaliteitssystemen’ (NVKS, Regulations on quality
management systems) and accordingly maintain a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
We have exercised professional judgement and have maintained professional scepticism
throughout the review, in accordance with the Dutch Standard 3810N, ethical requirements and
independence requirements.
Our review engagement included, among others, the following procedures:
— We performed an analysis of the external environment relevant to NN Group and obtained an
understanding of relevant societal themes and issues and the characteristics of the company.
— We evaluated the appropriateness of the reporting criteria used, their consistent application
and related disclosures in the non-financial information in the annual report. This includes the
evaluation of the results of the stakeholders’ dialogue and the reasonableness of estimates
made by management.
— We obtained an understanding of the reporting processes for the non-financial information in
the annual report, including obtaining a general understanding of internal control relevant to
our review.
— We identified areas of non-financial information in the annual report with a higher risk of
misleading or unbalanced information or material misstatements, whether due to fraud or
error. Designing and performing further assurance procedures aimed at determining the
plausibility of the non-financial information in the annual report responsive to this risk
analysis. These procedures included among others:
— Interviews of management and relevant staff at corporate level responsible for the non-
financial strategy, policy and results.
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NN Group N.V.
2021 Annual Report
Assurance report of the independent auditor continued
—
Interviews of relevant staff responsible for providing the information for carrying out
internal control procedures on and consolidating the data of the non-financial information
in the annual report.
— We obtained assurance information that the non-financial information in the annual report
reconciles with underlying records of the company.
— We reviewed on a limited test basis relevant internal and external documentation.
— We performing an analytical review of the data and trends in the information submitted for
consolidation at corporate level.
— We assessed the presentation, structure and content of the non-financial information in the
annual report.
— We considered whether the non-financial information in the annual report as a whole,
including the disclosures, reflects the purpose of the reporting criteria used.
We have communicated with the Executive Board and the Supervisory Board regarding the
planned scope and timing of the review and significant findings we identified during our review.
Amstelveen, 9 March 2022
KPMG Accountants N.V.
D. Korf RA
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NN Group N.V.
2021 Annual Report
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NN Group N.V.
2021 Annual Report
Consolidated annual accounts
Consolidated balance sheet 144
Consolidated profit and loss account 145
Consolidated statement of comprehensive income 147
Consolidated statement of cash flows 148
Consolidated statement of changes in equity 150
Notes to the Consolidated annual accounts 152
1 Accounting policies 152
2 Covid-19 pandemic 168
3 Cash and cash equivalents 169
4 Financial assets at fair value through profit or loss 169
5 Available-for-sale investments 170
6 Loans 172
7 Associates and joint ventures 173
8 Real estate investments 175
9 Property and equipment 176
10 Intangible assets 177
11 Deferred acquisition costs 178
12 Assets and liabilities held for sale 179
13 Other assets 180
14 Equity 180
15 Subordinated debt 186
16 Debt securities issued 186
17 Other borrowed funds 186
18 Insurance and investment contracts, reinsurance contracts 187
19 Customer deposits and other funds on deposit
191
20 Financial liabilities at fair value through profit or loss 192
21 Other liabilities 192
22 Gross premium income 193
23 Investment income 194
24 Net fee and commission income 194
25 Valuation results on non-trading derivatives 195
26 Underwriting expenditure 195
27 Amortisation of intangible assets and other impairments 197
28 Staff expenses 197
29 Interest expenses 198
30 Other operating expenses 199
31 Discontinued operations 199
32 Earnings per ordinary share 200
33 Segments 201
34 Principal subsidiaries and geographical information 208
35 Taxation 210
36 Fair value of financial assets and liabilities 212
37 Fair value of non-financial assets 220
38 Derivatives and hedge accounting 223
39 Assets by contractual maturity 225
40 Liabilities by maturity 226
41 Assets not freely disposable 227
42 Transferred, but not derecognised financial assets 227
43 Offsetting of financial assets and liabilities 228
44 Contingent liabilities and commitments 229
45 Legal proceedings 230
46 Companies and businesses acquired and divested 233
47 Structured entities 236
48 Related parties 237
49 Key management personnel compensation 238
50 Fees of auditors 241
51 Subsequent events 241
52 Risk management 241
53 Capital and liquidity management 278
Authorisation of the Consolidated annual accounts 287
Parent company annual accounts
Parent company balance sheet 288
Parent company profit and loss account 289
Parent company statement of changes in equity 290
Notes to the Parent company annual accounts 292
Authorisation of the Parent company annual accounts 298
Other
Independent Auditor’s Report 299
Appropriation of result 319
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About
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Our strategy and
Creating value for
Safeguarding
Corporate
Facts and
Annual
Other
NN
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performance
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information
Consolidated balance sheet
Amounts in millions of euros, unless stated otherwise
Consolidated balance sheet
As at 31 December notes 2021 2020
Assets
Cash and cash equivalents
3 6 ,929 12, 3 8 2
Financial assets at fair value through profit or loss:
4
– investments for risk of policyholders 39 , 2 61 3 4 ,7 97
– non-trading derivatives 6 , 419 14 , 8 3 3
– designated as at fair value through profit or loss 9 91 1, 3 36
Available-for-sale investments
5 1 0 7, 8 8 3 118,175
Loans
6 6 8,20 0 6 5 ,42 8
Reinsurance contracts
18 95 4 1, 0 63
Associates and joint ventures
7 6 , 919 5, 673
Real estate investments
8 2 ,719 2,444
Property and equipment
9 414 448
Intangible assets
10 1,12 9 1,0 6 3
Deferred acquisition costs
11 1,8 93 1 , 8 71
Assets held for sale
12 4,121 113
Deferred tax assets
35 47 73
Other assets
13 3 ,70 6 4,039
Total assets 2 51 , 5 8 5 2 6 3 ,73 8
Equity
Shareholders’ equity (parent) 32,888 3 6 ,7 31
Minority interests 266 27 7
Undated subordinated notes 1, 76 4 1 ,76 4
Total equity
14 3 4 ,918 3 8,7 72
Liabilities
Subordinated debt
15 2,356 2,383
Debt securities issued
16 2, 292 1,694
Other borrowed funds
17 7, 3 0 1 7, 5 4 2
Insurance and investment contracts
18 16 8 , 8 12 17 0 , 6 7 2
Customer deposits and other funds on deposit
19 15 , 9 45 15 , 8 0 3
Financial liabilities at fair value through profit or loss:
20
– non-trading derivatives 1,9 0 4 4 ,012
Liabilities held for sale
12 3 ,46 4 93
Deferred tax liabilities
35 4 , 8 17 6,329
Other liabilities
21 9,7 76 16 , 4 3 8
Total liabilities 216 ,6 6 7 224,96 6
Total equity and liabilities 2 51 , 5 8 5 2 6 3 ,73 8
References relate to the notes (starting with Note 1 ‘Accounting policies’). These form an integral part of the Consolidated annual accounts.
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Consolidated profit and loss account
For the period ended 31 December notes 2021 2020
Gross premium income 22 14 , 3 1 2 13 , 82 2
Investment income
23 5,805 4 , 5 74
Result on disposals of group companies 53 10 0
– gross fee and commission income 427 343
– fee and commission expenses -1 2 2 -7 9
Net fee and commission income:
24 305 264
Valuation results on non-trading derivatives
25 -7 0 2 9 01
Foreign currency results 672 -43 4
Share of result from associates and joint ventures
7 899 219
Other income 89 76
Total income 21,4 3 3 19,52 2
– gross underwriting expenditure 20,022 1 7, 3 1 6
– investment result for risk of policyholders -4,201 -1 , 7 3 3
– reinsurance recoveries -1 , 0 4 5 -1 , 0 9 5
Underwriting expenditure:
26 1 4,77 6 14 ,4 8 8
Amortisation of intangible assets and other impairments
27 33 27
Staff expenses
28 1,42 9 1,4 4 6
Interest expenses
29 521 511
Other operating expenses
30 8 42 854
Total expenses 17, 6 0 1 1 7 ,326
Result before tax from continuing operations 3, 832 2 ,19 6
Taxation
35 669 385
Net result from continuing operations 3, 16 3 1 , 811
Net result from discontinued operations 13 5 115
Net result from discontinued operations
31 13 5 11 5
Net result from continuing and discontinued operations
(before attribution to minority interests) 3, 298 1,926
Net result from continuing and discontinued operations
For the period ended 31 December 2021 2020
Net result from continuing and discontinued operations attributable to:
Shareholders of the parent 3 , 278 1,9 0 4
Minority interests 20 22
Net result from continuing and discontinued operations 3,29 8 1,926
Net result from continuing operations
For the period ended 31 December 2021 2020
Net result from continuing operations attributable to:
Shareholders of the parent 3 , 151 1 ,793
Minority interests 12 18
Net result from continuing operations 3 ,16 3 1 , 811
Consolidated profit and loss account
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2021 Annual Report
Net result from discontinued operations
For the period ended 31 December 2021 2020
Net result from discontinued operations attributable to:
Shareholders of the parent 127 111
Minority interests 8 4
Net result from discontinued operations 135 11 5
Earnings per ordinary share from continuing and discontinued operations
For the period ended 31 December and amounts in euros per ordinary share 2021 2020
Earnings per ordinary share from continuing and discontinued operations
Basic earnings from continuing and discontinued operations 10 . 42 5.88
Diluted earnings from continuing and discontinued operations 10 . 41 5 . 87
Earnings per ordinary share from continuing operations
For the period ended 31 December and amounts in euros per ordinary share 2021 2020
Earnings per ordinary share from continuing operations
Basic earnings from continuing operations 10 . 01 5. 52
Diluted earnings from continuing operations 10 . 0 0 5 . 51
Earnings per ordinary share from discontinued operations
For the period ended 31 December and amounts in euros per ordinary share 2021 2020
Earnings per ordinary share from discontinued operations
Basic earnings from discontinued operations 0 . 41 0.36
Diluted earnings from discontinued operations 0 . 41 0.36
Reference is made to Note 32 ‘Earnings per ordinary share’ for the disclosure on the Earnings per ordinary share.
Consolidated profit and loss account continued
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Consolidated statement of comprehensive income
For the period ended 31 December 2021 2020
Net result from continuing and discontinued operations 3,29 8 1,926
– unrealised revaluations available-for-sale investments and other -3, 0 99 3 , 110
– realised gains/losses transferred to the profit and loss account -1 , 4 3 1 -5 74
– changes in cash flow hedge reserve -3,383 3 , 42 2
– deferred interest credited to policyholders 1 , 8 61 -7 5 0
– share of other comprehensive income of associates and joint ventures -2 5
– exchange rate differences -66 -1 1 0
Items that may be reclassified subsequently to the profit and loss account: -6 ,12 0 5 , 10 3
– remeasurement of the net defined benefit asset/liability 19 6
– unrealised revaluations property in own use -3
Items that will not be reclassified to the profit and loss account: 19 3
Total other comprehensive income -6 ,101 5 ,10 6
Total comprehensive income -2 , 8 0 3 7, 0 3 2
Comprehensive income attributable to:
Shareholders of the parent -2 , 8 2 5 7, 0 0 9
Minority interests 22 23
Total comprehensive income -2 , 8 0 3 7, 0 3 2
Reference is made to Note 35 ‘Taxation’ for the disclosure on the income tax effects on each component of comprehensive income.
Consolidated statement of comprehensive income
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2021 Annual Report
Consolidated statement of cash flows
For the period ended 31 December notes 2021 2020
Result before tax
1
Adjusted for:
– depreciation and amortisation 15 0 157
– deferred acquisition costs and value of business acquired -39 63
– underwriting expenditure (change in insurance liabilities) -38 4 39
– realised results and impairments of available-for-sale investments -1 , 6 6 7 -654
– other -6 01 18 8
Taxation paid (received) -3 97 -2 5 0
Changes in:
– non-trading derivatives 2,20 4 2 ,2 76
– other financial assets at fair value through profit or loss 384 -5 4
– loans -2 5 2 -864
– other assets 6 14 7 81
– customer deposits and other funds on deposit 48 52 2
– financial liabilities at fair value through profit or loss – non-trading derivatives -589 -886
– other liabilities -6 , 075 3 , 3 37
Net cash flow from operating activities -2 , 5 9 4 7, 0 0 4
Investments and advances:
– group companies, net of cash acquired -3 14 -539
– available-for-sale investments -2 6 ,7 5 3 -24 , 9 2 8
– loans -9,03 8 -7, 5 8 9
– associates and joint ventures -71 9 -349
– real estate investments -1 5 6 -66
– property and equipment -47 -51
– investments for risk of policyholders -9,00 6 -1 0,005
– other investments -51 -82
Disposals and redemptions:
– group companies 72
– available-for-sale investments 29 , 271 2 8 , 717
– loans 5 ,7 71 4,903
– associates and joint ventures 15 6 121
– real estate investments 124 17 6
– property and equipment 8 2
– investments for risk of policyholders 8,835 10 , 24 0
– other investments 21
Net cash flow from investing activities -1 , 8 2 6 550
Proceeds from debt securities issued 5 97
Repayments of debt securities issued -30 0
Proceeds from other borrowed funds 1 , 7 51 5 , 14 4
Repayments of other borrowed funds -2 , 0 2 1 -5 , 24 9
Dividend paid -4 45 -400
Purchase/sale of treasury shares -5 45 -6 21
Coupon on undated subordinated notes -7 8 -7 8
Net cash flow from financing activities -74 1 -1 ,5 0 4
Net cash flow
2
-5, 161 6,05 0
1 Includes result before tax from continuing operations of EUR3,832 million (2020: EUR2,1 96 million) and result before tax from discontinued operations of EUR1 78 million (2020: EUR1 53 million). Result after
tax from discontinued operations is EUR135 million (2020: EUR115 million). Reference is made to Note 31 ‘Discontinued operations’.
2 Reference is made to Note 3 ‘Cash and cash equivalents’.
Consolidated statement of cash flows
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2021 Annual Report
Included in Net cash flow from operating activities
For the period ended 31 December 2021 2020
Interest received 4 , 172 4 , 272
Interest paid -634 -5 74
Dividend received 524 533
Cash and cash equivalents
For the period ended 31 December 2021 2020
Cash and cash equivalents at beginning of the year 12 , 3 9 0 6 ,43 6
Net cash flow -5 , 161 6,05 0
Effect of exchange rate changes on cash and cash equivalents -74 -96
Cash and cash equivalents at the end of the year
Consolidated statement of cash flows continued
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Consolidated statement of changes in equity (2021)
Share
capital
Share
premium Reserves
Total
Shareholders’
equity
(parent)
Minority
interest
Undated
subordinated
notes
Total
equity
Balance at 1 January 2021 39 1 2 , 5 74 24 , 11 8 3 6, 731 277 1 ,76 4 3 8 ,77 2
Unrealised revaluations available-for-sale
investments and other -3 , 10 1 -3 , 101 2 -3, 0 99
Realised gains/losses transferred to the
profit and loss account -1 , 4 3 1 -1 , 4 3 1 -1 , 4 3 1
Changes in cash flow hedge reserve -3,383 -3,383 -3,383
Deferred interest credited to policyholders 1, 8 61 1, 8 61 1, 8 61
Share of other comprehensive income of
associates and joint ventures -2 -2 -2
Exchange rate differences -66 -66 -66
Remeasurement of the net defined benefit
asset/liability 19 19 19
Total amount recognised directly in
equity (Other comprehensive income) – – -6 ,10 3 -6 ,10 3 2 – -6, 101
Net result from continuing and
discontinued operations 3, 278 3 , 27 8 20 3, 298
Total comprehensive income – – -2 , 8 2 5 -2 , 8 2 5 22 – -2 , 8 0 3
Changes in share capital -1 1 – –
Dividend -412 -412 -33 -4 45
Purchase/sale of treasury shares -5 45 -5 45 -5 45
Employee stock option and share plans -2 -2 -2
Coupon on undated subordinated notes -59 -59 -59
Balance at 31 December 2021 38 12 , 575 2 0, 275 3 2,888 266 1 ,76 4 3 4 ,918
Consolidated statement of changes in equity
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Consolidated statement of changes in equity (2020)
Share
capital
Share
premium Reserves
Total
Shareholders’
equity
(parent)
Minority
interest
Undated
subordinated
notes
Total
equity
Balance at 1 January 2020 41 12, 572 18, 155 30, 7 68 26 0 1,76 4 32 ,792
Unrealised revaluations available-for-sale
investments and other 3 , 10 9 3 ,10 9 1 3 , 11 0
Realised gains/losses transferred to the
profit and loss account -5 74 -5 74 -5 74
Changes in cash flow hedge reserve 3, 42 2 3, 42 2 3, 42 2
Deferred interest credited to policyholders -7 5 0 -7 5 0 -75 0
Share of other comprehensive income of
associates and joint ventures 5 5 5
Exchange rate differences -11 0 -1 1 0 -11 0
Remeasurement of the net defined benefit
asset/liability 6 6 6
Unrealised revaluations property
inownuse -3 -3 -3
Total amount recognised directly in
equity (Other comprehensive income) – – 5 ,10 5 5 ,10 5 1 – 5 ,10 6
Net result from continuing and
discontinued operations 1,9 0 4 1, 9 0 4 22 1,9 26
Total comprehensive income – – 7, 0 0 9 7, 0 0 9 23
Changes in share capital -2 2 – – –
Dividend -39 4 -3 9 4 -6 -400
Purchase/sale of treasury shares -62 2 -622 -62 2
Employee stock option and share plans 1 1 1
Coupon on undated subordinated notes -59 -59 -59
Changes in the composition of the group
and other changes 28 28 28
Balance at 31 December 2020 39 1 2 , 5 74 2 4 , 11 8 3 6 ,731 27 7 1,76 4 3 8 ,77 2
Consolidated statement of changes in equity continued
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Notes to the Consolidated annual accounts
1 Accounting policies
Basis of preparation
official seat in Amsterdam , the Netherlands and its office address in The Hague, the Netherlands. NN Group is recorded in the Commercial
Register no. 52387534. The principal activities of NN Group are described in the section ‘About NN’. Amounts in the annual accounts are in
millions of euros, unless stated otherwise.
NN Group prepares its Consolidated annual accounts in accordance with International Financial Reporting Standards as endorsed by the
European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code. In the Consolidated annual accounts, the term IFRS-EU is used
to refer to these standards, including the decisions NN Group made with regard to the options available under IFRS-EU. IFRS-EU provides
a number of options in accounting policies. The key areas, in which IFRS-EU allows accounting policy choices and the related NN Group
accounting policy, are summarised as follows:
• Under IFRS 4, an insurer may continue to apply its existing pre-IFRS accounting policies for insurance contracts, provided that certain
minimum requirements are met. Upon adoption of IFRS in 2005, NN Group decided to continue the then existing accounting principles for
insurance contracts. NN Group operates in different countries and the accounting principles for insurance contracts follow local practice in
these countries. For NN Group’s businesses in the Netherlands, NN Group for example applies accounting standards generally accepted in
the Netherlands (Dutch GAAP) for its insurance liabilities. Changes in those local accounting standards (including Dutch GAAP) subsequent
to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a
change in accounting policy under IFRS-EU.
• NN Group’s accounting policy for real estate investments is fair value, with changes in the fair value reflected immediately in the
Consolidated profit and loss account.
• NN Group’s accounting policy for property in own use is fair value, with changes in the fair value reflected, after tax, in the ‘Revaluation
reserve’ in ‘Other comprehensive income’ (equity). A net negative revaluation on individual properties is reflected immediately in the
Consolidated profit and loss account.
NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of IFRS-EU.
NN Group’s accounting policies under IFRS-EU and its decision on the options available are included below. Except for the options included
above, the principles are IFRS-EU and do not include other significant accounting policy choices made by NN Group. The accounting policies
that are most significant to NN Group are included in the section ‘Critical accounting policies and significant judgements’.
The preparation of the Consolidated annual accounts requires the use of estimates and assumptions. These estimates and assumptions
affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as
reported income and expenses for the year. The actual outcome may differ from these estimates.
Upcoming changes in IFRS-EU
The most relevant upcoming changes in IFRS-EU that are relevant for NN Group relate to IFRS 9 ‘Financial instruments’ and IFRS 17
‘Insurance contracts’.
IFRS 9 ‘Financial Instruments’
IFRS 9 ‘Financial Instruments’ was issued by the IASB in July 2014. IFRS 9 replaces most of the current IAS 39 ‘Financial Instruments:
Recognition and Measurement’ and includes requirements for classification and measurement of financial assets and liabilities, impairment
of financial assets and hedge accounting.
Classification and measurement
The classification and measurement of financial assets under IFRS 9 will depend on NN Group’s business model and the instrument’s
contractual cash flow characteristics. These may result in financial assets being recognised at amortised cost, at fair value through
other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under
IFRS 9 will be similar to IAS 39, although changes in classification will occur. The classification and measurement of financial liabilities
remains unchanged.
Impairment
The recognition and measurement of impairments under IFRS 9 is intended to be more forward-looking than under IAS 39. The new
impairment requirements will apply to all financial assets measured at amortised cost and at fair value through other comprehensive income.
Initially, a provision is required for expected credit losses resulting from default events that are expected within the next twelve months. In the
event of a significant increase in credit risk, a provision is required for expected credit losses resulting from all possible default events over the
expected life of the financial assets.
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1 Accounting policies continued
Hedge accounting
The hedge accounting requirements of IFRS 9 aim to simplify hedge accounting. IFRS 9 includes the option to continue applying IAS 39 for
hedge accounting.
IFRS 9 is effective as of 2018. However, in September 2016 the IASB issued an amendment to IFRS 4 ‘Insurance Contracts’ (the ‘Amendment’)
and extended the amendment in June 2020. This Amendment addresses the issue arising from the different effective dates of IFRS 9 and the
new standard on accounting for insurance contracts (IFRS 17). The Amendment allows applying a temporary exemption from implementing
IFRS 9, so that it can be implemented together with IFRS 17. This exemption is only available to entities whose activities are predominantly
connected with insurance.
NN Group’s activities are predominantly connected with insurance as defined in this Amendment as more than 90% of liabilities are
connected with insurance activities. Liabilities connected with insurance activities of NN Group include insurance liabilities within the scope
of IFRS 4, certain investment contract liabilities and other liabilities relating to insurance entities and activities. Liabilities of NN Group that are
not related to insurance activities represent mainly the liabilities of the Banking operations.
NN Group applies the temporary exemption and, therefore, NN Group expects to implement IFRS 9 together with IFRS 17.
The Amendment requires certain additional disclosures on whether financial assets that remain accounted for under IAS 39 meet the
definition of ‘solely payments of principal and interest on the principal amount outstanding’ in IFRS 9 as well as additional information on the
credit rating of such assets and whether such assets are ‘low credit risk’. In this context, ‘low credit risk’ is equivalent to ‘investment grade’ as
defined by ratings agencies (generally a rating of BBB- or better). These additional disclosures are included in Note 36 ‘Fair value of financial
assets and liabilities’ and in Note 52 ‘Risk management’. These disclosures reflect the current business models and the current accounting
choices and interpretations. These may therefore change when IFRS 9 and IFRS 17 are implemented.
Certain subsidiaries within NN Group (mainly NN Bank) do not qualify under the Amendment. Therefore, the financial information of these
entities is based on IFRS 9 in the statutory IFRS reporting of these entities, but not in the consolidated financial reporting of NN Group.
The impact of applying IFRS 9 for these entities would not have been significant to NN Group. NN Group does not have associates or joint
ventures for which IFRS 9 has a significant impact.
IFRS 17 ‘Insurance Contracts’
IFRS 17 ‘Insurance Contracts’ was issued in May 2017 and a revised version was issued in June 2020. IFRS 17 covers the recognition and
measurement, presentation and disclosure of insurance contracts and replaces the current IFRS 4. IFRS 17 will fundamentally change the
accounting for insurance liabilities and deferred acquisition costs (DAC) for all insurance companies, including NN Group and its subsidiaries.
IFRS 17 is endorsed in the EU and will be effective as of 1 January 2023.
The main features of IFRS 17 are:
• Measurement of the insurance liabilities in the balance sheet at current fulfilment value, being the sum of the present value of future cash
flows and a risk adjustment
• Remeasurement of the current fulfilment value every reporting period using current assumptions and discount rates
• A Contractual Service Margin (CSM) recognised in the balance sheet that is equal to the unearned profit in the insurance contract at issue
and is subsequently recognised as result in the profit and loss account over the remaining life of the portfolio
• Certain changes in the insurance liability are adjusted against the CSM and thereby recognised in the profit and loss account over the
remaining life of the portfolio
• The effect of changes in discount rates is recognised either in the profit and loss account or in equity (OCI)
• The presentation of the profit and loss account and the disclosures in the notes will change fundamentally
IFRS 17 must be implemented retrospectively with amendment of comparative figures. However, several simplifications may be used
on transition.
NN Group will implement IFRS 17 together with IFRS 9. NN Group initiated an implementation project and is performing impact assessments
and parallel reporting runs. NN Group expects that the implementation of IFRS 9 and IFRS 17 will result in significant changes to its
accounting policies and will have a significant impact on shareholders’ equity, net result, presentation and disclosure. Shareholders’ equity
under IFRS 9 and 17 will be significantly lower as a result of the measurement of insurance liabilities at current assumptions. This will be
consistent with the measurement of the associated invested assets that are already mostly measured at fair value. At this moment it is too
early to disclose quantitative impact of the implementation as of 2023 as the preparation of the transitional balance sheet, the decisions on
key policy choices and assumptions and the parallel reporting runs are ongoing.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Changes in presentation
The presentation of and certain terms used in the Consolidated balance sheet, Consolidated profit and loss account, Consolidated
statement of cash flows, Consolidated statement of changes in equity and the notes was changed to provide additional and more relevant
information or (for changes in comparative information) to better align with the current period presentation. The impact of these changes is
explained in the respective notes when significant.
As of 2021, NN Group’s asset management activities executed by NN Investment Partners (NN IP) are classified as discontinued operations.
Net result from discontinued operations consists of the net result (after tax) of the businesses classified as discontinued operations and
is presented separately in the profit and loss account for both 2021 and 2020. Reference is made to Note 46 ‘Companies and businesses
acquired and divested’.
Critical accounting policies and significant judgements
NN Group has identified the accounting policies that are most critical to its business operations and to the understanding of its results.
These critical accounting policies are those which involve the most complex or subjective judgements and assumptions and relate to
insurance contracts, acquisition accounting, deferred acquisition costs, the determination of the fair value of real estate and financial
assets and liabilities and impairments. In each case, the determination of these items is fundamental to the financial condition and results
of operations and requires management to make complex judgements based on information and financial data that may change in future
periods. As a result, determinations regarding these items necessarily involve the use of assumptions and subjective judgements as to future
events and are subject to change, as the use of different assumptions or data could produce significantly different results. All valuation
techniques used are subject to internal review and approval. For further details on the application of these accounting policies, reference is
made to the applicable notes to the Consolidated annual accounts and the information below.
Reference is made to Note 52 ‘Risk management’ for a sensitivity analysis of certain assumptions as mentioned below.
Acquisition accounting, goodwill and other intangible assets
NN Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured
at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued
in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution
channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration
arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition
(including assumed debt) and NN Group’s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of
acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed
debt) and NN Group’s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is
referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related
costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as ‘Other operating expenses’.
The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as
the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be
limited. The initial accounting shall be completed within a year after acquisition.
Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets
and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce
significantly different estimates of the fair value.
Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets.
These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes,
which is either at the segment level or at a level below. This test is performed annually or more frequently if there are indicators of impairment.
Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable
amount which is the higher of its fair value less costs to sell and its value in use.
The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors,
including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management’s judgement and other
information available. Significantly different results can occur as circumstances change and additional information becomes known.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Insurance liabilities and deferred acquisition costs (DAC)
The determination of insurance liabilities and DAC is an inherently uncertain process, involving assumptions about factors such as social,
economic and demographic trends, inflation, investment returns, policyholder behaviour, court decisions, changes in laws and other factors
and, in the life insurance business, assumptions concerning mortality and morbidity trends. Specifically, assumptions that could have a
significant impact on financial results include interest rates, mortality, morbidity, property and casualty claims, investment yields on equity
and real estate and foreign currency exchange rates.
Insurance liabilities also include the impact of minimum guarantees which are contained within certain products. This impact is dependent
upon the difference between the potential minimum benefits payable and the total account balance, expected mortality and surrender rates.
The determination of the potential minimum benefits payable also involves the use of assumptions about factors such as inflation, investment
returns, policyholder behaviour, mortality and morbidity trends and other factors.
The use of different assumptions could have a significant effect on insurance liabilities, DAC and underwriting expenditure. Changes in
assumptions may lead to changes in insurance liabilities over time.
The adequacy of the insurance liabilities, net of DAC, is evaluated each reporting period by each business unit for the business originated in
that business unit. The test involves comparing the established insurance liability with current best estimate actuarial assumptions. The use
of different assumptions in this test could lead to a different outcome.
Fair value of real estate
Real estate investments are reported at fair value. The fair value of real estate investments is based on regular appraisals by external,
qualified valuers. The fair value is established using valuation methods such as comparable market transactions, capitalisation of income
methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third
parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations
of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases
expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that appropriately reflect the
risk characteristics of real estate investments.
Reference is made to Note 37 ‘Fair value of non-financial assets’ for more disclosure on fair value of real estate investments at the balance
sheet date.
The use of different assumptions and techniques could produce significantly different valuations.
Fair value of financial assets and liabilities
The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available.
Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available,
market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price
for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices.
When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most
appropriate price requires judgement and could result in different estimates of the fair value.
For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is
determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques
range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference
instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account.
Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets
and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and
assumptions could produce significantly different estimates of the fair value.
Reference is made to Note 36 ‘Fair value of financial assets and liabilities’ for more disclosure on fair value of financial assets and liabilities at
the balance sheet date.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
1 Accounting policies continued
Impairments
All debt and equity securities and loans (other than those carried at fair value through profit or loss) are subject to impairment testing
every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred. Evaluation for
impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated
incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the
issuer may be unlikely to pay amounts when due. Equity securities are impaired when management believes that, based on a significant
or prolonged decline of the fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be
recovered. ‘Significant’ and ‘prolonged’ are interpreted on a case-by-case basis for specific equity securities. Generally, 25% and six months
are used as triggers. Upon impairment of available-for-sale debt and equity securities, the full difference between the (acquisition) cost and
fair value is removed from equity and recognised in net result. Impairments on debt securities may be reversed if there is a decrease in the
amount of the impairment which can be objectively related to an observable event after the impairment. Impairments on equity securities
cannot be reversed.
The identification of impairments is an inherently uncertain process involving various assumptions and factors, including financial condition of
the counterparty, expected future cash flows, statistical loss data, discount rates, observable market prices, etc. Estimates and assumptions
are based on management’s judgement and other information available. Significantly different results can occur as circumstances change
and additional information becomes known.
General accounting policies
Consolidation
NN Group comprises NN Group N.V. and all its subsidiaries. The Consolidated annual accounts of NN Group comprise the accounts of
NN Group N.V. and all entities over which NN Group has control. NN Group has control over an entity when NN Group is exposed to, or has
rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity.
The assessment of control is based on the substance of the relationship between NN Group and the entity and considers existing and
potential voting rights that are substantive. For a right to be substantive, the holder must have the practical ability to exercise that right.
For interests in investment entities, the existence of control is determined taking into account both NN Group’s financial interests for own risk
and its role as asset manager. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the
investment allocations of their insurance policies (i.e. the policyholder has the ‘power’) and assume all risks and benefits of these investments
(i.e. the policyholder assumes the variable returns).
The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the
date control is obtained until the date control is lost. Minority interests are initially measured at their proportionate share of the subsidiaries’
identifiable net assets at the date of acquisition. On disposal, the difference between the sales proceeds, net of directly attributable
transaction costs, and the net assets is included in net result.
A subsidiary which NN Group has agreed to sell but is still legally owned by NN Group may still be controlled by NN Group at the balance
sheet date and, therefore, still be included in the consolidation. Such a subsidiary may be presented as held for sale if certain conditions
are met.
All intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated.
Where necessary, the accounting policies used by subsidiaries are changed to ensure consistency with NN Group policies. In general, the
reporting dates of subsidiaries are the same as the reporting date of NN Group N.V.
A list of principal subsidiaries is included in Note 34 ‘Principal subsidiaries and geographical information’.
Foreign currency translation
Functional and presentation currency
Items included in the annual accounts of each NN Group entity are measured using the currency of the primary economic environment in
which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is NN Group’s functional
and presentation currency.
Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions.
Exchange rate differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except when deferred in
equity as part of qualifying cash flow hedges or qualifying net investment hedges.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
1 Accounting policies continued
Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported as part of the ‘Fair value gain or
loss’. Exchange rate differences on non-monetary items measured at fair value through other comprehensive income (equity) are included in
the ‘Revaluation reserve’ in equity.
Exchange rate differences in the profit and loss account are generally included in ‘Foreign currency results and net trading income’.
Exchange rate differences relating to the disposal of available-for-sale debt and equity securities are considered to be an inherent part of the
capital gains and losses recognised in ‘Investment income’. As mentioned below in Group companies, on disposal of group companies, any
exchange rate difference deferred in equity is recognised in the profit and loss account in ‘Result on disposals of group companies’.
Group companies
The results and financial positions of all group companies that have a functional currency different from the presentation currency are
translated into the presentation currency as follows:
• Assets and liabilities included in each balance sheet are translated at the closing rate at the date of that balance sheet
• Income and expenses included in each profit and loss account are translated at average exchange rates (unless this average is not a
reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are
translated at the dates of the transactions)
• All resulting exchange rate differences are recognised in a separate component of equity in ‘Currency translation reserve’
On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a foreign
operation and of borrowings and other instruments designated as hedges of such investments are taken to shareholders’ equity. When a
foreign operation is sold the corresponding exchange rate differences are recognised in the profit and loss account as part of the gain or loss
on sale.
Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign
operation and translated at the exchange rate prevailing at the balance sheet date.
Recognition and derecognition of financial instruments
Financial assets and liabilities are generally (de)recognised at trade date, which is the date on which NN Group commits to purchase or sell
the asset. Loans and receivables are recognised at settlement date, which is the date on which NN Group receives or delivers the asset.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where NN Group has
transferred substantially all risks and rewards of ownership. If NN Group neither transfers nor retains substantially all the risks and rewards of
ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset.
Realised gains and losses on investments are determined as the difference between the sales proceeds and (amortised) cost. For equity
securities, the cost is determined using a weighted average per portfolio. For debt securities, the cost is determined by specific identification
(generally FIFO).
Fair value of financial assets and liabilities
The fair values of financial instruments are based on unadjusted quoted market prices at the balance sheet date where available. The quoted
market price used for financial assets held by NN Group is the current bid price; the quoted market price used for financial liabilities is the
current offer price.
The fair values of financial instruments that are not traded in an active market are determined using valuation techniques, based on market
conditions existing at each balance sheet date. An active market for the financial instrument is a market in which transactions for the asset
or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Assessing whether a market is
active requires judgement, considering factors specific to the financial instrument.
Reference is made to Note 36 ‘Fair value of financial assets and liabilities’ for the basis of determination of the fair value of
financial instruments.
Offsetting of financial assets and financial liabilities
Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when NN Group has a current legally
enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability at
the same time.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
1 Accounting policies continued
Impairments of financial assets
NN Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of
financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognised if, and only if,
there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but before
the balance sheet date, (a ‘loss event’) and that loss event (or events) has an impact on the estimated future cash flows of the financial
asset or group of financial assets that can be reliably estimated. In the specific case of equity investments classified as available-for-sale, a
significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired.
‘Significant’ and ‘prolonged’ are interpreted on a case-by-case basis for specific equity securities; generally, 25% and six months are used
as triggers.
In certain circumstances NN Group may grant borrowers postponement and/or reduction of loan principal and/or interest payments for
a temporary period of time to maximise collection opportunities and, if possible, avoid default, foreclosure or repossession. When such
postponement and/or reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to
as ‘forbearance’. In general, forbearance represents an impairment trigger under IFRS-EU. In such cases, the net present value of the
postponement and/or reduction of loan principal and/or interest payments is taken into account in the determination of the appropriate level
of loan loss provisioning as described below. If the forbearance results in a substantial modification of the terms of the loan, the original loan
is derecognised and a new loan is recognised at its fair value at the modification date.
In determining the impairment loss, expected future cash flows are estimated on the basis of the contractual cash flows of the assets in
the portfolio. NN Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually
significant and then individually or collectively for financial assets that are not individually significant.
If there is objective evidence that an impairment loss on an asset carried at amortised cost has occurred, the amount of the loss is measured
as the difference between the asset’s carrying value and the present value of estimated future cash flows (excluding future credit losses that
have not been incurred) discounted at the financial asset’s original effective interest rate. The carrying value of the asset is reduced through
the use of an allowance account (loan loss provisions) and the amount of the loss is recognised in the profit and loss account in ‘Investment
income’. If the asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate
determined under the contract. When a loan is uncollectable, it is written off against the related loan loss provision. Such loans are written off
after all the necessary procedures have been completed and the amount of the loss has been determined.
If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring
after the impairment was recognised (such as an improvement in the debtor’s credit rating), the previously recognised impairment loss is
reversed by adjusting the provision. The amount of the reversal is recognised in the profit and loss account.
If there is objective evidence that an impairment loss on available-for-sale debt and equity investments has occurred, the cumulative loss
– measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously
recognised in net result – is removed from equity and recognised in the profit and loss account.
Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent period, the impairment loss on a loan or a debt
instrument classified as available-for-sale reverses, which can be objectively related to an event occurring after the impairment loss was
recognised in the profit and loss account, the impairment loss is reversed through the profit and loss account.
Maximum credit risk exposure
The maximum credit risk exposure for items on the balance sheet is generally the carrying value for the relevant financial assets. For the off-
balance sheet items, the maximum credit exposure is the maximum amount that could be required to be paid. Reference is made to Note 44
‘Contingent liabilities and commitments’ for these off-balance sheet items. Collateral received is not taken into account when determining the
maximum credit risk exposure. The manner in which NN Group manages credit risk and determines credit risk exposures is explained in Note
52 ‘Risk management’.
Leases
The leases entered into by NN Group as a lessee are primarily operating leases. At inception of a contract, NN Group assesses whether a
contract is, or contains, a lease. A contract is, or contains a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration. The net present value of operating lease commitments is recognised on the balance sheet
as a ‘right of use asset’ under Property and equipment or Real estate investments and a lease liability is recognised under Other liabilities.
NN Group does not recognise a right of use asset and a lease liability for short-term leases that have a lease term of 12 months or less and for
leases of low value assets. The lease payments associated with these leases are recognised as an expense.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
1 Accounting policies continued
Taxation
Income tax on the result for the year comprises current and deferred tax. Income tax is generally recognised in the profit and loss account,
but is recognised directly in equity if the tax relates to items that are recognised directly in equity.
Current tax consists of the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the
tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax
amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or
substantively enacted at the reporting date.
Deferred tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities
and their carrying values in the balance sheet. Deferred tax is determined using tax rates (and laws) applicable in the jurisdictions in which
NN Group is liable to taxation, that have been enacted or substantively enacted at the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted.
Deferred tax assets are recognised for all deductible temporary differences and unused tax losses carried forward where it is probable
that future taxable profits will be available against which the temporary differences can be used. Unrecognised deferred tax assets are
reassessed periodically and recognised to the extent that it has become probable that future taxable profits will be available against which
they can be used. Deferred tax is provided on temporary differences arising from investments in subsidiaries and associates, except where
the timing of the reversal of the temporary difference is controlled by NN Group and it is probable that the difference will not reverse in the
foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is probable that
future taxable profits will be available against which these losses can be used.
Offsetting deferred tax assets with deferred tax liabilities is allowed as long as there is a legally enforceable right to offset current tax assets
against current tax liabilities together with the intention to do so and the deferred taxes relate to income taxes levied by the same taxation
authority on the same entity or on the same fiscal unity.
Employee benefits
Defined benefit pension plans
The net defined benefit asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the fair value of the
plan assets less the present value of the defined benefit obligation at the balance sheet date. Plan assets are measured at fair value at the
balance sheet date. For determining the pension expense, the expected return on plan assets is determined using a high quality corporate
bond rate identical to the discount rate used in determining the defined benefit obligation.
Defined contribution pension plans
For defined contribution plans, NN Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual
or voluntary basis. NN Group has no further payment obligations once the contributions have been paid. The contributions are recognised as
staff expenses in the profit and loss account when they are due.
Other post-employment obligations
Some NN Group companies provide post-employment benefits to certain employees and former employees. The entitlement to these
benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period.
The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for
defined benefit pension plans.
Share-based payments
Share-based payment expenses are recognised as staff expenses over the vesting period. A corresponding increase in equity is recognised
for equity-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions is measured at the
grant date. For cash-settled share-based payment transactions, a liability is recognised at fair value; this fair value is remeasured at every
balance sheet date.
Notes to the Consolidated annual accounts continued
Our operating
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NN Group N.V.
2021 Annual Report
1 Accounting policies continued
Interest income and expenses
Interest income and expenses are recognised in the profit and loss account using the effective interest method. The effective interest
method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or
interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments
or receipts throughout the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the
financial asset or financial liability. When calculating the effective interest rate, NN Group estimates cash flows considering all contractual
terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all
fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs
and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an
impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring
the impairment loss. Interest income and expenses from non-trading derivatives are classified as interest income and interest expenses in the
profit and loss account, except for interest income/expense on derivatives for which no hedge accounting is applied. The latter is classified in
‘Valuation results on non-trading derivatives’, together with the changes in the (clean) fair value of these derivatives.
Fiduciary activities
NN Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals,
trusts, retirement benefit plans and other institutions when conducting asset management activities. The assets and income arising thereon
are excluded from these annual accounts, as they are not assets or income of NN Group. Fees received acting as trustee and in other
fiduciary capacities are recognised as income.
Statement of cash flows
The Consolidated statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from
operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in
the profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year.
Cash and cash equivalents comprise balances with less than three months maturity from the date of acquisition. Investments qualify as a
cash equivalent if they are readily convertible into a known amount of cash and are not subject to significant risk of changes in value.
Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of the
cash flows.
The difference between the net cash flow in accordance with the statement of cash flows and the change in ‘Cash and cash equivalents’ in
the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash flow and
the balance sheet change in ‘Cash and cash equivalents’.
Cash flows arising from the issue of mortgage loans held in the banking operations are recognised under Net cash flows from operating
activities, whereas cash flows related to mortgage loans held as investment in the insurance operations are recognised under Net cash flow
from investing activities.
Cash flows on collateral related to derivatives (presented in the balance sheet in Other assets and Other liabilities) is presented in
the Consolidated statement of cash flows as part of Net cash flow from operating activities, consistent with the cash flows of the
related derivatives.
Accounting policies for specific items
Financial assets and liabilities at fair value through profit or loss (Notes 4 and 20)
A financial asset or liability is classified as at fair value through profit or loss if it is acquired principally for the purpose of selling in the short-
term or if designated by management as such. Management will make this designation only if this eliminates a measurement inconsistency or
if the related assets and liabilities are managed on a fair value basis.
Transaction costs on initial recognition are expensed as incurred. Interest income from debt securities and loans and receivables classified
as at fair value through profit or loss is recognised in the profit and loss account using the effective interest method. Dividend income
from equity instruments classified as at fair value through profit or loss is recognised in the profit and loss account when the dividend has
been declared.
Notes to the Consolidated annual accounts continued
Our operating
environment
Our strategy and
performance
Corporate
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value creation
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our stakeholders
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NN Group N.V.
2021 Annual Report
1 Accounting policies continued
Investments for risk of policyholders
Investments for risk of policyholders are investments against insurance liabilities for which all changes in the fair value of invested assets are
offset by similar changes in insurance liabilities. Investments for risk of policyholders are recognised at fair value; changes in fair value are
recognised in the profit and loss account.
Derivatives and hedge accounting
Derivatives are recognised at fair value. Derivatives are presented as assets when the fair value is positive and as liabilities when the fair
value is negative.
The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument
and, if so, the nature of the item being hedged. NN Group designates certain derivatives as hedges of highly probable future cash flows
attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), hedges of the fair value of recognised assets
or liabilities or firm commitments (fair value hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for
derivatives designated in this way provided certain criteria are met.
At the inception of the hedge transaction NN Group documents the relationship between hedging instruments and hedged items, its
risk management objectives, together with the methods selected to assess hedge effectiveness. In addition, NN Group documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair value or cash flows of the hedged items. NN Group applies fair value hedge accounting to portfolio
hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of IFRS-EU. The EU ‘carve-out’ macro hedging enables a group
of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the
limitations in fair value hedge accounting relating to hedging deposits and under-hedging strategies. Under the IFRS-EU ‘carve-out’, hedge
accounting may be applied to deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled
time buckets falls below the designated amount of that bucket.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other
comprehensive income (equity) in ‘Cash flow hedge reserve’. The gain or loss relating to the ineffective portion is recognised immediately in
the profit and loss account. Amounts accumulated in equity are recycled to the profit and loss account in the periods in which the hedged
item affects Net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the
profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously reported in equity
is transferred immediately to the profit and loss account.
Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account,
together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria
for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the
profit and loss account over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non-
interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the profit and loss account only when the
hedged item is derecognised.
Net investment hedges
Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging
instrument relating to the effective portion of the hedge is recognised in other comprehensive income (equity) and the gain or loss relating to
the ineffective portion is recognised immediately in the profit and loss account. Gains and losses in equity are included in the profit and loss
account when the foreign operation is disposed.
Notes to the Consolidated annual accounts continued
Our operating
environment
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Corporate
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NN Group N.V.
2021 Annual Report
1 Accounting policies continued
Non-trading derivatives that do not qualify for hedge accounting
Derivatives that are used by NN Group as part of its risk management strategies, that do not qualify for hedge accounting under NN Group’s
accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair
value taken to ‘Valuation results on non-trading derivatives’ in the profit and loss account.
Certain derivatives embedded in other contracts are measured as separate derivatives if:
• Their economic characteristics and risks are not closely related to those of the host contract
• The host contract is not carried at fair value through profit or loss
• A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative (unless the embedded
derivative meets the definition of an insurance contract)
These embedded derivatives are measured at fair value with changes in fair value recognised in the profit and loss account. An assessment
is carried out when NN Group first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of
the contract that significantly modifies the expected cash flows.
Available-for-sale investments (Note 5)
Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale
financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost
and redemption value is amortised. Interest income is recognised using the effective interest method. Available-for-sale financial assets are
subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in the profit and loss
account in ‘Investment income’. Dividend income from equity instruments classified as available-for-sale is recognised in the profit and loss
account in ‘Investment income’ when the dividend has been declared.
Unrealised gains and losses arising from changes in the fair value are recognised in other comprehensive income (equity). On disposal, the
related accumulated fair value adjustments are included in the profit and loss account as ‘Investment income’. For impairments of available-
for-sale financial assets reference is made to the section ‘Impairments of financial assets’.
Loans (Note 6)
Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially
recognised at fair value plus transaction costs. Subsequently, they are carried at amortised cost using the effective interest method less
any impairment losses. Interest income from loans is recognised in the profit and loss account in ‘Investment income’ using the effective
interest method.
Associates and joint ventures (Note 7)
Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a
shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations
including, but not limited to, one or more of the following:
• Representation on the board of directors
• Participation in the policy making process
• Interchange of managerial personnel
Joint ventures are all entities in which NN Group has joint control.
Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method
of accounting. Subsequently, NN Group’s share of profits or losses is recognised in the profit and loss account and its share of changes in
reserves is recognised in other comprehensive income (equity).
The cumulative changes are adjusted against the carrying value of the investment. When NN Group’s share of losses in an associate or joint
venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate or joint venture.
Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of NN
Group’s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the
policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group.
Notes to the Consolidated annual accounts continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
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2021 Annual Report
1 Accounting policies continued
For interests in investment entities the existence of significant influence is determined taking into account both NN Group’s financial interests
for own risk and its role as asset manager.
Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity
funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real
estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments
in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials
and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of
the investee’s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for
similar entities quoted in an active market. Valuations of private equity investments are mainly based on an ‘adjusted multiple of earnings’
methodology on the following basis:
• Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and,
in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest,
tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from
management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable
estimate of maintainable earnings.
• Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies
in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth
rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies.
• Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and
NN Group’s investment rights in the deal structure.
Real estate investments (Note 8)
Real estate investments under construction are included in ‘Real estate investments’. Real estate investments are held for long-term
rental yields and are not occupied by NN Group. Real estate investments are initially measured at cost, including transaction cost and
are subsequently measured at fair value. Changes in the carrying value resulting from revaluations are recognised in the profit and loss
account. On disposal the difference between the sales proceeds and carrying value is recognised in the profit and loss account. The fair
value of real estate investments is based on regular appraisals by independent qualified valuers. For each reporting period every property
is valued by an external valuer. Market transactions and disposals made by NN Group are monitored as part of the validation procedures to
test the valuations. Valuations performed earlier in the year are updated if necessary to reflect the situation at the year-end. All real estate
investments are appraised externally at least annually.
The fair value represents the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer
and willing seller in an at-arm’s-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and
without compulsion. The fair value is based on appraisals using valuation methods such as comparable market transactions, capitalisation
of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or
sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based
on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new
leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that reflect
appropriately the risk characteristics of real estate. The valuation of real estate investments takes (expected) vacancies into account.
Occupancy rates differ significantly from investment to investment. For real estate investments held through (minority shares in) real estate
investment funds, the valuations are performed under the responsibility of the funds’ asset manager.
Subsequent expenditures are recognised as part of the asset’s carrying value only when it is probable that future economic benefits
associated with the item will flow to NN Group and the cost of an item can be measured reliably. All other repairs and maintenance costs
are recognised immediately in the profit and loss account. Borrowing costs on real estate investments under construction are capitalised
until completion.
Property and equipment (Note 9)
Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying value are recognised in
other comprehensive income (equity). Decreases in the carrying value that offset previous increases of the same asset are charged against
other comprehensive income (equity); all other decreases are recognised in the profit and loss account. Increases that reverse a revaluation
decrease on the same asset previously recognised in net result are recognised in the profit and loss account. Depreciation is recognised
based on the fair value and the estimated useful life (in general 20-50 years). On disposal, the related revaluation reserve in equity is
transferred within equity to ‘Retained earnings’.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
The fair value of land and buildings is based on regular appraisals by independent, qualified valuers or internally, similar to appraisals of real
estate investments. All significant holdings of land and buildings are appraised at least annually. Subsequent expenditure is included in the
asset’s carrying value when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of the
item can be measured reliably.
Equipment is stated at cost less accumulated depreciation and any impairment losses. The estimated useful lives are generally as follows:
two to five years for data processing equipment and four to ten years for fixtures and fittings. Expenditure incurred on maintenance and
repairs is recognised in the profit and loss account as incurred. Expenditure incurred on major improvements is capitalised and depreciated.
The difference between the proceeds on disposal and net carrying value is recognised in the profit and loss account in ‘Other income’.
Methods of depreciation and amortisation
Items of property and equipment are depreciated, intangible assets with finite useful lives are amortised. The carrying values of the assets
are depreciated/amortised on a straight-line basis over the estimated useful lives. Methods of depreciation and amortisation, useful lives and
residual values are reviewed at each reporting date and adjusted if appropriate.
Intangible assets (Note 10)
Goodwill
NN Group’s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured
at the aggregate of the fair value (at the date of acquisition) of assets given, liabilities incurred or assumed and equity instruments issued
in exchange for control of the acquiree. Where applicable, the consideration for the acquisition includes any asset or liability resulting from
a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the
cost of the acquisition (including assumed debt) and NN Group’s interest in the fair value of the acquired assets, liabilities and contingent
liabilities as at the date of acquisition, is capitalised as an intangible asset. Negative goodwill is recognised immediately in the profit and loss
account as income. The results of the operations of the acquired companies are included in the profit and loss account from the date control
is obtained.
Where a business combination is achieved in stages, NN Group’s previously held interests in the assets and liabilities of the acquired
entity are remeasured to fair value at the acquisition date (i.e. the date NN Group obtains control) and the resulting gain or loss, if any, is
recognised in the profit and loss account. Amounts arising from interests in the acquiree before the acquisition date that have previously
been recognised in other comprehensive income (equity) are reclassified to the profit and loss account, where such treatment would be
appropriate if that interest were disposed of.
Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as ‘Other
operating expenses’.
Until 2009, before IFRS 3 ‘Business Combinations’ was revised, the accounting of previously held interests in the assets and liabilities of
the acquired entity were not remeasured at the acquisition date and the acquisition-related costs were considered to be part of the total
consideration. Goodwill is only capitalised on acquisitions after the implementation date of IFRS-EU (1 January 2004). Accounting for
acquisitions before that date has not been restated; goodwill and internally generated intangibles on these acquisitions were recognised
directly in shareholders’ equity.
The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as
the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be
limited. The initial accounting shall be completed within a year after acquisition.
Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing. These cash generating units (reporting
units) represent the lowest level at which goodwill is monitored for internal management purposes, which is either at the segment level or at a
level below. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying
value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount which is the higher of its fair
value less costs to sell and its value in use.
Computer software
Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment
losses. The expected useful life of computer software will generally not exceed three years. Amortisation is included in ‘Other
operating expenses’.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Value of business acquired (VOBA)
VOBA is an asset that represents the present value of estimated net cash flows embedded in the insurance contracts of an acquired
company, which exists at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and
their carrying value. VOBA is amortised in a similar manner to the amortisation of the deferred acquisition costs as described in the section
‘Deferred acquisition costs’.
Other intangible assets
Other intangible assets include brand names, client relationships and distribution channels. These assets are stated at cost less amortisation
and any impairment losses. The expected useful life is between 2 and 17 years.
Impairment
Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that
impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting
unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit).
The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is
estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the
recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are
tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset.
Deferred acquisition costs (Note 11)
Deferred acquisition costs (DAC) represent costs of acquiring insurance and investment contracts that are deferred and amortised.
The deferred costs, all of which vary with (and are primarily related to) the production of new and renewal business, consist principally of
commissions, certain underwriting and contract issuance expenses and certain agency expenses.
For traditional life insurance contracts, certain types of flexible life insurance contracts and non-life contracts, DAC is amortised over the
premium payment period in proportion to the premium revenue recognised.
For other types of flexible life insurance contracts DAC is amortised over the lives of the policies in relation to the emergence of estimated
profits. Amortisation is adjusted when estimates of current or future profits, to be realised from a group of products, are revised.
DAC amortisation is included in the Underwriting expenditure in the profit and loss account.
DAC is evaluated for recoverability at issue. Subsequently it is tested on a regular basis together with the life insurance liabilities. The test for
recoverability is described in the section ‘Insurance and investment contracts, reinsurance contracts’.
For certain products DAC is adjusted for the impact of unrealised results on allocated investments through equity.
Assets and liabilities held for sale (Note 12)
Assets and liabilities of a business are classified as held for sale if their carrying amount will be recovered principally through a sale
transaction rather than through continuing use. This is only the case when the sale is highly probable, the business is available for immediate
sale in its present condition and management is committed to the sale, which is expected to occur within one year from the date of
classification as held for sale. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet.
Subordinated debt, debt securities issued and other borrowed funds (Notes 15, 16 and 17)
Subordinated debt, debt securities issued and other borrowed funds are recognised initially at their issue proceeds (fair value of
consideration received) net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between
proceeds, net of transaction costs and the redemption value is recognised in the profit and loss account over the period of the borrowings
using the effective interest method.
If NN Group purchases its own debt, it is derecognised from the balance sheet and the difference between the carrying value of the liability
and the consideration paid is recognised in the profit and loss account.
Financial liabilities include only instruments of which the terms and conditions represent a contractual obligation to pay interest and/or
principal. Instruments that are similar in substance, but of which the terms and conditions do not include a contractual obligation to pay
interest and principal are classified as equity.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Insurance and investment contracts, reinsurance contracts (Note 18)
Insurance liabilities are established in accordance with IFRS 4 ‘Insurance Contracts’. Under IFRS 4, an insurer may continue its existing pre-
IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS-EU in 2005,
NN Group decided to continue the then existing accounting principles for insurance contracts under IFRS-EU. NN Group operates in many
different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group’s businesses
in the Netherlands, NN Group applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance contracts.
Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on
a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policies under IFRS-EU.
In addition, for certain specific products or components thereof, NN Group applies the option in IFRS 4 to measure (components of)
insurance liabilities using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain
guarantees embedded in insurance contracts in Japan.
Insurance contracts
Insurance policies which bear significant insurance risk and/or contain discretionary participation features (including investment contracts
with discretionary participation features) are presented as insurance contracts. Insurance liabilities represent estimates of future pay-outs
that will be required for life and non-life insurance claims, including expenses relating to such claims. For some insurance contracts the
measurement reflects current market assumptions. Unless indicated otherwise below, changes in the insurance liabilities are recognised in
the profit and loss account.
Life insurance liabilities
The life insurance liabilities are generally calculated on the basis of a prudent prospective actuarial method. Specific methodologies may
differ between business units as they may reflect local regulatory requirements and local practices for specific product features in the
local markets.
Insurance liabilities on traditional life policies are calculated using various assumptions, including assumptions on mortality, morbidity,
expenses, investment returns and surrenders. Assumptions for insurance liabilities for traditional life insurance contracts, including traditional
whole-life and term-life insurance contracts, are based on best estimate assumptions including margins for adverse deviations. Generally,
these assumptions are set initially at the policy issue date and remain constant throughout the life of the policy. For the insurance liabilities
that were taken over in the Delta Lloyd acquisition, these assumptions are set as at the date of acquisition, 1 April 2017.
Insurance liabilities for universal life, variable life and annuity contracts, unit-linked contracts, etc. are generally set equal to the balance that
accrues to the benefit of the policyholders.
Certain contracts contain minimum (interest) guarantees on the amounts payable upon death and/or maturity. The insurance liabilities
include the impact of these minimum (interest) guarantees, taking into account the difference between the potential minimum benefit
payable and the total account balance, expected mortality and surrender rates.
Unamortised interest rate rebates on periodic and single premium contracts are deducted from the life insurance contract liabilities.
Interest rate rebates granted during the year are amortised in conformity with the anticipated recovery pattern and are recognised in the
profit and loss account.
Liabilities for unearned premiums and unexpired insurance risks
The liabilities are calculated in proportion to the unexpired periods of risk. For insurance policies covering a risk increasing during the term
of the policy at premium rates independent of age, this risk is taken into account when determining the liability. Further liabilities are formed
to cover claims under unexpired insurance contracts, which may exceed the unearned premiums and the premiums due in respect of
these contracts.
Claims liabilities
Claims liabilities are calculated either on a case-by-case basis or by approximation on the basis of experience. Liabilities have also been
recognised for claims incurred but not reported (IBNR) and for future claims handling expenses. IBNR liabilities are set to recognise the
estimated cost of losses that have occurred but which have not yet been notified to NN Group. The adequacy of the claims liabilities is
evaluated each year using standard actuarial techniques.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Deferred interest credited to policyholders
For insurance contracts and investment contracts with discretionary participation features, ‘Deferred interest credited to policyholders’
is recognised for the full amount of the unrealised revaluations on allocated investments. Upon realisation, the ‘Deferred interest credited
to policyholders’ regarding unrealised revaluations is reversed and a deferred profit sharing amount is recognised for the share of realised
results on allocated investments that is expected to be shared with policyholders. The amount of deferred profit sharing is reduced by
the actual allocation to individual policyholders. The change in the amount of ‘Deferred interest credited to policyholders’ on unrealised
revaluations (net of tax) is recognised in the ‘Revaluation reserve’ in other comprehensive income (equity).
Liabilities for life insurance for risk of policyholders
Liabilities for life insurance for risk of policyholders are generally shown at the balance sheet value of the related investments.
Reinsurance contracts
Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of insurance contracts are accounted for
in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations,
NN Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are recognised for receivables on
reinsurance contracts which are deemed uncollectable. Both reinsurance premiums and reinsurance recoveries are included in
‘Underwriting expenditure’ in the profit and loss account.
Adequacy test
The adequacy of the insurance liabilities is evaluated at each reporting period by each business unit for the business originated in that
business unit. The test involves comparing the established insurance liability (gross of reinsurance and net of DAC and VOBA) to a liability
based on current best estimate actuarial assumptions. The assumed investment returns are a combination of the run-off of current portfolio
yields on existing assets and reinvestment rates in relation to maturing assets and anticipated new premiums, as a result (part of) the
revaluation reserve in shareholders equity is taken into account in assessing the adequacy of insurance liabilities.
If, for any business unit, the established insurance liability is lower than the liability based on current best estimate actuarial assumptions the
shortfall is recognised immediately in the profit and loss account.
If the insurance liabilities are determined to be more than adequate no reduction in the insurance liabilities is recognised.
Investment contracts
Insurance policies without discretionary participation features which do not bear significant insurance risk are presented as Investment
contracts. Investment contract liabilities are determined at amortised cost, using the effective interest method (including certain initial
acquisition expenses), or at fair value.
Other liabilities (Note 21)
Provisions
Other liabilities include reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions include employee
termination benefits when NN Group is demonstrably committed to either terminating the employment of current employees according
to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage
voluntary redundancy. Provisions are discounted when the effect of the time value of money is significant, using a before tax discount rate.
The determination of provisions is an inherently uncertain process involving estimates regarding amounts and timing of cash flows.
Gross premium income (Note 22)
Premiums from insurance policies are recognised as income when due from the policyholder. Receipts under investment contracts are not
recognised as gross premium income; instead, deposit accounting is applied. When applying deposit accounting, the amounts contributed
by policyholders are recognised as direct increases in the provision for investment contracts, not as premium income and payments are
deducted directly from the provision.
Net fee and commission income (Note 24)
Fees and commissions are generally recognised as the service is provided. Portfolio and other management advisory and service fees are
recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and
investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth
management, financial planning and custody services that are continuously provided over an extended period of time.
Notes to the Consolidated annual accounts continued
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1 Accounting policies continued
Earnings per ordinary share (Note 32)
Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the
weighted average number of ordinary shares outstanding, own shares held by group companies are deducted from the total number of
ordinary shares in issue.
Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if
these changes occurred after the reporting date but before the annual accounts are authorised for issue.
Diluted earnings per share data are computed as if all convertible instruments outstanding at the year-end were exercised at the beginning
of the period. It is also assumed that NN Group uses the assumed proceeds received to buy its own shares against the average market price
in the financial year. The net increase in the number of shares resulting from the exercise is added to the average number of shares used to
calculate diluted earnings per share.
Segments and Principal subsidiaries and geographical information (Notes 33 and 34)
A segment is a distinguishable component of NN Group, engaged in providing products or services, subject to risks and returns that are
different from those of other segments. A geographical area is a distinguishable component of NN Group engaged in providing products or
services within a particular economic environment that is subject to risks and returns that are different from those of segments operating
in other economic environments. The geographical analysis is based on the location of the business unit from which the transactions
are originated.
2 Covid-19 pandemic
Since early 2020, the spread of the Covid-19 pandemic is causing significant disruption to society and the world-wide economy, impacting
NN Group, its employees, its customers and its suppliers. Financial markets have been severely impacted by significant volatility in interest
rates, equity prices and spreads and the world-wide economy has been significantly impacted as well. Governments and central banks
worldwide are responding to this crisis with aid packages and further supporting measures. NN Group is constantly monitoring the
developments and the (potential) impact on NN Group. The most significant risks that NN Group is facing in this context are related to the
financial markets (including interest rates, inflation, equity prices and spreads), insurance risk (including mortality and policyholder behaviour)
and operational risk (continuity of business processes). Note 52 ‘Risk management’ includes extensive disclosure on the exposure to such
risks and the risk management thereof.
The Covid-19 pandemic, and the related impact on the financial markets, impacted the financial reporting of NN Group mainly through
additional uncertainties in the determination of the fair value of illiquid assets, including real estate investments and private equity
investments. NN Group uses quarterly appraisals by external valuers as main input for the determination of fair value of its real estate
investments. During 2020 uncertainties in the environment have led to the inclusion of ‘material valuation uncertainty’ clauses in certain
external valuation reports. Such clauses do not imply that the valuation cannot be relied upon, but are used to indicate that – in the
extraordinary circumstances – less certainty can be attached to valuations than would otherwise be the case.
In 2021, the Covid-19 pandemic continued, but the impact on NN Group’s financial reporting in 2021 was limited. While real estate valuations
remain complex and uncertain, the specific valuation uncertainty clauses were no longer included in real estate appraisals by external
appraisers in the valuations and there were no significant impairments (including debt and equity securities, loans and intangible assets).
Furthermore, there was no significant impact from the Covid-19 pandemic on the technical provisions for Life insurance contracts. For Non-
life disability insurance contracts there are both direct effects from insureds being affected by Covid-19 as well as indirect effects from longer
disability as treatment is postponed. For specific portfolios this may lead to increased claims; however, the observed and expected financial
impact for NN Group is not significant. Covid 19 contributed positively to the favourable claims development in P&C. NN Bank offered
postponements of interest and/or principal payments on an individual basis to retail borrowers who face temporary payment difficulties on
their mortgage loans or consumer loans. The number of cases is limited and the financial impact for NN Group was not significant.
NN Group has established a business continuity plan to help ensure the continuity of its businesses, the well-being of its staff and its
capability to support its customers, while maintaining financial and operational resilience.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
3 Cash and cash equivalents
Cash and cash equivalents
2021 2020
Cash and bank balances 4,203 6,157
Money market funds 1,965 4,568
Short-term deposits 761 1,657
Cash and cash equivalents 6,929 12,382
Cash and cash equivalents classified as assets held for sale 226 8
Cash and cash equivalents at the end of the year 7, 15 5 12,390
As at 31 December 2021, NN Group held EUR1,325 million (2020: EUR2,586 million) at central banks.
NN Group invests in several types of money market funds, some qualifying as cash equivalents and some as investments. Short-term investments in
money market funds are presented as cash equivalents only if these are highly liquid and quoted in an active market and have low investment risk.
Changes in Cash and cash equivalents
2021 2020
Cash and cash equivalents at beginning of the year 12,390 6,436
Net cash flow -5,161 6,050
Effect of exchange rate changes on cash and cash equivalents -74 -96
Cash and cash equivalents at the end of the year 7, 15 5 12,390
The change in market interest rates in 2021 significantly impacted cash collateral amounts paid and received as well as other assets
and liabilities which are components of the net cash flow. Consequently, the net cash flow for 2021 decreased by EUR11,211 million to
EUR-5,161 million (2020: EUR6,050 million).
4 Financial assets at fair value through profit or loss
Financial assets at fair value through profit or loss
2021 2020
Investments for risk of policyholders 39,261 34,797
Non-trading derivatives 6,419 14,833
Designated as at fair value through profit or loss 991 1,336
Financial assets at fair value through profit or loss 46,671 50,966
Investments for risk of policyholders
2021 2020
Equity securities 37,010 31,992
Debt securities 1,368 1,786
Loans and receivables 883 1,019
Investments for risk of policyholders 39,261 34,797
Investments in investment funds (with underlying investments in debt and equity securities, real estate and derivatives) are included in
equity securities.
Non-trading derivatives
2021 2020
Derivatives used in:
– fair value hedges 29 1
– cash flow hedges 4,622 10,530
Other non-trading derivatives 1,768 4,302
Non-trading derivatives 6,419 14,833
The fair value of derivatives was impacted significantly in 2021 by the change (increase) in market interest rates. This change in market
interest rates also significantly impacted other balance sheet items, including Available for sale investments and Other liabilities – Cash
collateral amounts received as well as other liabilities in the consolidated statement of cash flows.
Other non-trading derivatives includes derivatives for which no hedge accounting is applied.
Notes to the Consolidated annual accounts continued
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4 Financial assets at fair value through profit or loss continued
Designated as at fair value through profit or loss
2021 2020
Equity securities 415 425
Debt securities 28 28
Money market funds 548 883
Designated as at fair value through profit or loss 991 1,336
5 Available-for-sale investments
Available-for-sale investments
2021 2020
Equity securities:
– shares in NN Group managed investment funds 2,459 2,539
– shares in third-party managed investment funds 3,970 2,774
– other 5,537 5,986
Equity securities 11,966 11,299
Debt securities 95,917 106,876
Available-for-sale investments 107,8 83 118,175
Changes in Available-for-sale investments
Equity securities Debt securities Total
2021 2020 2021 2020 2021 2020
Available-for-sale investments – opening balance 11,299 8,078 106,876 109,566 118,175 117,6 4 4
Additions 2,375 4,545 24,378 20,383 26,753 24,928
Amortisation -379 -453 -379 -453
Transfers and reclassifications -10 0 -2 -1 -2 -101
Changes in unrealised revaluations 1,093 1,341 -5,462 3,660 -4,369 5,001
Impairments -44 -338 -6 -44 -344
Disposals and redemptions -2,797 -2,245 -26,474 -26,472 -29,271 -28,717
Changes in the composition of the group and other
changes -6 40 -3,111 1,419 -3,117 1,459
Exchange rate differences 46 -22 91 -1,220 137 -1,242
Available-for-sale investments – closing balance 11,966 11,299 95,917 106,876 10 7,883 118,175
Transfers and reclassifications in 2020 mainly relate to the transfer of certain investments in real estate funds to associates and joint
ventures due to an increase in level of influence. Reference is also made to Note 23 ‘Investment income’ for details on impairments by
segment. Changes in composition of the group and other changes includes the impact of the classification of a closed book life insurance
portfolio in NN Belgium as held for sale.
NN Group’s total exposure to debt securities is included in the following balance sheet lines:
Total exposure to debt securities
2021 2020
Available-for-sale investments 95,917 106,876
Loans 281 667
Available-for-sale investments and loans 96,198 10 7,5 4 3
Investments for risk of policyholders 1,368 1,786
Designated as at fair value through profit or loss 28 28
Financial assets at fair value through profit or loss 1,396 1,814
Total exposure to debt securities 97, 59 4 109,357
Notes to the Consolidated annual accounts continued
Our operating
environment
Our strategy and
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Corporate
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5 Available-for-sale investments continued
NN Group’s total exposure to debt securities (excluding debt securities presented as held for sale) is included in ‘Available-for-sale
investments’ and ‘Loans’ is specified as follows by type of exposure:
Debt securities by type
Available-for-sale investments Loans Total
2021 2020 2021 2020 2021 2020
Government bonds 61,587 70,716 61,587 70,716
Corporate bonds 20,427 20,544 20,427 20,544
Financial institution and Covered bonds 10,454 12,247 10,454 12,247
Bond portfolio (excluding ABS) 92,468 103,507 – – 92,468 103,507
US RMBS 464 517 464 517
Non-US RMBS 2,107 2,318 198 575 2,305 2,893
CDO/CLO 444 444 –
Other ABS 434 534 83 92 517 626
ABS portfolio 3,449 3,369 281 667 3,730 4,036
Debt securities – Available-for-sale investments
andLoans
95,917 106,876 281 667 96,198 107, 5 4 3
For more details, reference is made to Note 52 ‘Risk management’.
Available-for-sale equity securities
2021 2020
Listed 5,579 6,431
Unlisted 6,387 4,868
Available-for-sale equity securities 11,966 11,299
Notes to the Consolidated annual accounts continued
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6 Loans
Loans
2021 2020
Loans secured by mortgages 59,283 55,310
Loans related to savings mortgages 1,426 1,532
Loans to or guaranteed by public authorities 1,478 1,830
Asset-backed securities 281 667
Policy loans 937 947
Other loans 4,954 5,324
Loans – before loan loss provisions 68,359 65,610
Loan loss provisions -159 -182
Loans 68,200 65,428
Changes in Loans secured by mortgages
2021 2020
Loans secured by mortgages – opening balance 55,310 51,382
Additions/origination 10,509 9,188
Amortisation -160 -170
Redemption -5,231 -4,909
Disposals -686 -520
Fair value changes recognised on hedged items -453 341
Changes in the composition of the group and other changes -6 -2
Loans secured by mortgages – closing balance 59,283 55,310
NN Group has sold mortgage loans to securitisation entities that, in turn, issued notes to investors that are collateralised by the purchased
assets. These mortgage loans continue to be recognised on NN Group’s balance sheet as NN Group retained all or substantially all of the
risks and rewards of the mortgage loans. Reference is made to Note 47 ‘Structured entities’.
Changes in Loan loss provisions
2021 2020
Loan loss provisions – opening balance 182 166
Write-offs -7 -6
Increase/decrease in loan loss provisions -13 19
Changes in the composition of the group and other changes -3 3
Loan loss provisions – closing balance 159 182
Notes to the Consolidated annual accounts continued
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7 Associates and joint ventures
Associates and joint ventures (2021)
2021
Interest
held
Balance
sheet value
Total
assets
Total
liabilities
Total
income
Total
expenses
Vesteda Residential Fund FGR 24% 1,840 9,463 1,909 1,588 132
CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68
CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39
CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34
Rivage Euro Debt Infrastructure 3 34% 226 665 2
CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26
NRP Nordic Logistic Fund SA 42% 222 532 3 100 5
Lazora S.I.I. S.A. 22% 212 1,542 583 72 43
CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2
CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37
Ardstone Residential Income Fund 45% 178 540 147 28 1
Dutch Urban Living Venture FGR 45% 152 447 112 53 5
Macquarie European Infrastructure Debt Fund 77% 152 198 1
DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3
Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8
Dutch Student and Young Professional Housing fund
FGR 49% 127 339 80 30 5
Allee center Kft 50% 124 275 27 14 11
Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5
Fiumaranuova s.r.l. 50% 110 229 9 13 10
Parcom Buy-Out Fund V CV 21% 107 584 81 127 6
Siresa House S.L. 49% 98 484 282 61 54
Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2
The Fizz Student Housing Fund SCS 50% 91 259 74 20 6
Boccaccio - Closed-end Real Estate Mutual Investment
Fund 50% 79 189 31 11 4
Parquest Capital II B FPCI 26% 78 308 14 8
Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23
CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13
NL Boompjes Property 5 C.V. 50% 65 133 4 14 3
Rivage Hopitaux Publics Euro 34% 61 178
CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 44 14 8
Prime Ventures V C.V. 19% 57 306 3 4
Siresa House 2 S.L. 49% 55 199 86 11 8
DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3
Other 588
Associates and joint ventures 6,919
The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity.
Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group’s financial
interest for own risk and other arrangements, such as participation in the relevant boards.
NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these
are classified as associates and are not consolidated.
Notes to the Consolidated annual accounts continued
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7 Associates and joint ventures continued
Other includes EUR379 million of associates and joint ventures with an individual balance sheet value of less than EUR50 million and
EUR209 million of receivables from associates and joint ventures.
The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the
individual amounts have been brought in line with NN Group’s accounting principles.
The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group.
The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can
be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends
or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures
operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed.
These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time.
Associates and joint ventures (2020)
2020
Interest
held
Balance sheet
value
Total
assets
Total
liabilities
Tota l
income
Total
expenses
Vesteda Residential Fund FGR 24% 1,531 7,333 1,050 558 103
CBRE Dutch Office Fund FGR 19% 370 2,709 718 154 67
CBRE European Industrial Fund FGR 26% 240 1,344 416 148 37
CBRE Retail Industrial Fund Iberica FGR 50% 218 518 82 -34 30
Lazora S.I.I. S.A. 22% 209 1,531 588 86 41
CBRE Dutch Residential Fund FGR 9% 209 2,562 108 175 31
NRP Nordic Logistic Fund SA 42% 203 501 18 36 11
CBRE Dutch Retail Fund FGR 20% 201 1,382 392 -32 36
CBRE UK Property Fund PAIF 10% 163 1,605 -46 5
Dutch Urban Living Venture FGR 45% 127 384 105 61 7
Allee center Kft 50% 126 276 24 5 10
Achmea Dutch Health Care Property Fund 23% 121 543 14 23 3
Dutch Student and Young Professional
Housing fund FGR 49% 120 323 79 34 8
Parcom Buy-Out Fund V CV 21% 119 579 15 -38 5
Robeco Bedrijfsleningen FGR 26% 117 451 1 15 2
Rivage Euro Debt Infrastructure 3 34% 104 306 1 5 3
Fiumaranuova s.r.l. 50% 100 234 34 8 10
Siresa House S.L. 49% 96 490 293 39 47
DPE Deutschland III (Parallel) GmbH & Co 17% 93 575 21 83 4
Boccaccio - Closed-end Real Estate Mutual
Investment Fund 50% 88 238 61 3
The Fizz Student Housing Fund SCS 50% 87 250 75 11 1
Parcom Buy Out Fund IV B.V. 100% 82 96 14 5
CBRE Dutch Retail Fund II FGR 10% 69 703 12 -36 11
Delta Mainlog Holding GmbH & Co. KG 50% 64 129 1 16
CBRE Property Fund Central and Eastern
Europe FGR 50% 60 -119 9 9
DPE Deutschland II B GmbH & Co KG 37% 56 196 45 -19 1
Parquest Capital II B FPCI 28% 54 197 4 8
NL Boompjes Property 5 C.V. 50% 54 108 6
Other 592
Associates and joint ventures 5,673
Notes to the Consolidated annual accounts continued
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7 Associates and joint ventures continued
Changes in Associates and joint ventures
2021 2020
Associates and joint ventures – opening balance 5,673 5,457
Additions 719 349
Transfers to/from available-for-sale investments 19
Share in changes in equity (Revaluations) 8
Share of result 899 219
Dividends received -223 -277
Disposals -156 -121
Changes in the composition of the group and other changes 21
Exchange rate differences 7 -2
Associates and joint ventures – closing balance 6,919 5,673
In 2020, Transfers to/from available-for-sale investments mainly relate to the transfer of certain investments in real estate funds to associates
and joint ventures due to an increase in level of influence.
8 Real estate investments
Changes in Real estate investments
2021 2020
Real estate investments – opening balance 2,444 2,571
Additions 156 66
Transfers to/from other assets 2 3
Fair value gains/losses 241 -21
Disposals -124 -176
Exchange rate differences 1
Real estate investments – closing balance 2,719 2,444
The total amount of rental income recognised in the profit and loss account for the year ended 31 December 2021 is EUR161 million
(2020:EUR163 million). The Real estate investments include properties that are leased (ground lease). At 31 December 2021, the
corresponding right of use assets amount to EUR45 million (2020: EUR38 million).
The total amount of direct operating expenses (including repairs and maintenance) in relation to real estate investments recognised in rental
income for the year ended 31 December 2021 is EUR57 million (2020: EUR54 million).
Real estate investments by year of most recent appraisal
2021 2020
Most recent appraisal in current year 100% 100%
100% 100%
NN Group’s total exposure to real estate is included in the following balance sheet lines:
Real estate exposure
2021 2020
Real estate investments 2,719 2,444
Available-for-sale investments 2,415 1,950
Associates and joint ventures 5,612 4,834
Property and equipment - property in own use 71 74
Real estate exposure 10,817 9,302
Furthermore, the exposure is impacted by third-party interests, leverage in funds and off-balance commitments. Reference is made to Note
52 ‘Risk management’.
Notes to the Consolidated annual accounts continued
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9 Property and equipment
Property and equipment
2021 2020
Property in own use 71 74
Equipment 101 93
Property and equipment owned 172 167
Right of use assets 242 281
Property and equipment total 414 448
Changes in Property in own use
2021 2020
Property in own use – opening balance 74 82
Additions 1
Revaluations -1 -4
Disposals -2
Depreciation -2 -2
Changes in the composition of the group and other changes 2 -2
Exchange rate differences -1
Property in own use – closing balance 71 74
Gross carrying value 118 118
Accumulated depreciation, revaluations and (reversal of) impairments -47 -44
Net carrying value 71 74
Revaluation surplus – opening balance 12 16
Revaluation in year -1 -4
Revaluation surplus – closing balance 11 12
Changes in Equipment
Data processing equipment
Fixtures and fittings
and other equipment Total
2021 2020 2021 2020 2021 2020
Equipment – opening balance 26 28 67 51 93 79
Additions 26 13 20 37 46 50
Disposals -6 -1 -1 -1 -7 -2
Depreciation -13 -13 -16 -19 -29 -32
Exchange rate differences -1 -2 -1 -2 -2
Equipment – closing balance 33 26 68 67 101 93
Gross carrying value 167 147 246 229 413 376
Accumulated depreciation -134 -121 -178 -162 -312 -283
Net carrying value 33 26 68 67 101 93
Notes to the Consolidated annual accounts continued
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9 Property and equipment continued
Changes in Right of use assets
Property Equipment Total
2021 2020 2021 2020 2021 2020
Right of use assets – opening balance 257 281 24 23 281 304
Additions 21 33 10 14 31 47
Disposals -5 -8 -1 -1 -6 -9
Depreciation -42 -45 -11 -12 -53 -57
Changes in the composition of the group and other
changes -8 -8 -
Exchange rate differences -3 -4 -3 -4
Right of use assets – closing balance 220 257 22 24 242 281
Gross carrying value 346 341 58 49 404 390
Accumulated depreciation -126 -84 -36 -25 -162 -109
Net carrying value 220 257 22 24 242 281
10 Intangible assets
Intangible assets (2021)
2021 Goodwill
Value of
business
acquired Software Other Total
Intangible assets – opening balance 533 210 87 233 1,063
Additions 334 30 13 377
Capitalised expenses 7 7
Amortisation -17 -33 -33 -83
Disposals -1 -8 -9
Changes in the composition of the group and other changes -311 -13 104 -220
Exchange rate differences -7 3 -2 -6
Intangible assets – closing balance 549 196 75 309 1,129
Gross carrying value 1,522 309 921 784 3,536
Accumulated amortisation -113 -780 -427 -1,320
Accumulated impairments -973 -66 -48 -1,087
Net carrying value 549 196 75 309 1,129
Intangible assets (2020)
2020 Goodwill
Value of
business
acquired Software Other Total
Intangible assets – opening balance 539 149 79 228 995
Additions 47 12 59
Capitalised expenses 4 4
Amortisation -66 -39 -27 -132
Disposals -1 -1
Changes in the composition of the group and other changes 129 21 150
Exchange rate differences -6 -2 -3 -1 -12
Intangible assets – closing balance 533 210 87 233 1,063
Gross carrying value 1,506 306 900 675 3,387
Accumulated amortisation -96 -747 -394 -1,237
Accumulated impairments -973 -66 -48 -1,087
Net carrying value 533 210 87 233 1,063
Additions to goodwill in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 ‘Companies and businesses
acquired and divested’. Changes in composition of the group and other changes includes the impact of the classification of the asset
management activities as held for sale.
Notes to the Consolidated annual accounts continued
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10 Intangible assets continued
Other intangible assets include the intangibles recognised upon the acquisition of Heinenoord, VIVAT Non-life and the remaining part
of the intangibles recognised in 2017 on the acquisition of Delta Lloyd. Changes in composition of the group and other changes mainly
relate to the acquisition of Heinenoord. Reference is made to Note 46 ‘Companies and businesses acquired and divested’. The acquisition
intangibles comprise:
• Brand names – with an average expected remaining useful life at the acquisition date of approximately 10 years
• Client relationships – with an average expected remaining useful life at the acquisition date of approximately 10 years
• Distribution channels/agreements – with an average expected remaining useful life at the acquisition date of approximately 18 years
The increase in 2020 in Value of business acquired includes the impact of the acquisition of VIVAT Non-life.
Amortisation of software and other intangible assets is included in the profit and loss account in ‘Other operating expenses’ and
‘Amortisation of intangible assets and other impairments’ respectively.
Goodwill by cash generating unit (reporting unit)
2021 2020
Netherlands Non-life 424 90
Insurance Europe 63 70
Asset Management 311
Bank 62 62
Goodwill 549 533
Reference is made to Note 46 ‘Companies and businesses acquired and divested’.
Goodwill impairment
Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as
the cash generating unit (reporting unit) as set out above. Goodwill is tested for impairment by comparing the carrying value of the cash
generating unit (reporting unit) to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying
value is determined as the IFRS-EU book value including goodwill and certain acquisition intangibles. The recoverable amount is estimated
as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the
recoverable amount.
The identification of impairment is an inherently uncertain process involving various assumptions and factors. Estimates and assumptions
(including unobservable Level 3 inputs) are based on management’s judgement and other information available.
For the goodwill recognised there is a significant excess of recoverable amount over book value for the cash generating units (reporting
units) to which goodwill is allocated.
In 2021 and 2020, there was no impairment of goodwill.
11 Deferred acquisition costs
Changes in Deferred acquisition costs
Life insurance Non-life insurance Total
2021 2020 2021 2020 2021 2020
Deferred acquisition costs – opening balance 1,781 1,838 90 75 1,871 1,913
Capitalised expenses 447 388 656 591 1,103 979
Amortisation and unlocking -384 -398 -662 -578 -1,046 -976
Changes in the composition of the group and other
changes -2 2 2 - 2
Exchange rate differences -35 -47 -35 -47
Deferred acquisition costs – closing balance 1,807 1,781 86 90 1,893 1,871
Notes to the Consolidated annual accounts continued
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2021 Annual Report
12 Assets and liabilities held for sale
Disposal groups (and groups of non-current assets) are classified as held for sale if their carrying amount will be recovered principally
through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable and the disposal group
(or group of assets) is available for immediate sale in its present condition; management must be committed to the sale, which is expected to
occur within one year from the date of classification as held for sale.
Upon classification as held for sale, the carrying amount of the disposal group (or group of assets) is compared to their fair value less cost to sell.
If the fair value less cost to sell is lower than the carrying value, this expected loss is recognised through a reduction of the carrying value of any
goodwill related to the disposal group or the carrying value of certain other non-current non-financial assets to the extent that the carrying value
of those assets exceeds their fair value. Any excess of the expected loss over the reduction of the carrying amount of these relevant assets is not
recognised upon classification as held for sale, but is recognised as part of the result on disposal if and when a divestment transaction occurs.
Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet.
When a group of assets that is classified as held for sale or is sold also represents a major line of business or geographical area the disposal
group is classified as discontinued operations. In the Consolidated profit and loss account, the result after tax from discontinued operations
is reported separately from income and expenses from continuing operations. The information for comparative years is adjusted accordingly.
Reference is made to Note 31 ‘Discontinued operations’.
As at 31 December 2021 assets and liabilities held for sale relate to NN Group’s asset management activities executed by NN Investment
Partners (NN IP) and a closed book life insurance portfolio in NN Belgium.
As at 31 December 2020 assets and liabilities held for sale relate to NN Group’s Bulgarian Pension and Life businesses.
Assets held for sale
2021 2020
Cash and cash equivalents 226 8
Financial assets at fair value through profit or loss 38
Available-for-sale investments 3,117 59
Loans 64 1
Reinsurance contracts 1
Property and equipment 12 1
Intangible assets 345
Deferred acquisition costs 1
Other assets 356 5
Total assets 4,121 113
Liabilities held for sale
2021 2020
Insurance and investment contracts 3,115 90
Other liabilities 349 3
Total liabilities 3,464 93
Reference is made to Note46 ‘Companies acquired and companies divested’.
In 2021, Intangible assets under Assets held for sale includes EUR311 million goodwill that relates to asset management. For businesses
classified as held for sale, the related goodwill is no longer evaluated at the level of the reporting unit to which it was allocated in the regular
goodwill impairment test. Instead, it is reviewed as part of the valuation of the disposal unit that is presented as held for sale. This goodwill is
expected to be recovered through the sale at or above book value.
The fair value hierarchy of financial assets and liabilities (measured at fair value and measured at amortised cost), which are presented as
held for sale is included below. The fair value hierarchy consists of three levels, depending upon whether fair values were determined based
on quoted prices in an active market (Level1), valuation techniques with observable inputs (Level2) or valuation techniques that incorporate
inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level3). Reference is
made to Note36 ‘Fair value of financial assets and liabilities’ for more details on the methods applied in determining fair values.
Notes to the Consolidated annual accounts continued
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12 Assets and liabilities held for sale continued
Methods applied in determining the fair value of financial assets and liabilities at fair value – held for sale (2021)
2021 Level 1 Level 2 Level 3 Total
Available-for-sale investments 2,492 625 3,117
Financial assets 2,492 625 - 3,117
13 Other assets
Other assets
2021 2020
Insurance and reinsurance receivables 634 724
Income tax receivables 141 55
Accrued interest and rents 1,307 1,467
Other accrued assets 131 249
Cash collateral amounts paid 803 1,000
Other 690 544
Other assets 3,706 4,039
Insurance and reinsurance receivables
2021 2020
Receivables on account of direct insurance from:
– policyholders 434 454
– intermediaries 139 115
Reinsurance receivables 61 155
Insurance and reinsurance receivables 634 724
The allowance for uncollectable insurance and reinsurance receivables amounts to EUR33 million as at 31 December 2021
(2020:EUR36 million). The receivable is presented net of this allowance.
14 Equity
Total equity
2021 2020
Share capital 38 39
Share premium 12,575 12,574
Revaluation reserve 14,422 20,468
Currency translation reserve -181 -97
Net defined benefit asset/liability remeasurement reserve -119 -138
Other reserves 6,153 3,885
Shareholders’ equity (parent) 32,888 36,731
Minority interests 266 277
Undated subordinated notes 1,764 1,764
Total equity 34,918 38,772
Notes to the Consolidated annual accounts continued
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14 Equity continued
Changes in Equity (2021)
2021
Share
capital
Share
premium Reserves
Total
shareholders’
equity
(parent)
Equity – opening balance 39 12,574 24,118 36,731
Total amount recognised directly in equity (Other comprehensive income) -6,103 -6,103
Net result for the period 3,278 3,278
Changes in share capital -1 1 -
Dividend -412 -412
Purchase/sale of treasury shares -545 -545
Employee stock option and share plans -2 -2
Coupon on undated subordinated notes -59 -59
Equity – closing balance 38 12,575 20,275 32,888
Purchase/sale of treasury shares (2021)
In 2021, 12,828,981 ordinary shares for a total amount of EUR550 million were repurchased under an open market share buyback programme,
including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR5 million were delivered under
Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of
treasury shares).
In 2021, 12,400,000 NN Group treasury shares were cancelled.
As at 31 December 2021, 12,294,129 treasury shares were held by NN Group.
Issue of ordinary shares (2021)
In 2021, 2,891,880 NN Group shares were issued for the interim dividend.
Coupon paid on undated subordinated notes (2021)
The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of
EUR59 million (net of tax) from equity.
Changes in Equity (2020)
2020
Share
capital
Share
premium Reserves
Total
shareholders’
equity
(parent)
Equity – opening balance 41 12,572 18,155 30,768
Total amount recognised directly in equity (Other comprehensive income) 5,105 5,105
Net result for the period 1,904 1,904
Changes in share capital -2 2 -
Dividend -394 -394
Purchase/sale of treasury shares -622 -622
Employee stock option and share plans 1 1
Coupon on undated subordinated notes -59 -59
Changes in the composition of the group and other changes 28 28
Equity – closing balance 39 12,574 24,118 36,731
Purchase/sale of treasury shares (2020)
In 2020, 21,817,879 ordinary shares for a total amount of EUR627 million were repurchased under an open market share buyback programme,
including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR5 million were delivered under
Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of
treasury shares).
In 2020, 23,289,558 NN Group treasury shares were cancelled.
As at 31 December 2020, 19,822,194 treasury shares were held by NN Group.
Notes to the Consolidated annual accounts continued
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14 Equity continued
Issue of ordinary shares (2020)
In 2020, 10,011,647 NN Group shares were issued for the interim dividend.
Coupon paid on undated subordinated notes (2020)
The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of
EUR59 million (net of tax) from equity.
Shareholders’ equity (parent)
Share capital
Ordinary shares (in number)
Ordinary shares
(amounts in millions of euros)
2021 2020 2021 2020
Authorised share capital 700,000,000 700,000,000 84 84
Unissued share capital 382,121,790 369,721,790 46 45
Issued share capital 317,878,210 330,278,210 38 39
Ordinary shares
The authorised ordinary share capital consists of 700,000,000 ordinary shares with a par value of EUR0.12 per share. At 31 December 2021
issued and fully paid ordinary share capital consists of 317,878,210 ordinary shares with a par value of EUR0.12 per share.
Distributable reserves
NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains
the restriction that dividends can only be paid up to an amount equal to total shareholders’ equity less the paid-up and called share capital
and less the reserves required pursuant to law or the Articles of Association. In case of negative balances for individual reserves legally to be
retained, no distributions can be made out of retained earnings to the level of these negative amounts.
In addition, NN Group’s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures.
NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject
to dividend payment restrictions. Such restrictions may among others be of a similar nature as the restrictions which apply to NN Group.
Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch
Civil Code, from NN Group’s subsidiaries, associates and joint ventures are as follows:
Distributable reserves based on the Dutch Civil Code
2021 2021 2020 2020
Total shareholders’ equity 32,888 36,731
– share capital 38 39
– revaluation reserve 14,422 20,468
– share of associates reserve 2,111 1,412
– other non-distributable reserves 418 208
Total non-distributable part of shareholders’ equity: 16,989 22,127
Distributable reserves based on the Dutch Civil Code 15,899 14,604
The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a
second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on
the basis of solvency requirements and freely distributable capital on the basis of capital protection.
Notes to the Consolidated annual accounts continued
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Freely distributable reserves
2021 2021 2020 2020
Solvency requirement under the Financial Supervision Act 9,840 9,534
Reserves available for financial supervision purposes 20,927 20,028
Total freely distributable reserves on the basis of solvency requirements 11,087 10,494
Total freely distributable reserves on the basis of the Dutch Civil Code 15,899 14,604
Total freely distributable reserves (lower of the values above) 11,087 10,494
Reference is made to Note 53 ‘Capital and liquidity management’ for more information on solvency requirements.
Other restrictions
There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of
minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is
made to Note 53 ‘Capital and liquidity management’ for the minimum capital requirements.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group
there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the
Group’s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and
regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations.
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most
junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist.
Furthermore, NN Group is subject to legal restrictions with respect to repayment of nominal share capital to holders of ordinary shares.
Nominal share capital may be repaid to the holders of ordinary shares pursuant to an amendment of NN Group’s Articles of Association
whereby the ordinary shares are written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group’s creditors
opposes such a repayment within two months following the announcement of a resolution to that effect.
Preference shares
As at 31 December 2021, none of the preference shares had been issued. The authorised number of preference shares is
700,000,000 shares.
Changes in Revaluation reserve (2021)
2021
Property
revaluation
reserve
Available-
for-sale
reserve
Cash flow
hedge
reserve Total
Revaluation reserve – opening balance 9 8,239 12,220 20,468
Unrealised revaluations -3,093 -3,093
Realised gains/losses transferred to the profit and loss account -1,431 -1,431
Changes in cash flow hedge reserve -3,383 -3,383
Deferred interest credited to policyholders 1,861 1,861
Revaluation reserve – closing balance 9 5,576 8,837 14,422
Changes in Revaluation reserve (2020)
2020
Property
revaluation
reserve
Available-
for-sale
reserve
Cash flow
hedge
reserve Total
Revaluation reserve – opening balance 12 6,459 8,798 15,269
Unrealised revaluations -3 3,104 3,101
Realised gains/losses transferred to the profit and loss account -574 -574
Changes in cash flow hedge reserve 3,422 3,422
Deferred interest credited to policyholders -750 -750
Revaluation reserve – closing balance 9 8,239 12,220 20,468
Deferred interest credited to policyholders reflects the change in the deferred profit sharing liabilities (net of deferred tax). Reference is made
to Note 18 ‘Insurance and investment contracts, reinsurance contracts’.
Notes to the Consolidated annual accounts continued
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14 Equity continued
Changes in Currency translation reserve
2021 2020
Currency translation reserve – opening balance -97 3
Unrealised revaluations after taxation -18 10
Exchange rate differences for the period -66 -110
Currency translation reserve – closing balance -181 -97
Unrealised revaluations relate to changes in the value of hedging instruments that are designated as net investment hedges.
Changes in Other reserves (2021)
2021
Retained
earnings
Share of
associates
reserve Total
Other reserves – opening balance 2,473 1,412 3,885
Net result for the period 3,278 3,278
Transfers to/from share of associates reserve -699 699 -
Dividend -412 -412
Purchase/sale of treasury shares -545 -545
Employee stock option and share plans -2 -2
Coupon on subordinated notes -59 -59
Changes in the composition of the group and other changes 8 8
Other reserves – closing balance 4,042 2,111 6,153
Changes in Other reserves (2020)
2020
Retained
earnings
Share of
associates
reserve Total
Other reserves – opening balance 1,756 1,271 3,027
Net result for the period 1,904 1,904
Transfers to/from share of associates reserve -141 141 -
Dividend -394 -394
Purchase/sale of treasury shares -622 -622
Employee stock option and share plans 1 1
Coupon on subordinated notes -59 -59
Changes in the composition of the group and other changes 28 28
Other reserves – closing balance 2,473 1,412 3,885
Dividends
2021 2020
Dividend distributed from Other reserves:
Dividend paid in cash (interim current year) 160 394
Dividend paid in cash (final previous year) 252
Stock dividend (interim current year) 128 311
Stock dividend (final previous year) 202
Total dividend 742 705
Notes to the Consolidated annual accounts continued
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Interim dividend 2021
In September 2021 NN Group paid an interim dividend of EUR0.93 per ordinary share, or approximately EUR287 million in total. The interim
dividend was paid either fully in cash, after deduction of withholding tax if applicable, or fully in ordinary shares, at the election of the
shareholders. Dividends paid in the form of ordinary shares have been delivered from NN Group treasury shares. To neutralise the dilutive
effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the stock dividend.
Proposed final dividend 2021
At the annual general meeting on 19 May 2022, a final dividend will be proposed of EUR1.56per ordinary share, or approximately
EUR476million in total based on the current number of outstanding shares. The final dividend will be paid either in cash, after deduction of
withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares will be
delivered from NN Group treasury shares or issued from the share premium reserve. To neutralise the dilutive effect of the stock dividend,
NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. This is subject to adoption by the General Meeting
at the annual general meeting to be held on 19 May 2022.
Interim dividend 2020
In September 2020, NN Group paid a 2020 interim dividend of EUR2.26 per ordinary share, or approximately EUR705 million in total.
This amount comprises (i) EUR1.40 per ordinary share, equal to the amount of the 2019 final dividend that was suspended in April 2020
plus ii) EUR0.86 per ordinary share, equal to the regular 2020 interim dividend calculated in accordance with the NN Group dividend policy.
The 2020 interim dividend was paid either in cash, after deduction of withholding tax if applicable, or ordinary shares at the election of the
shareholder. As a result, an amount of EUR394 million was distributed out of Other reserves (cash dividend) and 10,011,647 ordinary shares,
with a par value of EUR0.12 per share, were issued (EUR311 million stock dividend). To neutralise the dilutive effect of the interim stock
dividend, NN Group repurchased ordinary shares for an amount equivalent to the stock dividend.
Final dividend 2020
NN Group paid a final dividend of EUR1.47per ordinary share, or EUR454million in total. The final dividend was paid either in cash, after
deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary
shares were delivered from NN Group treasury shares or issued from the share premium reserve. To neutralise the dilutive effect of the stock
dividend, NN Group repurchased ordinary shares for an amount equivalent to the stock dividend.
Appropriation of result
The result is appropriated pursuant to Article 34 of the Articles of Association of NN Group N.V., of which the relevant provisions state that the
appropriation of result shall be determined by the General Meeting, on the proposal of the Executive Board, as approved by the Supervisory
Board. It is proposed to add the 2021 net result less the (interim and final) cash dividends to the retained earnings.
Minority interest
NN Group owns 51% of the shares of ABN AMRO Verzekeringen Holding B.V. (ABN AMRO Verzekeringen). ABN AMRO Verzekeringen‘s
principal place of business is Zwolle, the Netherlands. ABN AMRO Verzekeringen is fully consolidated by NN Group, with a minority interest
recognised of 49%.
At 31 December 2021, the minority interest relating to ABN AMRO Verzekeringen recognised in equity was EUR245 million (2020:
EUR259 million).
Summarised information ABN AMRO Verzekeringen
1
2021 2020
Total assets 4,566 4,706
Total liabilities 4,065 4,176
Total income 502 546
Total expenses 470 489
Net result recognised in period 23 37
Other comprehensive income recognised in period 7 6
Dividends paid 59 5
1 All on 100% basis.
Notes to the Consolidated annual accounts continued
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Undated subordinated notes
In July 2014, NN Group N.V. issued fixed to floating rate undated subordinated notes with a par value of EUR1,000 million. The notes are
undated, but are callable after 11.5 years and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.5% per
annum for the first 11.5 years and will be floating thereafter. As these notes are undated and include optional deferral of interest at the
discretion of NN Group, these are classified under IFRS-EU as equity. Coupon payments are distributed out of equity if and when paid or
contractually due. The discount to the par value and certain issue costs were deducted from equity at issue, resulting in a balance sheet
value equal to the net proceeds of EUR986 million.
In June 2014, fixed to floating rate undated subordinated notes with a par value of EUR750 million were originally issued by Delta Lloyd which
are classified as equity under IFRS-EU. The notes are undated, but are callable as from 13 June 2024 and every quarter thereafter (subject
to regulatory approval). The coupon is fixed at 4.375% per annum until 13 June 2024 and will be floating thereafter. Coupon payments are
distributed out of equity if and when paid or contractually due. These notes were recognised upon acquisition of Delta Lloyd for an amount of
EUR778 million.
15 Subordinated debt
Subordinated debt
Notional amount Balance Sheet Value
Interest rate Year of issue Due date First call date 2021 2020 2021 2020
4.625% 2014 8 April 2044 8 April 2024 1,000 1,000 995 994
4.625% 2017 13 January 2048 13 January 2028 850 850 841 840
9.000% 2017 29 August 2042 29 August 2022 500 500 520 549
Subordinated debt 2,356 2,383
The above subordinated debt instruments have been issued to raise hybrid capital. Under IFRS-EU these debt instruments are classified as
liabilities. They are considered capital for regulatory purposes. All subordinated debt is euro denominated.
16 Debt securities issued
Debt securities issued
Notional amount Balance Sheet Value
Interest rate Year of issue Due date First call date 2021 2020 2021 2020
1.000% 2015 18 March 2022 Not applicable 600 600 600 600
0.875% 2017 13 January 2023 13 October 2022 500 500 499 498
1.625% 2017 1 June 2027 1 March 2027 600 600 596 596
0.875% 2021 23 November 2031 23 May 2031 600 597
Debt securities issued 2,292 1,694
17 Other borrowed funds
Other borrowed funds
2021 2020
Credit institutions 578 1,402
Other 6,723 6,140
Other borrowed funds 7,3 01 7,5 42
Other borrowed funds includes the funding of the consolidated securitisation programmes as disclosed in Note 47 ‘Structured entities’ and
unsecured Debt Issuance.
During 2021, NN Bank issued EUR0.5 billion bonds under its Covered Bond Programme, backed by Dutch prime residential mortgage loans
(2020 EUR1.3 billion).
Notes to the Consolidated annual accounts continued
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18 Insurance and investment contracts, reinsurance contracts
Insurance and investment contracts, reinsurance contracts
Liabilities net
of reinsurance
Reinsurance
contracts
Insurance and
investment contracts
2021 2020 2021 2020 2021 2020
Non-participating life policy liabilities 55,364 55,968 475 284 55,839 56,252
Participating life policy liabilities 54,739 55,451 98 397 54,837 55,848
Investment contracts with discretionary participation
features 3,222 5,601 3,222 5,601
Liabilities for (deferred) profit sharing and rebates 7, 3 0 5 9,822 7,305 9,822
Life insurance liabilities excluding liabilities for risk of
policyholders 120,630 126,842 573 681 121,203 127,523
Liabilities for life insurance for risk of policyholders 37,499 33,287 32 36 37,531 33,323
Investment contract with discretionary participation
features for risk of policyholders 259 245 259 245
Life insurance liabilities 158,388 160,374 605 717 158,993 161,091
Liabilities for unearned premiums and unexpired risks 406 443 19 16 425 459
Reported claims liabilities 4,940 4,908 265 255 5,205 5,163
Claims incurred but not reported (IBNR) 1,722 1,632 65 75 1,787 1,707
Claims liabilities 6,662 6,540 330 330 6,992 6,870
Insurance liabilities and investment contracts with
discretionary participation features 165,456 167,3 57 954 1,063 166,410 168,420
Investment contracts 953 1,002 953 1,002
Investment contracts for risk of policyholders 1,449 1,250 1,449 1,250
Investment contracts liabilities 2,402 2,252 2,402 2,252
Insurance and investment contracts, reinsurance
contracts 167,858 169,609 954 1,063 168,812 170,672
The liabilities for insurance and investment contracts are presented gross in the balance sheet as ‘Insurance and investment contracts’.
The related reinsurance is presented as ‘Reinsurance contracts’ under Assets in the balance sheet.
Deferred interest credited to policyholders is included in the ‘Liabilities for (deferred) profit sharing and rebates’ and amounts to
EUR7,148 million as at 31 December 2021 (2020: EUR9,538 million).
Notes to the Consolidated annual accounts continued
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18 Insurance and investment contracts, reinsurance contracts continued
Changes in Life insurance liabilities (2021)
2021
Net life
insurance
liabilities
1
Net liabilities
for risk of
policyholders
2
Reinsurance
contracts
Life insurance
liabilities
Life insurance liabilities – opening balance 126,842 33,532 717 161,091
Deferred interest credited to policyholders -2,381 -2,381
Current year liabilities 4,567 2,971 1,082 8,620
Prior years liabilities:
– benefit payments to policyholders -7,495 -2,525 -809 -10,829
– interest accrual and changes in fair value of liabilities 2,135 3 2,138
– valuation changes for risk of policyholders 4,201 4,201
– effect of changes in discount rate assumptions -15 -4 -19
– effect of changes in other assumptions -94 -22 -116
Changes in the composition of the group and other changes -2,316 -339 -373 -3,028
Exchange rate differences -613 -60 -11 -684
Life insurance liabilities – closing balance 120,630 37,75 8 605 158,993
1 Net of reinsurance and liabilities for risk of policyholders.
2 Net of reinsurance.
Changes in composition of the group and other changes includes the impact of the classification of a closed book life insurance portfolio in
NN Belgium as held for sale.
Changes in Life insurance liabilities (2020)
2020
Net life
insurance
liabilities
1
Net liabilities
for risk of
policyholders
2
Reinsurance
contracts
Life insurance
liabilities
Life insurance liabilities – opening balance 126,089 33,224 713 160,026
Deferred interest credited to policyholders 1,298 1,298
Current year liabilities 5,713 2,059 855 8,627
Prior years liabilities:
– benefit payments to policyholders -8,539 -2,258 -853 -11,650
– interest accrual and changes in fair value of liabilities 2,351 7 2,358
– valuation changes for risk of policyholders 1,731 1,731
– effect of changes in discount rate assumptions 14 1 15
– effect of changes in other assumptions -105 -24 -129
Changes in the composition of the group and other changes 752 -964 5 -207
Exchange rate differences -731 -236 -11 -978
Life insurance liabilities – closing balance 126,842 33,532 717 161,091
1 Net of reinsurance and liabilities for risk of policyholders.
2 Net of reinsurance.
Where discounting is used in the calculation of life insurance liabilities, the discount rate for the main units in the Netherlands was in a range
of 1.0% to 4.0% (2020: 1.0% to 4.0%). The range of discount rates in the international entities was -1.0% to 6.0% (2020: -1.0% to 8.0%).
Changes in the composition of the group and other changes includes insurance contracts for risk of policyholders with guarantees that were
extended as general account contracts and the transfer of certain insurance contracts.
Notes to the Consolidated annual accounts continued
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18 Insurance and investment contracts, reinsurance contracts continued
Longevity reinsurance
In May 2020, NN Group entered into three reinsurance agreements to reinsure the full longevity risk associated with in total approximately
EUR13.5 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group’s exposure to longevity risk and,
consequently, the required capital under Solvency II. The three reinsurance agreements are similar in nature but are agreed with three
different assuming reinsurers, Canada Life, Munich Re and Swiss Re. The risk transfer is effective as of 1 January 2020 and will continue until
the relevant portfolio has run off.
The premium payable to the assuming reinsurers is fixed and includes a margin of approximately EUR451 million over the current best
estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group is recognised
in the profit and loss account over the duration of the reinsurance. An amount of EUR27 million (2020: EUR25 million) was recognised in
Underwriting expenditure in the profit and loss account in 2021. An amount of approximately EUR399 million (undiscounted) remains to be
recognised in future periods.
In December 2021, NN Group entered into a fourth reinsurance agreement to reinsure the full longevity risk associated with in total
approximately EUR4 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group’s exposure to longevity
risk and, consequently, the required capital under Solvency II. The fourth reinsurance agreement is similar in nature to the first three contracts
but is agreed with a different reinsurer, RGA. The risk transfer for the fourth contract is effective as of 31 December 2021. The risk transfer will
continue until the relevant portfolio has run off.
The premium payable to the assuming reinsurer is fixed and includes a margin of approximately EUR140 million over the current best
estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group is recognised in
the profit and loss account over the duration of the reinsurance. No amount was recognised in Underwriting expenditure in the profit and loss
account in 2021. An amount of approximately EUR140 million (undiscounted) remains to be recognised in future periods.
Changes in Liabilities for unearned premiums and unexpired risks
Liabilities net
of reinsurance
Reinsurance
contracts
Liabilities for unearned
premiums and unexpired risk
2021 2020 2021 2020 2021 2020
Liabilities for unearned premiums and unexpired risks –
opening balance 443 390 16 15 459 405
Premiums written 3,648 3,363 221 216 3,869 3,579
Premiums earned during the year -3,681 -3,478 -218 -216 -3,899 -3,694
Changes in the composition of the group and other
changes -4 168 1 -4 169
Liabilities for unearned premiums and unexpired risks
– closing balance 406 443 19 16 425 459
Notes to the Consolidated annual accounts continued
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18 Insurance and investment contracts, reinsurance contracts continued
Changes in Claims liabilities
Liabilities net
of reinsurance
Reinsurance
contracts
Claims
liabilities
2021 2020 2021 2020 2021 2020
Claims liabilities – opening balance 6,540 5,400 330 260 6,870 5,660
Additions:
– for the current year 2,347 2,391 60 95 2,407 2,486
– for prior years -28 -125 -18 -15 -46 -140
– interest accrual of liabilities 58 61 58 61
Additions 2,377 2,327 42 80 2,419 2,407
Claim settlements and claim settlement costs:
– for the current year -859 -918 -9 -30 -868 -948
– for prior years -1,396 -1,306 -33 -49 -1,429 -1,355
Claim settlements and claim settlement cost -2,255 -2,224 -42 -79 -2,297 -2,303
Changes in the composition of the group and other
changes 1,040 69 - 1,109
Exchange rate differences -3 - -3
Claims liabilities – closing balance 6,662 6,540 330 330 6,992 6,870
Where discounting is used in the calculation of the claims liabilities the rate is within the range of -1.0% to 4.0% (2020: -1.0% to 4.0%).
Changes in Investment contracts
2021 2020
Investment contracts – opening balance 2,252 2,160
Current year liabilities 276 209
Prior years liabilities:
– payments to contract holders -266 -179
– interest accrual 8 10
– valuation changes investments 132 52
Investment contracts – closing balance 2,402 2,252
Notes to the Consolidated annual accounts continued
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18 Insurance and investment contracts, reinsurance contracts continued
Gross claims development table
Accident year
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Total
Estimate of cumulative claims
At the end of accident year 2,943 2,789 2,669 2,546 2,709 2,602 2,837 2,640 2,674 2,443
1 year later 2,869 2,874 2,687 2,596 2,721 2,598 2,792 2,648 2,569
2 years later 2,828 2,839 2,661 2,615 2,699 2,539 2,795 2,664
3 years later 2,788 2,814 2,680 2,611 2,715 2,555 2,817
4 years later 2,778 2,778 2,656 2,577 2,658 2,538
5 years later 2,770 2,762 2,655 2,569 2,694
6 years later 2,779 2,769 2,670 2,587
7 years later 2,770 2,772 2,630
8 years later 2,757 2,775
9 years later 2,759
Estimate of cumulative claims 2,759 2,775 2,630 2,587 2,694 2,538 2,817 2,664 2,569 2,443 26,476
Cumulative payments -2,539 -2,507 -2,337 -2,213 -2,283 -2,017 -2,065 -1,824 -1,524 -869 -20,178
220 268 293 374 411 521 752 840 1,045 1,574 6,298
Effect of discounting -22 -22 -21 -28 -26 -31 -40 -48 -35 -35 -308
Liabilities recognised 198 246 272 346 385 490 712 792 1,010 1,539 5,990
Liabilities relating to accident
years prior to 2012 1,002
Gross claims 6,992
To the extent that the assuming reinsurers are unable to meet their obligations, NN Group is liable to its policyholders for the portion
reinsured. Consequently, provisions are made for receivables on reinsurance contracts if and when they are deemed uncollectable.
As at 31 December 2021, the total reinsurance exposure including reinsurance contracts and receivables from reinsurers (presented in
Note13 ‘Other assets’) amounts to EUR1,015 million (2020: EUR1,218 million).
19 Customer deposits and other funds on deposit
Customer deposits and other funds on deposit
2021 2020
Savings 7,36 4 7,278
Bank annuities 8,577 8,521
Corporate deposits 4 4
Customer deposits and other funds on deposit 15,945 15,803
Customers have not entrusted any funds to NN Group on terms other than those prevailing in the normal course of business. All customer
deposits and other funds on deposit are interest bearing.
Changes in Customer deposits and other funds on deposit
2021 2020
Customer deposits and other funds on deposit – opening balance 15,803 15,161
Deposits received 4,826 4,220
Withdrawals -4,656 -3,549
Amortisation -28 -29
Customer deposits and other funds on deposit – closing balance 15,945 15,803
Notes to the Consolidated annual accounts continued
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20 Financial liabilities at fair value through profit or loss
Non-trading derivatives
2021 2020
Derivatives used in:
– fair value hedges 4 547
– cash flow hedges 904 159
– hedges of net investments in foreign operations 10 12
Other non-trading derivatives 986 3,294
Non-trading derivatives 1,904 4,012
Other non-trading derivatives includes derivatives for which no hedge accounting is applied.
21 Other liabilities
Other liabilities
2021 2020
Income tax payable 65 92
Net defined benefit liability 138 167
Other post-employment benefits 6 14
Other staff-related liabilities 93 124
Other taxation and social security contributions 161 169
Deposits from reinsurers 63 327
Lease liabilities 294 335
Accrued interest 182 240
Costs payable 309 324
Amounts payable to policyholders 802 1,002
Provisions 137 158
Amounts to be settled 1,213 1,126
Cash collateral amounts received 5,330 11,594
Other 983 766
Other liabilities 9,776 16,438
Other staff-related liabilities include vacation leave provisions, variable compensation provisions, jubilee provisions and disability/
illness provisions.
Cash collateral amounts received relate to collateralised derivatives. The decrease is a result of the decrease in fair value of outstanding
collateralised derivatives following an increase in market interest rates.
Other mainly relates to year-end accruals in the normal course of business.
Net defined benefit liability
2021 2020
Fair value of plan assets 79 76
Defined benefit obligation 217 243
Net defined benefit liability recognised in the balance sheet (funded status) 138 167
Notes to the Consolidated annual accounts continued
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21 Other liabilities continued
Changes in Provisions
2021 2020
Provisions – opening balance 158 292
Additions 69 99
Releases -12 -135
Charges -74 -95
Changes in the composition of the group and other changes -3
Exchange rate differences -1 -3
Provisions – closing balance 137 158
Provisions relate to reorganisation provisions, litigation provisions and other provisions.
Reorganisation provisions were recognised for operations in the Netherlands for the cost of workforce reductions. Additions to the
reorganisation provision were recognised in 2021 and 2020 due to additional initiatives announced during the year. During 2021
EUR66 million was charged to the reorganisation provision for the cost of workforce reductions (2020: EUR65 million).
22 Gross premium income
Gross premium income
2021 2020
Gross premium income from life insurance policies 10,443 10,243
Gross premium income from non-life insurance policies 3,869 3,579
Gross premium income 14,312 13,822
Gross premium income is presented before deduction of reinsurance and retrocession premiums. Gross premium income excludes premium
received for investment contracts, for which deposit accounting is applied.
Premiums written – net of reinsurance
Life Non-life Total
2021 2020 2021 2020 2021 2020
Direct gross premiums written 10,411 10,209 3,864 3,576 14,275 13,785
Reinsurance assumed gross premiums written 32 34 5 3 37 37
Gross premiums written 10,443 10,243 3,869 3,579 14,312 13,822
Reinsurance ceded -1,304 -1,119 -221 -216 -1,525 -1,335
Premiums written net of reinsurance 9,139 9,124 3,648 3,363 12,787 12,487
Non-life premiums earned – net of reinsurance
2021 2020
Direct gross premiums earned 3,894 3,692
Reinsurance assumed gross premiums earned 5 2
Gross premiums earned 3,899 3,694
Reinsurance ceded -218 -216
Non-life premiums earned – net of reinsurance 3,681 3,478
Reinsurance ceded is included in Underwriting expenditure. Reference is made to Note 26 ‘Underwriting expenditure’.
Notes to the Consolidated annual accounts continued
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23 Investment income
Investment income
2021 2020
Interest income from investments in debt securities 1,739 1,752
Interest income from loans 1,531 1,604
Interest income from investments in debt securities and loans 3,270 3,356
Realised gains/losses on disposal of available-for-sale debt securities 569 595
Impairments of available-for-sale debt securities -6
Realised gains/losses and impairments of available-for-sale debt securities 569 589
Realised gains/losses on disposal of available-for-sale equity securities 1,141 403
Impairments of available-for-sale equity securities -44 -338
Realised gains/losses and impairments of available-for-sale equity securities 1,097 65
Interest income on non-trading derivatives 210 239
Changes in loan loss provisions 13 -19
Income from real estate investments 104 109
Dividend income 301 256
Change in fair value of real estate investments 241 -21
Investment income 5,805 4,574
Impairments on investments by segment
2021 2020
Netherlands Life -39 -283
Netherlands Non-life -1 -24
Insurance Europe -4 -4
Japan Life -17
Other -16
Impairments on investments -44 -344
24 Net fee and commission income
Net fee and commission income
2021 2020
Asset management fees 288 168
Insurance brokerage and advisory fees 153 131
Other -14 44
Gross fee and commission income 427 343
Trailer fees -1
Asset management fees 34 34
Commission expenses and other 88 46
Fee and commission expenses 122 79
Net fee and commission income 305 264
Notes to the Consolidated annual accounts continued
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25 Valuation results on non-trading derivatives
Valuation results on non-trading derivatives
2021 2020
Change in fair value of derivatives relating to:
– fair value hedges 481 -670
– cash flow hedges (ineffective portion) -10 2
– other non-trading derivatives -716 883
Net result on non-trading derivatives -245 215
Change in fair value of assets and liabilities (hedged items) -486 678
Valuation results on assets and liabilities designated as at fair value through profit or loss 29 8
Valuation results on non-trading derivatives -702 901
Included in ‘Valuation results on non-trading derivatives’ are the fair value movements on derivatives used to economically hedge exposures,
but for which no hedge accounting is applied. These derivatives hedge exposures in insurance contract liabilities and foreign exchange
exposures in the investment portfolio. The fair value movements on the derivatives are influenced by changes in the market conditions, such
as share prices, interest rates and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance
contract liabilities, which are included in ‘Underwriting expenditure’ and partly offset by foreign currency results. Reference is made to Note
26 ‘Underwriting expenditure’ and the line Foreign currency results in the consolidated profit and loss account.
Valuation results on non-trading derivatives are reflected in the Consolidated statement of cash flows in the section ‘Result before tax’, in the
line item ‘Adjusted for: other’.
Reference is made to Note 38 ‘Derivatives and hedge accounting’.
26 Underwriting expenditure
Underwriting expenditure
2021 2020
Gross underwriting expenditure:
– before effect of investment result for risk of policyholders 15,821 15,583
– effect of investment result for risk of policyholders 4,201 1,733
Gross underwriting expenditure 20,022 17,316
Investment result for risk of policyholders -4,201 -1,733
Reinsurance recoveries -1,045 -1,095
Underwriting expenditure 14,776 14,488
The investment income and valuation results regarding investments for risk of policyholders is EUR4,201 million (2020: EUR1,733 million).
This amount is recognised in ‘Underwriting expenditure’. As a result, it is shown together with the equal amount of related change in insurance
liabilities for risk of policyholders.
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26 Underwriting expenditure continued
Underwriting expenditure by class
2021 2020
Expenditure from life underwriting:
– reinsurance and retrocession premiums 1,304 1,119
– gross benefits 11,044 11,426
– reinsurance recoveries -991 -1,007
– change in life insurance liabilities -509 -828
– costs of acquiring insurance business 470 499
– other underwriting expenditure 194 182
– profit sharing and rebates 62 81
Expenditure from life underwriting 11,574 11,472
Expenditure from non-life underwriting:
– reinsurance and retrocession premiums 221 216
– gross claims 2,260 2,238
– reinsurance recoveries -54 -88
– changes in the liabilities for unearned premiums -33 -115
– changes in claims liabilities 122 110
– costs of acquiring insurance business 712 676
– other underwriting expenditure -35 -32
Expenditure from non-life underwriting 3,193 3,005
Expenditure from investment contracts:
– costs of acquiring investment contracts 1 1
– other changes in investment contract liabilities 8 10
Expenditure from investment contracts 9 11
Underwriting expenditure 14,776 14,488
Profit sharing and rebates
2021 2020
Distributions on account of interest or underwriting results 7 18
Bonuses added to policies 55 63
Profit sharing and rebates 62 81
The total costs of acquiring insurance business (life and non-life) and investment contracts amounted to EUR1,183 million (2020:
EUR1,176 million). This includes amortisation and unlocking of DAC of EUR1,046 million (2020: EUR976 million) and the net amount
of commissions paid of EUR1,240 million (2020: EUR1,179 million) and commissions capitalised in DAC of EUR1,103 million (2020:
EUR979 million).
The total amount of commission paid and commission payable amounted to EUR1,418 million (2020: EUR1,288 million). This includes the
commissions recognised in ‘costs of acquiring insurance business’ of EUR1,240 million (2020: EUR1,179 million) referred to above and
commissions recognised in ‘other underwriting expenditure’ of EUR178 million (2020: EUR109 million). Other underwriting expenditure also
includes reinsurance commissions received of EUR89 million (2020: EUR81 million).
Notes to the Consolidated annual accounts continued
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26 Underwriting expenditure continued
As set out in the section ‘Accounting policies for specific items – Insurance and investment contracts, reinsurance contracts’, NN Group
applies, for certain specific products or components thereof, the option in IFRS4 to measure (components of) the liabilities for insurance
contracts using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees
embedded in insurance contracts in Japan. The impact of these market-consistent assumptions is reflected in ‘Underwriting expenditure –
change in life insurance liabilities’.
This impact is largely offset by the impact of related hedging derivatives. As disclosed in Note 25 ‘Valuation results on non-trading derivatives’,
the valuation results on non-trading derivatives include the fair value movements on derivatives used to economically hedge exposures,
but for which no hedge accounting is applied. For insurance operations, these derivatives hedge mainly exposures in Insurance contract
liabilities. The fair value movements on the derivatives are influenced by changes in the market conditions, such as stock prices, interest rates
and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance contract liabilities, which are
included in ‘Underwriting expenditure’.
27 Amortisation of intangible assets and other impairments
Amortisation of intangible assets and other impairments
2021 2020
Other impairments and reversals of other impairments - -
Amortisation of other intangible assets 33 27
Amortisation of intangible assets and other impairments 33 27
Impairment on debt securities, equity securities and loans are included in Note 23 ‘Investment income’.
28 Staff expenses
Staff expenses
2021 2020
Salaries 813 791
Variable salaries 38 44
Pension costs 117 118
Social security costs 123 124
Share-based compensation arrangements 6 5
External staff costs 272 289
Education 14 12
Other staff costs 46 63
Staff expenses 1,429 1,446
Pension costs
2021 2020
Current service cost 9 9
Net interest cost -7 -6
Defined benefit plans 2 3
Defined contribution plans 115 115
Pension costs 117 118
Defined contribution plans
Certain group companies sponsor defined contribution pension plans. The assets of all NN Group’s defined contribution plans are held in
independently administered funds. Contributions are generally determined as a percentage of pay. These plans do not give rise to balance
sheet provisions, other than relating to short-term timing differences included in ‘Other assets’ or ‘Other liabilities’.
Number of employees
Reference is made to Note 34 ‘Principal subsidiaries and geographical information’ for information on the average number of employees.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
28 Staff expenses continued
Remuneration of Executive Board, Management Board and Supervisory Board
Reference is made to Note 49 ‘Key management personnel compensation’.
Share plans
NN Group has granted shares to a number of senior executives (members of the Management Board, general managers and other officers
nominated by the Management Board). The purpose of the share schemes is to attract, retain and motivate senior executives and staff.
Share awards comprise upfront shares and deferred shares. The entitlement to the deferred shares is granted conditionally. If the participant
remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional.
A retention period applies from the moment of vesting these awards (five years for Management Board and one year for Identified Staff).
Share awards
Changes in Share awards outstanding
Share awards (in number)
Weighted average grant
date fair value (in euros)
2021 2020 2021 2020
Share awards outstanding – opening balance 454,738 478,058 29.29 36.38
Granted 271,322 292,189 40.48 20.78
Vested -279,522 -298,899 33.13 32.02
Forfeited -36,155 -16,610 34.12 34.55
Share awards outstanding – closing balance 410,383 454,738 33.64 29.29
In 2021, 35,645 (2020: 40,278) share awards on NN Group shares were granted to the members of the Executive and Management Board.
In 2021, 235,677 (2020: 251,911) share awards on NN Group shares were granted to senior management and other employees.
As at 31 December 2021, the share awards on NN Group shares consist of 383,942 (2020: 427,305) share awards relating to equity-settled
share-based payment arrangements and 26,441 (2020: 27,433) share awards relating to cash-settled share-based payment arrangements.
The fair value of share awards granted is allocated over the vesting period of the share awards as an expense under staff expenses.
As at 31 December 2021, total unrecognised compensation costs related to share awards amount to EUR7 million (2020: EUR4 million).
These costs are expected to be recognised over a weighted average period of 1.3 years (2020: 1.3 years).
29 Interest expenses
Interest expenses
2021 2020
Interest expenses on non-trading derivatives 238 228
Other interest expenses 283 283
Interest expenses 521 511
In 2021, total interest income and total interest expenses for items not valued at fair value through profit or loss were EUR3,270 million (2020:
EUR3,356 million) and EUR283 million (2020: EUR283 million) respectively.
Interest income and expenses are included in the following profit and loss account lines.
Total net interest income
2021 2020
Investment income 3,480 3,595
Interest expenses on non-trading derivatives -238 -228
Other interest expenses -283 -283
Total net interest income 2,959 3,084
Notes to the Consolidated annual accounts continued
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30 Other operating expenses
Other operating expenses
2021 2020
Depreciation of property and equipment 79 84
Amortisation of software 33 36
Computer costs 281 285
Office expenses 60 68
Travel and accommodation expenses 3 6
Advertising and public relations 66 60
External advisory fees 211 169
Addition/(releases) of provisions for reorganisation and relocations 31 73
Other 78 73
Other operating expenses 842 854
31 Discontinued operations
As of 2021, NN Group’s asset management activities executed by NN Investment Partners (NN IP) are classified as discontinued operations.
Reference is made to Note 46 ‘Companies and businesses acquired and divested’.
Net result from discontinued operations consists of the net result (after tax) of the businesses classified as discontinued operations and
is presented separately in the profit and loss account for both 2021 and 2020. No gain or loss has been recognised in the profit and loss
account upon the classification as held for sale and discontinued operations.
Net result from discontinued operations
For the period ended 31 December 2021 2020
Total income 482 439
Total expenses 304 286
Result before tax from discontinued operations 178 153
Taxation 43 38
Net result from discontinued operations 135 115
The activities of NN IP were reported in the segment Asset Management before these were classified as discontinued operations and held
for sale. The segment Asset Management ceased to exist in 2021, following the classification as discontinued operations, as all activities
previously included in this segment are now discontinued operations.
Reference is made to Note 12 ‘Assets and liabilities held for sale’ for information on the assets and liabilities of the discontinued operations.
Net cash flow from discontinued operations
2021 2020
Operating cash flow 95 -2
Investing cash flow -10 -22
Financing cash flow -4 -3
Net cash flow from discontinued operations 81 -27
Notes to the Consolidated annual accounts continued
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32 Earnings per ordinary share
Earnings per ordinary share shows earnings per share amounts for profit or loss attributable to shareholders of the parent. Earnings per ordinary
share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of
ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue.
Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if
these changes occurred after the reporting date but before the annual accounts are authorised for issue.
Diluted earnings per share is calculated as if the share plans had been exercised at the beginning of the period and assuming that the cash
received from exercised share plans and warrants was used to buy own shares against the average market price during the period. The net
increase in the number of shares resulting from exercising share plans and warrants is added to the average number of shares used for the
calculation of diluted earnings per share.
Earnings per ordinary share from continuing and discontinued operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2021 2020 2021 2020 2021 2020
Net result from continuing and discontinued operations 3,278 1,904
Coupon on undated subordinated notes -59 -59
Basic earnings from continuing and discontinued
operations 3,219 1,845 308.9 314.1 10.42 5.88
Dilutive instruments:
– Share plans 0.4 0.5
Dilutive instruments 0.4 0.5
Diluted earnings from continuing and discontinued
operations 3,219 1,845 309.3 314.6 10.41 5.87
Earnings per ordinary share from continuing operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2021 2020 2021 2020 2021 2020
Net result from continuing operations 3,151 1,793
Coupon on undated subordinated notes -59 -59
Basic earnings from continuing operations 3,092 1,734 308.9 314.1 10.01 5.52
Dilutive instruments:
– Share plans 0.4 0.5
Dilutive instruments 0.4 0.5
Diluted earnings from continuing operations 3,092 1,734 309.3 314.6 10.00 5.51
Earnings per ordinary share from discontinued operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2021 2020 2021 2020 2021 2020
Net result from discontinued operations 127 111
Basic earnings from discontinued operations 127 111 308.9 314.1 0.41 0.36
Dilutive instruments:
– Share plans 0.4 0.5
Dilutive instruments 0.4 0.5
Diluted earnings from discontinued operations 127 111 309.3 314.6 0.41 0.36
Notes to the Consolidated annual accounts continued
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33 Segments
The reporting segments for NN Group, based on the internal reporting structure, are as follows:
∙ Netherlands Life (Group life and individual life insurance products in the Netherlands)
∙ Netherlands Non-life (Non-life insurance in the Netherlands including disability and accident, fire, motor and transport insurance)
∙ Insurance Europe (Life insurance, pension products and to a small extent non-life insurance and retirement services in Central and Rest
of Europe)
∙ Japan Life (Life insurance primarily Corporate Owned Life Insurance (COLI) business)
∙ Banking
∙ Other (Operating segments that have been aggregated due to their respective size; including Japan Closed Block VA (Closed block single
premium variable annuity individual life insurance portfolio in Japan, including the internally reinsured minimum guarantee risk, which
has been closed to new business and which is being managed in run-off), reinsurance and items related to capital management and the
head office)
As disclosed in Note 31 ‘Discontinued operations’ as of 2021 the segment Asset Management ceased to exist. As a result, the result from the
Asset management activities is presented separately from the results of the remaining segments. The comparatives for 2020 have also been
restated to reflect the classification as a discontinued operation.
The Executive Board and the Management Board set the performance targets and approve and monitor the budgets prepared by the
reporting segments. The segments formulate strategic, commercial and financial policies in conformity with the strategy and performance
targets set by the Executive Board and the Management Board.
The accounting policies of the segments are the same as those described in Note 1 ‘Accounting policies’. Transfer prices for inter-segment
transactions are set at arm’s length. Corporate expenses are allocated to segments based on time spent by head office personnel, the
relative number of staff, or on the basis of income and/or assets of the segment. Intercompany loans that qualify as equity instruments
under IFRS-EU are presented in the segment reporting as debt; related coupon payments are presented as income and expenses in the
respective segments.
Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments.
The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and
premium-based revenues and the technical margin. Disclosures on comparative years also reflect the impact of current year’s divestments.
Operating result as presented below is an Alternative Performance Measure (non-GAAP financial measure) and is not a measure of
financial performance under IFRS-EU. Because it is not determined in accordance with IFRS-EU, operating result as presented by NN Group
may not be comparable to other similarly titled measures of performance of other companies. The net result on transactions between
segments is eliminated in the net result of the relevant segment. Operating result is calculated as explained below in the section Alternative
Performance Measures.
Notes to the Consolidated annual accounts continued
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33 Segments continued
Segments (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Investment margin 996 116 -12 1,100
Fees and premium-based revenues 391 811 610 1,812
Technical margin 103 235 30 368
Operating income non-modelled life
business 1 1
Operating income 1,490 - 1,163 628 - - 3,281
Administrative expenses 473 446 135 1,054
DAC amortisation and trail commissions 31 401 230 662
Expenses 504 - 847 365 - - 1,716
Operating result non-life 314 -1 313
Operating result banking 134 134
Operating result other -157 -157
Operating result from continuing
operations 986 314 315 263 134 -157 1,855
Non-operating items from continuing
operations:
– gains/losses and impairments 1,618 33 2 4 2 12 1,671
– revaluations 379 24 46 -2 39 485
– market and other impacts -51 -28 -26 -105
Special items before tax -17 -35 -14 -3 -30 -99
Acquisition intangibles and goodwill -7 -21 -28
Result on divestments 54 54
Result before tax from continuing
operations 2,915 336 396 262 106 -184 3,832
Taxation 431 71 80 74 25 -11 669
Minority interests -4 16 12
Net result from continuing operations 2,488 250 316 188 82 -172 3,151
Net result from discontinued operations 127 127
Net result 2,488 250 316 188 82 -45 3,278
Special items in 2021 mainly reflect restructuring expenses incurred in respect of the cost reduction target and other project related
expenses, such as the implementation of IFRS 17.
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33 Segments continued
Operating result (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Operating result from continuing
operations 986 314 315 263 134 -157 1,855
Operating result from discontinued
operations 181 181
Operating result 986 314 315 263 134 24 2,036
Result before tax (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Result before tax from continuing
operations 2,915 336 396 262 106 -184 3,832
Result before tax from discontinued
operations 178 178
Result before tax 2,915 336 396 262 106 -6 4,010
Segments (2020)
2020
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Investment margin 890 110 -14 986
Fees and premium-based revenues 392 730 639 1,762
Technical margin 184 252 17 454
Operating income non-modelled life
business 1 1
Operating income 1,467 - 1,093 642 - - 3,202
Administrative expenses 440 417 144 1,001
DAC amortisation and trail commissions 33 389 258 680
Expenses 473 - 806 402 - - 1,681
Operating result non-life 215 -3 212
Operating result banking 154 154
Operating result other -151 -151
Operating result from continuing
operations 994 215 285 240 154 -151 1,737
Non-operating items from continuing
operations:
– gains/losses and impairments 620 4 -7 11 12 640
– revaluations 371 -9 -12 -20 7 337
– market and other impacts -310 12 -4 17 -29 -315
Special items before tax -77 -79 -29 -3 -14 -75 -278
Acquisition intangibles and goodwill -24 -24
Result on divestments -11 111 100
Result before tax from continuing
operations 1,597 138 234 210 167 -149 2,197
Taxation 330 31 63 57 35 -131 385
Minority interests 8 11 18
Net result from continuing operations 1,260 97 171 152 132 -18 1,793
Net result from discontinued operations 111 111
Net result 1,260 97 171 152 132 93 1,904
Notes to the Consolidated annual accounts continued
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33 Segments continued
Special items in 2020 mainly reflect integration expenses and other project related expenses such as the implementation of IFRS 17.
Operating result (2020)
2020
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Operating result from continuing
operations 994 215 285 240 154 -151 1,737
Operating result from discontinued
operations 152 152
Operating result 994 215 285 240 154 1 1,889
Result before tax (2020)
2020
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Result before tax from continuing
operations 1,597 138 234 210 167 -149 2,197
Result before tax from discontinued
operations 152 152
Result before tax 1,597 138 234 210 167 3 2,349
Gross premium income and investment income by segment (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Gross premium income 3,972 3,798 3,127 3,381 34 14,312
Investment income 4,382 213 429 182 613 -14 5,805
Gross premium income and investment income by segment (2020)
2020
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Gross premium income 3,544 3,521 3,001 3,728 28 13,822
Investment income 3,203 123 443 177 647 -19 4,574
Interest income and interest expenses by segment (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Interest income 2,201 147 389 176 603 -36 3,480
Interest expenses -222 -19 -21 -4 -298 42 -522
Interest income and interest expenses 1,979 128 368 172 305 6 2,958
Interest income and interest expenses by segment (2020)
2020
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Interest income 2,279 109 423 181 640 -37 3,595
Interest expenses -207 -15 -20 -4 -307 42 -511
Interest income and interest expenses 2,072 94 403 177 333 5 3,084
Notes to the Consolidated annual accounts continued
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2021 Annual Report
33 Segments continued
Total assets and Total liabilities by segment
Total assets Total liabilities Total assets Total liabilities
2021 2021 2020 2020
Netherlands Life 158,579 131,056 168,228 137,172
Netherlands Non-life 10,011 8,389 9,704 8,039
Insurance Europe 30,837 28,063 31,783 28,945
Japan Life 21,527 19,205 21,370 18,879
Banking 24,194 23,347 25,381 24,471
Other (Including held for sale) 53,018 17,678 64,846 25,648
Total 298,166 227,738 321,312 243,154
Eliminations -46,581 -11,071 -57,574 -18,188
Total assets and Total liabilities 251,585 216,667 263,738 224,966
Alternative Performance Measures (Non-GAAP measures)
NN Group uses three Alternative Performance Measures (APMs, also referred to as Non-GAAP measures) in its external financial reporting:
Operating result, Adjusted allocated equity and Administrative expenses.
Operating result
Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments. Each segment’s operating result is
calculated by adjusting the reported result before tax for the following items:
• Non-operating items: related to (general account) investments that are held for own risk (net of policyholder profit sharing):
– Gains/losses and impairments: realised gains and losses as well as impairments on financial assets that are classified as Available-for-
sale and debt securities that are classified as loans. These investments include debt and equity securities (including fixed income and
equity funds), private equity (< 20% ownership), real estate funds and loans quoted in active markets.
– Revaluations: revaluations on assets marked-to-market through the Consolidated profit and loss account. These investments include
private equity (associates), real estate (property and associates), derivatives unrelated to product hedging programmes (i.e. interest rate
swaps, foreign exchange hedges) and direct equity hedges.
– Market & other impacts: these impacts mainly include movements in the liability for guarantees on separate account pension contracts
and unit-linked guarantee provisions in the Netherlands and related hedges, the accounting volatility related to the reinsurance
of minimum guaranteed benefits of Japan Closed Block VA and the changes in valuation of certain inflation linked liabilities and
related derivatives.
• Special items: items of income or expense before tax that are significant and arise from events or transactions that are clearly distinct from
the ordinary business activities and therefore are not expected to recur frequently or regularly. This includes, for example, restructuring
expenses, rebranding costs, results related to early redemption of debt, and gains/losses from employee pension plan amendments
or curtailments.
• Acquisition intangibles and goodwill: At the acquisition date, all assets and liabilities (including investments, loans and funding liabilities)
were remeasured to fair value. Acquisition related intangible assets (mainly brand names, distribution agreements and client relationships)
were recognised and will be amortised through the profit and loss account over their useful life. Goodwill on acquisition was also
recognised; goodwill is not amortised but tested annually for impairment. Any amortisation and goodwill impairment is recognised in the line
‘Amortisation of acquisition intangibles and other impairments’.
• Result on divestments: result before tax related to divested operations.
The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and
premium-based revenues and the technical margin. Investment margin is defined as theinvestment income (on the investments for the
account of NN Group) minus interest credited to policyholders and investment expenses. Technical margin includes the difference between
costs charged and claim related revenues (such as risk premiums, surrenders and reserve releases) and incurred claims. Disclosures on
comparative years also reflect the impact of current year’s divestments. Operating result as presented below is an Alternative Performance
Measure (non-GAAP financial measure) and is not a measure of financial performance under IFRS-EU. Because it is not determined
in accordance with IFRS-EU, operating result as presented by NN Group may not be comparable to other similarly titled measures of
performance of other companies. The net result on transactions between segments is eliminated in the net result of the relevant segment.
Notes to the Consolidated annual accounts continued
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206
NN Group N.V.
2021 Annual Report
33 Segments continued
Adjusted allocated equity
NN Group evaluates the efficiency of the operational deployment of its equity of its banking operations by calculating Return On Equity
(ROE). The net operating ROE is calculated using Net operating result in the numerator and average Adjusted allocated equity in the
denominator. Net operating result of NN Group is the Net operating result, adjusted to reflect the deduction of the accrued coupon on
undated subordinated notes classified in equity. Adjusted allocated equity is derived from IFRS equity by adjusting for:
• Revaluation reserves
• Undated subordinated notes classified as equity under IFRS
• Goodwill and Intangible assets recognised upon acquisitions
Allocated equity per segment represents the part of equity that is economically deployed by the segments. This allocation does not
impact equity in total for NN Group. Adjusted allocated equity is an Alternative Performance Measure that is not a measure under IFRS-
EU. Adjusted allocated equity as applied by NN Group may not be comparable to other similarly titled measures of other companies.
Adjusted allocated equity is reconciled to IFRS Total equity as follows:
Adjusted allocated equity
2021 2020
IFRS Total equity 34,918 38,772
Revaluation reserves, Goodwill and Intangible assets recognised upon acquisitions -14,925 -21,079
Undated subordinated notes -1,764 -1,764
Adjusted allocated equity excluding Japan Closed Block VA 18,229 15,929
Administrative expenses
NN Group monitors the level of expenses and assesses cost savings through the Administrative expenses. Administrative expenses are the
expenses included in operating result, unless already included in the technical margin or the investment margin in the margin analysis of the
operating result.
Administrative expenses
2021 2020
Staff expenses 1,429 1,446
Other operating expenses 842 853
IFRS operating expenses 2,271 2,299
Presented in non-operating items (including special items) -112 -289
Presented in the Technical margin (claims handling expenses) -123 -139
Presented in the Investment margin (investment expenses) -56 -35
Administrative expenses continuing operations 1,980 1,836
Administrative expenses are calculated as the total of IFRS Staff expenses and IFRS Other operating expenses, adjusted for expenses
already recognised in the technical margin and the investment margin and for expenses that are not included in operating result (non-
operating expenses and special items). From the total administrative expenses of EUR1,980 million (2020: EUR1,836 million), EUR1,055 million
(2020: EUR1,002 million) relates to the segments Netherlands Life, Insurance Europe Life and Japan Life. The remainder of EUR925 million
(2020: EUR834 million) is included in the operating result non-life, banking and other.
Notes to the Consolidated annual accounts continued
Our operating
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207
NN Group N.V.
2021 Annual Report
33 Segments continued
In addition, NN Group discloses a number of other metrics (that are not defined in IFRS and/or not defined in regulatory capital legislation).
As these are not derived from comparable metrics under IFRS, these cannot be reconciled to an IFRS equivalent. These include the following:
• Operating Capital Generation (OCG): NN Group analyses the change in the excess of Solvency II Own Funds over the Solvency
Capital Requirement (‘SCR’) in the following components: Operating Capital Generation, Market variance, Capital flows and Other.
Operating Capital Generation is the movement in the Solvency II surplus (Own Funds before eligibility over SCR at 100%) in the period due
to operating items, including the impact of new business, expected investment returns in excess of the unwind of liabilities, release of the risk
margin, operating variances, non-life underwriting result, contribution of non-Solvency II entities and holding expenses and debt costs and
the change in the SCR. It excludes economic variances, economic assumption changes and non-operating expenses.
• Annual Premium Equivalent (APE): the total of the IFRS annual recurring premiums and 10% of the IFRS single premiums received in a
given period
• Assets under Management (AuM): the total market value of all investments being managed by NN Group’s asset management segment on
behalf of NN Group entities and clients
• Combined ratio: the sum of the claims ratio (claims incurred, net of reinsurance, excluding unwind of interest accrual, divided by net earned
premiums) and the expense ratio (sum of acquisition costs and administrative expenses, divided by net earned premiums)
• Financial leverage ratio: the percentage of financial leverage in the total of financial leverage and equity
• Fixed cost coverage ratio: the ability of Earnings Before Interest and Tax (EBIT) to cover funding costs on financial leverage; calculated on a
last 12-month basis
• Free cash flow: the change in the cash capital position at the holding company over the period, excluding acquisitions and capital
transactions with shareholders and debtholders
• Cash capital position at the holding company: net current assets available at the holding company
• Net interest margin (NIM): interest result of the banking operations divided by the average total interest bearing assets of the
banking operations
• Net operating ROE - Segment banking only: the (annualised) net operating result of the banking operations, divided by (average) adjusted
allocated equity of the banking operations
• Value of New Business (VNB): the additional economic value created through writing new business during the period
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
34 Principal subsidiaries and geographical information
The table below provides additional information on principal subsidiaries, the nature of the main activities and employees by country.
Information on guarantees issued by NN Group N.V. to subsidiaries under article 403 of Book 2 of the Dutch Civil Code is filed with the
Chamber of Commerce.
Principal subsidiaries and geographical information (2021)
Name of principal subsidiaries Main activity
Country
Average
number of
employees
1
Total
income
Total
assets
Result
before tax Taxation
2
Income
tax paid
Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance
Nationale-Nederlanden Bank N.V. Banking
Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance
REI Investment I B.V. Real estate
NN Re (Netherlands) N.V. Reinsurance
ABN AMRO Levensverzekering N.V. Life insurance
The Netherlands 9,144 13,643 196,434 2,875 459 247
NN Life Insurance Company, Ltd. Life insurance
Japan 915 3,549 21,642 253 71 55
NN Insurance Belgium nv Life insurance
Belgium 673 1,093 16,129 106 21 57
Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance
Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance
Spain 535 74 8 5,166 53 13 3
Nationale-Nederlanden Towarzystwo Ubezpieczeń na Życie S.A. Life insurance
Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions
Poland 1,032 485 2,230 66 16 -3
NN Hellenic Life Insurance Co. S.A. Life insurance
Greece 413 579 2,386 23 10
NN Životní pojišťovna N.V. (pobočka pro Českou republiku) Life insurance
Czech Republic 671 226 1,479 27 6 21
NN Biztosító Zártkörûen Mûködõ Részvénytársaság Life insurance
Hungary 404 298 1,390 9 3 3
NN Asigurari de Viata S.A. Life insurance
Romania 471 257 1,106 49 8 7
Slovak Republic 334 186 859 34 8 6
Germany 9 102 392 131 20 2
France 8 129 1,255 119 29 8
Italy 6 13 278 13 -8 2
Denmark 45 196 43 7
United Kingdom 13 31 595 33 1 2
Bulgaria 66 16 3
Turkey 250 32 43 -4 1
Ireland 4 -16
Singapore 31 2
Mexico 1 4 -1
United States 13
Switzerland 4 1
Argentina 2 1
Uruguay 2
Total 14,997 21,433 251,585 3,832 669 397
1 The average number of employees is on a full-time equivalent basis.
2 Taxation is the taxation amount charged to the profit and loss account.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
34 Principal subsidiaries and geographical information continued
Principal subsidiaries and geographical information (2020)
Name of principal subsidiaries Main activity
Country
Average
number of
employees
1
Total
income
Total
assets
Result
before tax Taxation
2
Income
tax paid
Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance
Nationale-Nederlanden Bank N.V. Banking
Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance
REI Investment I B.V. Real estate
NN Re (Netherlands) N.V. Reinsurance
The Netherlands 8,595 11,905 2 07,8 01 1,707 261 87
NN Life Insurance Company, Ltd. Life insurance
Japan 901 3,883 21,999 203 56 83
NN Insurance Belgium nv Life insurance
Belgium 666 1,074 17,74 0 39 13 6
Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance
Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance
Spain 536 657 4,785 5 1 4
Nationale-Nederlanden Towarzystwo Ubezpieczeń na Życie S.A. Life insurance
Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions
Poland 1,022 474 2,300 77 17 37
NN Hellenic Life Insurance Co. S.A. Life insurance
Greece 419 506 2,234 15 6
NN Životní pojišťovna N.V. (pobočka pro Českou republiku) Life insurance
Czech Republic 649 220 1,402 25 7 7
NN Biztosító Zártkörûen Mûködõ Részvénytársaság Life insurance
Hungary 374 271 1,332 12 3 3
NN Asigurari de Viata S.A. Life insurance
Romania 457 229 1,065 38 7 4
NN Životná poist’ovna, a.s. Life insurance
Slovak Republic 349 161 799 18 5 5
Germany 10 25 704 22 5 8
France 9 58 689 42 6 1
Italy 6 -10 241 -12 -2 2
United Kingdom 12 -4 192 2 1
Denmark 5 238 3
Bulgaria 135 25 113 3 1
Turkey 395 43 62 -3
Ireland 21
Singapore 31 12
United States 13 2 1
Mexico 1 4
Switzerland 8 1
Argentina 2 1
Luxembourg 1
Uruguay 2
Total 14,592 19,522 263,738 2,196 385 250
1 The average number of employees is on a full-time equivalent basis.
2 Taxation is the taxation amount charged to the profit and loss account.
Notes to the Consolidated annual accounts continued
Our operating
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210
NN Group N.V.
2021 Annual Report
35 Taxation
Deferred tax (2021)
Net
liability
2020
Changes
through
equity
Changes
through
net result
Changes in the
composition of
the group and
other changes
Exchange
rate
differences
Net
liability
2021
Investments 4,638 -1,230 -39 -89 -9 3,271
Real estate investments 926 248 -2 1,172
Financial assets and liabilities at fair value through profit
or loss 22 7 29
Deferred acquisition costs 439 9 22 -10 460
Fiscal reserves 12 79 91
Depreciation 21 -2 -1 18
Insurance liabilities -3,778 530 -108 87 -4 -3,273
Cash flow hedges 4,073 -1,004 3,069
Pension and post-employment benefits 5 4 -1 11 1 20
Other provisions -54 19 7 1 -27
Receivables 12 1 5 -1 17
Loans -87 3 112 28
Unused tax losses carried forward -77 -6 2 -81
Other 104 -6 -20 -101 -1 -24
Deferred tax 6,256 -1,706 190 54 -24 4,770
Presented in the balance sheet as:
Deferred tax liabilities 6,329 4,817
Deferred tax assets -73 -47
Deferred tax 6,256 4,770
Deferred tax (2020)
Net
liability
2019
Changes
through
equity
Changes
through
net result
Changes in the
composition of
the group and
other changes
Exchange
rate
differences
Net
liability
2020
Investments 3,378 1,310 -58 17 -9 4,638
Real estate investments 777 149 926
Financial assets and liabilities at fair value through profit
or loss 22 1 -1 22
Deferred acquisition costs 422 -7 35 -11 439
Fiscal reserves 10 2 12
Depreciation 23 -1 -1 21
Insurance liabilities -3,155 -544 -160 81 -3,778
Cash flow hedges 2,473 1,600 4,073
Pension and post-employment benefits 5 1 -2 1 5
Other provisions -44 -7 -4 1 -54
Receivables -24 5 32 -1 12
Loans -20 -13 -54 -87
Unused tax losses carried forward -77 3 -3 -77
Other 156 14 13 -76 -3 104
Deferred tax 3,946 2,381 -74 27 -24 6,256
Presented in the balance sheet as:
Deferred tax liabilities 4,030 6,329
Deferred tax assets -84 -73
Deferred tax 3,946 6,256
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
35 Taxation continued
Deferred tax on unused tax losses carried forward
2021 2020
Total unused tax losses carried forward 511 527
Unused tax losses carried forward not recognised as a deferred tax asset -184 -221
Unused tax losses carried forward recognised as a deferred tax asset 327 306
Average tax rate 24.8% 25.3%
Deferred tax asset 81 77
Tax losses carried forward will expire as follows as at 31December:
Total unused tax losses carried forward analysed by term of expiration
No deferred tax asset recognised Deferred tax asset recognised
2021 2020 2021 2020
Within 1 year 12 22 2
More than 1 year but less than 5 years 34 40 14 12
More than 5 years but less than 10 years 3
Unlimited 135 159 313 292
Total unused tax losses carried forward 184 221 327 306
Deferred tax assets are recognised for temporary deductible differences, for tax losses carried forward and unused tax credits only to the
extent that realisation of the related tax benefit is probable.
Taxation on result
2021 2020
Current tax 480 459
Deferred tax 189 -74
Taxation on result 669 385
NN Group N.V., together with certain of its subsidiaries, is a part of a fiscal unity for Dutch income tax purposes. The members of the fiscal
unity are jointly and severally liable for any income taxes payable by the Dutch fiscal unity.
Reference is made to Note 34 ‘Principal subsidiaries and geographical information’ for more information on the taxation per country.
Reconciliation of the weighted average statutory tax rate to NN Group’s effective tax rate
2021 2020
Result before tax 3,832 2,196
Weighted average statutory tax rate 24.9% 24.6%
Weighted average statutory tax amount 954 540
Participation exemption -319 -112
Other income not subject to tax and other -11
Expenses not deductible for tax purposes 13 8
Impact on deferred tax from change in tax rates 7 24
Deferred tax benefit for previously not unrecognised amounts -9 -1
Tax for non-recognised losses 2 2
Write-off/reversal of deferred tax assets 1 3
Adjustments to prior periods 31 -80
Effective tax amount 669 384
Effective tax rate 17. 5 % 17.5%
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
35 Taxation continued
In 2021, the effective tax rate of 17.5% was lower than the weighted average statutory tax rate of 24.9%. This was mainly a result of tax
exempt results of associates and participations.
In 2020, the effective tax rate of 17.5% was lower than the weighted average statutory tax rate of 24.6%. This is mainly a result of tax exempt
results of associates and participations, including the tax exempt release of the provision related to ING Australia as well as a benefit
following a reassessment of prior year tax liabilities in the Netherlands as a result of the filing of the relevant tax return. This was partly offset
by a change in the Dutch corporate income tax rate.
Taxation on components of other comprehensive income
2021 2020
Unrealised revaluations property in own use 1
Unrealised revaluations available-for-sale investments and other 1,189 -1,157
Realised gains/losses transferred to the profit and loss account 235 80
Changes in cash flow hedge reserve 1,004 -1,600
Deferred interest credited to policyholders -530 544
Remeasurement of the net defined benefit asset/liability -5 -1
Income tax 1,893 -2,133
36 Fair value of financial assets and liabilities
The following table presents the estimated fair value of NN Group’s financial assets and liabilities. Certain balance sheet items are not
included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair value presented below does
not represent and should not be construed as representing, the underlying value of NN Group.
Fair value of financial assets and liabilities
Estimated fair value Balance sheet value
2021 2020 2021 2020
Financial assets
Cash and cash equivalents 6,929 12,382 6,929 12,382
Financial assets at fair value through profit or loss:
– investments for risk of policyholders 39,261 34,797 39,261 34,797
– non-trading derivatives 6,419 14,833 6,419 14,833
– designated as at fair value through profit or loss 991 1,336 991 1,336
Available-for-sale investments 107, 8 83 118,175 107,883 118,175
Loans 72,597 70,124 68,200 65,428
Total financial assets 234,080 251,647 229,683 246,951
Financial liabilities
Subordinated debt 2,624 2,734 2,356 2,383
Debt securities issued 2,351 1,781 2,292 1,694
Other borrowed funds 7,364 7,701 7,301 7,542
Investment contracts with discretionary participation features for risk of
policyholders 259 245 259 245
Investment contracts for risk of company 976 1,057 953 1,002
Investment contracts for risk of policyholders 1,449 1,250 1,449 1,250
Customer deposits and other funds on deposit 16,460 16,585 15,945 15,803
Financial liabilities at fair value through profit or loss:
– non-trading derivatives 1,904 4,012 1,904 4,012
Total financial liabilities 33,387 35,365 32,459 33,931
For the other financial assets and financial liabilities not included in the table above, including short-term receivables and payables, the
carrying amount is a reasonable approximation of fair value.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
36 Fair value of financial assets and liabilities continued
Reference is made to Note 1 ‘Accounting policies’ for the upcoming changes as a result of IFRS 9 ‘Financial instruments’. One of the
requirements in IFRS 9 is to assess whether investments in debt securities and loans meet the definition of ‘Solely Payments of Principal and
Interest’, also referred to as ‘SPPI assets’. SPPI assets are financial assets with contractual terms that give rise to cash flows that are solely
payments of principal and interest on the principal amount outstanding (as defined in IFRS 9), excluding assets that are held for trading and/
or that are managed and whose performance is evaluated on a fair value basis. The table below provides a split of the fair value of financial
assets into three categories: SPPI assessment applicable under IFRS 9 and conditions met (SPPI compliant assets), SPPI assessment
applicable under IFRS 9 and conditions not met (SPPI non-compliant assets), and SPPI assessment not applicable. Whilst IFRS 9 becomes
effective for NN Group on the same date as IFRS 17, the information in the table below is based on the assets held, and business models
in place.
Fair value of financial assets -SPPI assessment
SPPI compliant assets SPPI non-compliant assets SPPI assessment not applicable
2021 2020 2021 2020 2021 2020
Cash and cash equivalents 6,929 12,382
Financial assets at fair value through profit or loss:
– investments for risk of policyholders 39,261 34,797
– non-trading derivatives 6,419 14,833
– designated as at fair value through profit or loss 991 1,336
Available-for-sale investments 94,940 105,565 4,842 4,513 8,101 8,097
Loans 71,576 68,944 62 190 959 990
Financial assets 166,516 174,509 4,904 4,703 62,660 72,435
The estimated fair value represents the price at which an orderly transaction to sell the financial asset or to transfer the financial liability
would take place between market participants at the balance sheet date (exit price). The fair value of financial assets and liabilities is based
on unadjusted quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed
instruments. Where an exchange price is not available market prices are obtained from independent market vendors, brokers or market
makers. Because substantial trading markets do not exist for all financial instruments, various techniques have been developed to estimate
the approximate fair value of financial assets and liabilities that are not actively traded. The fair value presented may not be indicative of the
net realisable value. In addition, the calculation of the estimated fair value is based on market conditions at a specific point in time and may
not be indicative of the future fair value.
The following methods and assumptions were used by NN Group to estimate the fair value of the financial instruments:
Cash and cash equivalents
Cash and cash equivalents are recognised at their nominal value which approximates the fair value.
Financial assets and liabilities at fair value through profit or loss
Derivatives
Derivative contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined
using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those
instruments that are not actively traded, the fair value is estimated based on valuation techniques. OTC derivatives and derivatives
trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available
for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments.
The principal techniques used to value these instruments are based on discounted cash flows, Black-Scholes option models and Monte
Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on ‘no arbitrage’ principles.
These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where
possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model
calibration procedures. The inputs used include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit
spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates.
These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data,
where available.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
36 Fair value of financial assets and liabilities continued
Available-for-sale investments
Equity securities
The fair value of publicly traded equity securities is determined using quoted market prices when available. Where no quoted market prices
are available, fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private
equity is based on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis
of an analysis of the investee’s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by
reference to market valuations for similar entities quoted in an active market.
Debt securities
The fair value for debt securities is based on quoted market prices, where available. Quoted market prices may be obtained from an
exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available, fair value
is based on an analysis of available market inputs, which may include values obtained from one or more pricing services or by a valuation
technique that discounts expected future cash flows using market interest rate curves, referenced credit spreads, maturity of the investment
and estimated prepayment rates where applicable.
Loans
For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying values represent a
reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount
rate that reflects credit risk, liquidity and other current market conditions. The fair value of mortgage loans is estimated by taking into
account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes.
Subordinated debt and debt securities issued
The fair value of subordinated debt and debt securities issued is estimated using discounted cash flows based on interest rates and credit
spreads that apply to similar instruments.
Other borrowed funds
The fair value of other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting
expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity.
Investment contracts
For investment contracts for risk of the company the fair value has been estimated using a discounted cash flow approach based on
interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued.
For investment contracts for risk of policyholders the fair value generally equals the fair value of the underlying assets. For other investment-
type contracts, the fair value is estimated based on the cash surrender values.
Customer deposits and other funds on deposit
The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair value. The fair values of
deposits with stated maturities have been estimated based on discounting future cash flows using a discount rate that reflects credit risk,
liquidity and other current market conditions.
Notes to the Consolidated annual accounts continued
Our operating
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NN Group N.V.
2021 Annual Report
36 Fair value of financial assets and liabilities continued
Financial assets and liabilities at fair value
The fair value of the financial instruments carried at fair value was determined as follows:
Methods applied in determining the fair value of financial assets and liabilities at fair value (2021)
2021 Level 1 Level 2 Level 3 Total
Financial assets
Investments for risk of policyholders 38,092 444 725 39,261
Non-trading derivatives 30 6,381 8 6,419
Financial assets designated as at fair value through profit or loss 823 168 991
Available-for-sale investments 69,336 34,656 3,891 107,8 8 3
Financial assets 108,281 41,649 4,624 154,554
Financial liabilities
Investment contracts with discretionary participation features for risk
ofpolicyholders 259 259
Investment contracts (for contracts at fair value) 1,449 1,449
Non-trading derivatives 30 1,851 23 1,904
Financial liabilities 1,479 2,110 23 3,612
Methods applied in determining the fair value of financial assets and liabilities at fair value (2020)
2020 Level 1 Level 2 Level 3 Total
Financial assets
Investments for risk of policyholders 33,521 489 787 34,797
Non-trading derivatives 14,811 22 14,833
Financial assets designated as at fair value through profit or loss 1,217 119 1,336
Available-for-sale investments 79,118 36,377 2,680 118,175
Financial assets 113,856 51,796 3,489 169,141
Financial liabilities
Investment contracts with discretionary participation features for risk of
policyholders 245 245
Investment contracts (for contracts at fair value) 1,250 1,250
Non-trading derivatives 30 3,940 42 4,012
Financial liabilities 1,280 4,185 42 5,507
NN Group has categorised its financial instruments that are either measured in the balance sheet at fair value or for which the fair value is
disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority
to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by
unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient
frequency and volume to provide reliable pricing information on an ongoing basis.
The fair value hierarchy consists of three levels, depending on whether the fair value is determined based on (unadjusted) quoted prices in
an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are
unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include,
for example, illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about
similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), mortgage loans and
consumer lending, private equity instruments and investments in real estate funds.
Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on NN
Group’s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best
information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates
and recovery rates, prepayment rates and certain credit spreads. Transfers into and transfers out of levels in the fair value hierarchy are
recognised on the date of the event or change of circumstances that caused the transfer.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
36 Fair value of financial assets and liabilities continued
Level 1 – (Unadjusted) Quoted prices in active markets
This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market that
NN Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available
from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly
occurring market transactions with sufficient frequency and volume to provide reliable pricing information on an ongoing basis.
Level 2 – Valuation technique supported by observable inputs
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the
model are taken from an active market or are observable. If certain inputs in the model are unobservable the instrument is still classified
in this category, provided that the impact of those unobservable inputs elements on the overall valuation is insignificant. Included in this
category are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other
market observable external data and items whose value is derived from quoted prices but for which there was insufficient evidence of an
active market.
Level 3 – Valuation technique supported by unobservable inputs
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than
an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets
and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument is
classified in its entirety as Level 3 if a significant portion of the instrument’s fair value is driven by unobservable inputs. Unobservable in this
context means that there is little or no current market data available from which the price at which an orderly transaction would likely occur
can be derived.
Changes in Level 3 financial assets (2021)
2021
Investments
for risk of
policyholders
Non-trading
derivatives
Available-for-
sale
investments Total
Level 3 Financial assets – opening balance 787 22 2,680 3,489
Amounts recognised in the profit and loss account -41 -14 -18 -73
Revaluations recognised in other comprehensive income (equity) 388 388
Purchase 1,097 1,097
Sale -21 -50 -71
Maturity/settlement -116 -116
Transfers into Level 3 11 11
Transfers out of Level 3 -120 -120
Exchange rate differences 19 19
Level 3 Financial assets – closing balance 725 8 3,891 4,624
Changes in Level 3 financial assets (2020)
2020
Investments
for risk of
policyholders
Non-trading
derivatives
Available-
for-sale
investments Total
Level 3 Financial assets – opening balance 802 50 1,334 2,186
Amounts recognised in the profit and loss account -2 -28 -69 -99
Revaluations recognised in other comprehensive income (equity) 54 54
Purchase 1,425 1,425
Sale -13 -46 -59
Maturity/settlement -2 -2
Other transfers and reclassifications -19 -19
Transfers into Level 3 18 18
Exchange rate differences -15 -15
Level 3 Financial assets – closing balance 787 22 2,680 3,489
Notes to the Consolidated annual accounts continued
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2021 Annual Report
36 Fair value of financial assets and liabilities continued
Changes in Level 3 financial liabilities (2021)
2021
Non-trading
derivatives
Level 3 Financial liabilities – opening balance 42
Amounts recognised in the profit and loss account -19
Level 3 Financial liabilities – closing balance 23
Changes in Level 3 financial liabilities (2020)
2020
Non-trading
derivatives
Level 3 Financial liabilities – opening balance 59
Amounts recognised in the profit and loss account -19
Other transfers and reclassifications 2
Level 3 Financial liabilities – closing balance 42
Level 3 – Amounts recognised in the profit and loss account during the year (2021)
2021
Held at balance
sheet date
Derecognised
during the
period Total
Financial assets
Investments for risk of policyholders -41 -41
Non-trading derivatives -14 -14
Available-for-sale investments -18 -18
Financial assets -73 - -73
Financial liabilities
Non-trading derivatives -19 -19
Financial liabilities -19 - -19
Level 3 – Amounts recognised in the profit and loss account during the year (2020)
2020
Held at balance
sheet date
Derecognised
during the
period Total
Financial assets
Investments for risk of policyholders -2 -2
Non-trading derivatives -28 -28
Available-for-sale investments -69 -69
Financial assets -99 - -99
Financial liabilities
Non-trading derivatives -19 -19
Financial liabilities -19 - -19
Level 3 Financial assets at fair value
Financial assets measured at fair value in the balance sheet as at 31 December 2021 of EUR154,554 million (2020: EUR169,141 million) include
an amount of EUR4,625 million (3.00%) that is classified as Level 3 (2020: EUR3,489 million (2.10%)). Changes in Level 3 are disclosed above
in the table ‘Level 3 Financial assets’.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
36 Fair value of financial assets and liabilities continued
Financial assets in Level 3 include both assets for which the fair value was determined using valuation techniques that incorporate
unobservable inputs and assets for which the fair value was determined using quoted prices, but for which the market was not actively
trading at or around the balance sheet date. Unobservable inputs are inputs which are based on NN Group’s own assumptions about the
factors that market participants would use in pricing an asset, developed based on the best information available in the circumstances.
Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and
certain credit spreads. Fair values that are determined using valuation techniques using unobservable inputs are sensitive to the inputs used.
Fair values that are determined using quoted prices are not sensitive to unobservable inputs, as the valuation is based on unadjusted external
price quotes. These are classified in Level 3 as a result of the illiquidity in the relevant market, but are not significantly sensitive to NN Group’s
own unobservable inputs.
Unrealised gains and losses that relate to ‘Level 3 Financial assets’ are included in the profit and loss account as follows:
∙ Those relating to Investments for risk of policyholders are included in ‘Underwriting expenditure’
∙ Those relating to Non-trading derivatives are included in ‘Valuation results on non-trading derivatives’
∙ Those relating to financial assets designated as at fair value through profit or loss are included in ‘Valuation results on non-trading
derivatives – Valuation results on assets and liabilities designated as at fair value through profit or loss (excluding trading)’
Unrealised gains and losses that relate to available-for-sale investments are recognised in other comprehensive income (equity) and included
in reserves in ‘Unrealised revaluations available-for-sale investments and other’.
Investments for risk of policyholders
Investments for risk of policyholders classified as ‘Level 3 Financial assets’ amounted EUR725 million as at 31 December 2021 (2020:
EUR787 million). Net result is unaffected when reasonable possible alternative assumptions would have been used in measuring
these investments.
Non-trading derivatives
Non-trading derivatives classified as ‘Level 3 Financial assets’ are mainly used to hedge the fair value risk of the mortgage loan portfolio at
NN Bank. These derivatives classified as Level 3 amounted EUR8 million as at 31 December 2021 (2020: EUR22 million).
Available-for-sale investments
The available-for-sale investments classified as ‘Level 3 Financial assets’ amounted EUR3,891 million as at 31 December 2021 (2020:
EUR2,680 million) mainly consists of investments in debt securities and shares in real estate investment funds and private equity investment
funds of which the fair value is determined using (unadjusted) quoted prices in inactive markets for the securities or quoted prices obtained
from the asset managers of the funds. It is estimated that a 10% change in valuation of these investments would have no significant impact
on net result but would increase or reduce shareholders’ equity by EUR389 million (2020: EUR268 million), being approximately 1.1% (before
tax) (2020: 0.7% (before tax)), of total equity.
Level 3 Financial liabilities at fair value
Non-trading derivatives
The total amount of financial liabilities classified as Level 3 at 31 December 2021 of EUR23 million (2020: EUR42 million) relates to non-
trading derivative positions. In 2021, EUR9 million (2020: EUR22 million) relates to derivatives used to hedge the interest rate risk associated
with the funding position of NN Bank. EUR12 million (2020: EUR17 million) relates to longevity hedges closed by NN Group. It is estimated
that a 5% increase in mortality assumptions for these longevity hedges reduces result and equity before tax by EUR13 million (2020:
EUR13 million) and a 5% decrease in mortality assumptions increases result and equity before tax by EUR17 million (2020: EUR18 million).
Notes to the Consolidated annual accounts continued
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2021 Annual Report
36 Fair value of financial assets and liabilities continued
Financial assets and liabilities at amortised cost
The fair value of the financial instruments carried at amortised cost in the balance sheet (where fair value is disclosed) was determined
as follows:
Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2021)
2021 Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents 6,929 6,929
Loans 4 3,832 68,761 72,597
Financial assets 6,933 3,832 68,761 79,526
Financial liabilities
Subordinated debt 2,624 2,624
Debt securities issued 2,351 2,351
Other borrowed funds 6,372 941 51 7,36 4
Investment contracts for risk of company 49 927 976
Customer deposits and other funds on deposit 9,980 6,480 16,460
Financial liabilities 21,376 7,421 978 29,775
Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2020)
2020 Level 1 Level 2 Level 3 Total
Financial assets
Cash and cash equivalents 12,382 12,382
Loans 5 4,456 65,663 70,124
Financial assets 12,387 4,456 65,663 82,506
Financial liabilities
Subordinated debt 2,734 2,734
Debt securities issued 1,781 1,781
Other borrowed funds 5,243 2,456 2 7,701
Investment contracts for risk of company 46 1,011 1,057
Customer deposits and other funds on deposit 9,792 6,793 16,585
Financial liabilities 19,596 9,249 1,013 29,858
Notes to the Consolidated annual accounts continued
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2021 Annual Report
37 Fair value of non-financial assets
The following table presents the estimated fair value of NN Group’s non-financial assets that are measured at fair value in the balance sheet.
Reference is made to Note 1 ‘Accounting policies’ in the sections ‘Real estate investments’ and ‘Property and equipment’ for the methods and
assumptions used by NN Group to estimate the fair value of the non-financial assets.
Fair value of non-financial assets
Estimated fair value Balance sheet value
2021 2020 2021 2020
Real estate investments 2,719 2,444 2,719 2,444
Property in own use 71 74 71 74
Fair value of non-financial assets 2,790 2,518 2,790 2,518
The fair value of the non-financial assets were determined as follows:
Methods applied in determining the fair value of non-financial assets at fair value (2021)
2021 Level 1 Level 2 Level 3 Total
Real estate investments 2,719 2,719
Property in own use 71 71
Non-financial assets - - 2,790 2,790
Methods applied in determining the fair value of non-financial assets at fair value (2020)
2020 Level 1 Level 2 Level 3 Total
Real estate investments 2,444 2,444
Property in own use 74 74
Non-financial assets - - 2,518 2,518
Changes in Level 3 non-financial assets (2021)
2021
Real estate
investments
Property
in own use
Level 3 non-financial assets – opening balance 2,444 74
Amounts recognised in the profit and loss account during the year 241 -2
Purchase 156
Sale -124 -2
Changes in the composition of the group and other changes 2 1
Level 3 non-financial assets – closing balance 2,719 71
Changes in Level 3 non-financial assets (2020)
2020
Real estate
investments
Property
in own use
Level 3 non-financial assets – opening balance 2,571 82
Amounts recognised in the profit and loss account during the year -21 -2
Purchase 66 1
Revaluation recognised in equity during the year -4
Sale -176
Changes in the composition of the group and other changes 3 -2
Exchange rate differences 1 -1
Level 3 non-financial assets – closing balance 2,444 74
Notes to the Consolidated annual accounts continued
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37 Fair value of non-financial assets continued
Level 3 – Amounts recognised in the profit and loss account during the year on non-financial assets (2021)
2021
Held at balance
sheet date
Derecognised
during the year Total
Real estate investments 241 241
Property in own use -2 -2
Level 3 Amounts recognised in the profit and loss account during the year
on non-financial assets 239 - 239
Level 3 – Amounts recognised in the profit and loss account during the year on non-financial assets (2020)
2020
Held at balance
sheet date
Derecognised
during the year Total
Real estate investments 16 -37 -21
Property in own use -2 -2
Level 3 Amounts recognised in the profit and loss account during the year
on non-financial assets 14 -37 -23
Real estate investments and Property in own use
Valuation methodology
The fair value of real estate is based on regular appraisals by independent, qualified valuers. The fair value is established using valuation
methods that take into account recent comparable market transactions (CMT), capitalisation of income (CI) methods and/or discounted
cash flow (DCF) calculations.
The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status.
Future rental income is taken into account in accordance with the terms in existing leases, (expected) vacancies, estimations of the rental
values for new leases when leases expire and incentives like rent-free periods. These estimated cash flows are discounted using market-
based discount rates that reflect appropriately the risk characteristics of the real estate investments.
Notes to the Consolidated annual accounts continued
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37 Fair value of non-financial assets continued
Key assumptions
Key assumptions in the valuation of real estate include the estimated current rental value per square metre, the estimated future rental value
per square metre (ERV), the net initial yield and the vacancy rate. These assumptions were in the following ranges:
Significant assumptions
Fair value
Valuation
technique
Current
rent/m2 ERV/m2
Net initial
yield % Vacancy %
Average
lease term
in years
The Netherlands
Office 155 DCF 334-345 330-356 3.7-4.2 0-4.3 5.1
Residential 67 DCF 211 239 3.3 3.5
Industrial 183 DCF 53-56 55 2.9-3.6 4.7
Retail 12 DCF 133 198 5.0 35.7 7. 2
Ground positions 16 Residual
approach
Germany
Retail 242 DCF 184-313 175-314 4.3-4.6 10.9 3.6
Industrial 278 DCF 48-87 54-87 3.1-4.2 2.2 7. 4
France
Office 76 DCF 623 617 3.4 5.4
Residential 209 DCF 260-388 213-336 3.7-4.4 4.3 3.3
Industrial 366 DCF 45-70 45-72 3.5-4.5 4.5
Residential 13 Comparison
approach
322 5
Spain
Retail 244 DCF 189-229 194-234 5. 3 -7.1 5.1 4.6
Industrial 117 DCF 0-44 28-42 1.0-6.2 8.8 3.1
Italy
Retail 229 DCF 112-816 156-780 0.9-4.5 5.2 6.4
Industrial 33 DCF 42 44 4.6 3.4
Denmark
Residential 120 DCF 217 311 3.6 0.9
Industrial 65 DCF 155-167 144-154 4.4-5.0 11.5
Belgium
Retail 119 DCF 83-342 99-322 4 . 9 -7. 6 4.8 3.5
Industrial 35 DCF 44 43 4.5 1.7
Office 9 Income
Capitalisation
224 196 5.3 14.4 6.7
Poland
Retail 84 DCF 150 160 7.7 6.0 3.6
Real estate under construction and other 47
Total real estate 2,719
Notes to the Consolidated annual accounts continued
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37 Fair value of non-financial assets continued
Sensitivities
Significant increases (decreases) in the estimated rental value and rent growth in isolation would result in a significantly higher (lower) fair
value of the real estate investments. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would
result in a significantly lower (higher) fair value of the real estate investments.
NN Group uses quarterly appraisals by external valuers as main input for the determination of fair value of its real estate investments. The fair value
is established using valuation methods that take into account recent comparable market transactions (CMT), capitalisation of income (CI) methods
and/or discounted cash flow (DCF) calculations. In 2020, uncertainties related to the Covid-19 pandemic have led to the inclusion of ‘material
valuation uncertainty’ clauses in certain external valuation reports. Such clauses do not imply that the valuation cannot be relied upon, but are
used to indicate that – in the extraordinary circumstances – less certainty could be attached to valuations than would otherwise be the case. This
was primarily the case for real estate investments in the retail sector. At the end of 2021, valuators no longer included such clauses in the valuation
reports for assets in the portfolio of NN Group. As for the different sectors the fair value of industrial and logistic real estate developed positive during
the reporting period, as result of continuing favourable letting, capital markets and comparable market transactions, whereas for the retail sector,
the vacancy and yield assumptions were updated as to be in accordance with the current (Covid-19 dominated) situation.
38 Derivatives and hedge accounting
Use of derivatives and hedge accounting
NN Group uses derivatives for effective portfolio management and the management of its asset and liability portfolios. The objective of
economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure.
The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies
under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and reported in
accordance with the nature of the hedged item and the type of IFRS-EU hedge model that is applicable. The three models applicable under
IFRS-EU are: cash flow hedge accounting, fair value hedge accounting and net investment hedge accounting. The company’s detailed
accounting policies for these three hedge models are set out in Note 1 ‘Accounting policies’ in the section on ‘Accounting policies for
specific items’.
To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk
management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non-
qualifying hedges are taken to the profit and loss account. However, in certain cases, NN Group mitigates the profit and loss account
volatility by designating hedged assets and liabilities at fair value through profit or loss. If hedge accounting is applied under IFRS-EU, it is
possible that a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot be continued, even if the hedge
remains economically effective. As a result, the volatility arising from undertaking economic hedging in the profit and loss account may be
higher than would be expected from an economic point of view.
With respect to exchange rate and interest rate derivative contracts, the notional or contractual amount of these instruments is indicative of
the nominal value of transactions outstanding at the balance sheet date; however, they do not represent amounts at risk.
In 2017, NN Group entered into a longevity hedge, based on a general index of Dutch mortality. The maximum pay-out of the hedge amounts
to EUR100 million, payable after 20 years. The hedge is financed by annual premium payments to the counterparty. The longevity hedge
is accounted for as derivative. The hedge reduces the impact of longevity trend scenarios implying more improvement in life expectancy.
The regulator gave approval to include the effects of this specific hedge on the SCR. The purpose of the hedge is to reduce the longevity risk.
Interest rate benchmark reform
Almost all hedge accounting applied by NN Group relates to interest rate risk based on Euribor. The calculation method of Euribor changed
during 2019 and Euribor will continue to be used after the benchmark reform. As a result, NN Group expects that Euribor will continue to exist
as a benchmark and does not anticipate replacing Euribor in its interest rate risk management and related hedge accounting. Furthermore,
all of NN Groups Euribor based hedging instruments which are settled via clearing houses (the majority of NN Groups hedging instruments)
have changed in July 2020 from EONIA to the Euro Short-Term Rate ‘€STR’ as a reference rate to discount the future cash flows of the
respective contracts in line with market practice. The remainder of NN Groups hedging instruments (primarily bilateral agreements) execute
this change at the end of 2021, induced by market practice. This change does not impact the cash flows of the individual contracts, but only
the calculation method of the fair value of the contracts.
Notes to the Consolidated annual accounts continued
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38 Derivatives and hedge accounting continued
Cash flow hedge accounting
NN Group’s hedge accounting consists mainly of cash flow hedge accounting. NN Group’s cash flow hedges principally consist of Euribor
based (forward) interest rate swaps and cross-currency interest rate swaps that are used to protect against its exposure to variability in
future interest cash flows on assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the
future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of
financial assets and liabilities, based on contractual terms and other relevant factors including estimates of prepayments and defaults.
Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders’
equity. Interest income and expenses on these derivatives are recognised in the profit and loss account consistent with the manner in which
the forecast cash flows affect Net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the
profit and loss account.
For the year ended 31 December 2021, NN Group recognised EUR-3,383 million (2020: EUR3,422 million) in equity as effective fair value
changes on derivatives under cash flow hedge accounting. The balance of the cash flow hedge reserve in equity as at 31 December
2021 is EUR11,906 million (2020: EUR16,293 million) gross and EUR8,837 million (2020: EUR12,220 million) after deferred tax. This cash
flow hedge reserve will fluctuate with the fair value of the underlying derivatives and will be reflected in the profit and loss account under
Interest income/expenses over the remaining term of the underlying hedged items. The cash flow hedge reserve relates to a large number
of derivatives and hedged items with varying maturities up to 49 years with the largest concentrations in the range 1 year to 13 years.
Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in EUR10 million loss (2020: EUR2 million
income) which was recognised in the profit and loss account.
As at 31 December 2021, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR3,718 million
(2020: EUR10,371 million), presented in the balance sheet as EUR4,622 million (2020: EUR10,530 million) positive fair value under assets and
EUR904 million (2020: EUR159 million) negative fair value under liabilities.
As at 31 December 2021 and 2020, there were no non-derivatives designated as hedging instruments for cash flow hedge
accounting purposes.
Included in ‘Interest income and Interest expenses on non-trading derivatives’ is EUR164 million (2020: EUR192 million) and EUR98 million
(2020: EUR88 million), respectively, relating to derivatives used in cash flow hedges.
Fair value hedge accounting
NN Group’s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect
against changes in the fair value of fixed-rate instruments due to movements in market interest rates.
Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective
portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting
ineffectiveness has an impact on the net result.
For the year ended 31 December 2021, NN Group recognised EUR481 million (2020: EUR-670 million) of fair value changes on derivatives
designated under fair value hedge accounting in the profit and loss account. This amount was offset by EUR-486 million (2020:
EUR678 million) fair value changes recognised on hedged items. This resulted in EUR-5 million (2020: EUR8 million) net accounting
ineffectiveness recognised in the profit and loss account. As at 31 December 2021, the fair value of outstanding derivatives designated
under fair value hedge accounting was EUR25 million (2020: EUR-546 million), presented in the balance sheet as EUR29 million (2020:
EUR1 million) positive fair value under assets and EUR4 million (2020: EUR547 million) negative fair value under liabilities.
NN Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU ‘carve out’ of IFRS-EU.
The EU ‘carve-out’ for macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as
the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under-
hedging strategies. Under the IFRS-EU ‘carve-out’, hedge accounting may be applied to core deposits and ineffectiveness only arises when
the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. NN Group
applies the IFRS-EU ‘carve-out’ to hedge the interest rate risk of mortgage loans. The hedging activities are designated under a portfolio fair
value hedge on the mortgages, under IFRS-EU.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
39 Assets by contractual maturity
Amounts presented in these tables by contractual maturity are the amounts as presented in the balance sheet.
Assets by contractual maturity (2021)
2021
Less than 1
month
1
1-3 months 3-12 months 1-5 years Over 5 years
Maturity not
applicable Total
Assets
Cash and cash equivalents 4,268 2,661 6,929
Financial assets at fair value through
profit or loss:
– investments for risk of policyholders
2
39,261 39,261
– non-trading derivatives 5 98 84 108 6,124 6,419
– designated as at fair value through
profit or loss 552 28 411 991
Available-for-sale investments 1,747 2,576 6,086 20,787 64,721 11,966 107,8 83
Loans 20 301 1,447 6,451 59,992 -11 68,200
Reinsurance contracts 25 32 130 137 596 34 954
Intangible assets 5 15 49 198 309 553 1,129
Deferred acquisition costs 53 26 111 309 1,392 2 1,893
Assets held for sale
3
4,121 4,121
Deferred tax assets -13 1 1 24 34 47
Other assets 1,935 794 548 156 271 2 3,706
Remaining assets (for which maturities
are not applicable)
4
10,052 10,052
Total assets 8,597 6,503 12,577 28,175 133,429 62,304 251,585
1 Includes assets on demand.
2 Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not) have a maturity depending on their nature, this does not
impact the liquidity position of NN Group.
3 Assets held for sale consist of the assets of the disposal groups classified as held for sale as disclosed in Note 12 ‘Assets and liabilities held for sale’. For these assets and liabilities, the underlying contractual
maturities are no longer relevant to NN Group. The assets and liabilities held for sale have been classified in accordance with the agreed or expected closing date.
4 Included in remaining assets for which maturities are not applicable are Property and equipment, Real estate investments and Associates and joint ventures. Due to their nature remaining assets consist
mainly of assets expected to be recovered after more than 12 months.
Assets by contractual maturity (2020)
2020
Less than 1
month
1
1-3 months 3-12 months 1-5 years Over 5 years
Maturity not
applicable Total
Assets
Cash and cash equivalents 10,021 2,361 12,382
Financial assets at fair value through
profit or loss:
– investments for risk of policyholders
2
34,797 34,797
– non-trading derivatives 44 187 42 284 14,276 14,833
– designated as at fair value through
profit or loss 887 1 24 -1 425 1,336
Available-for-sale investments 1,373 2,093 5,937 25,485 71,988 11,299 118,175
Loans 329 182 1,235 6,503 57,16 4 15 65,428
Reinsurance contracts 21 27 117 184 639 75 1,063
Intangible assets 5 16 45 238 226 533 1,063
Deferred acquisition costs 41 22 105 277 1,424 2 1,871
Assets held for sale 113 113
Deferred tax assets 1 3 7 56 6 73
Other assets 2,213 1,057 613 98 56 2 4,039
Remaining assets (for which maturities
are not applicable)
3
8,565 8,565
Total assets 14,934 5,946 8,211 33,100 145,828 55,719 263,738
1 Includes assets on demand.
2 Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not) have a maturity depending on their nature, this does not
impact the liquidity position of NN Group.
3 Included in remaining assets for which maturities are not applicable are Property and equipment, Real estate investments and Associates and joint ventures. Due to their nature remaining assets consist
mainly of assets expected to be recovered after more than 12 months.
Notes to the Consolidated annual accounts continued
Our operating
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2021 Annual Report
40 Liabilities by maturity
The tables below include all financial liabilities by maturity based on contractual, undiscounted cash flows. Furthermore, the undiscounted
future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket. Derivative liabilities are
included on a net basis if cash flows are settled net. For other derivative liabilities the contractual gross cash flow payable is included.
Non-financial liabilities, including insurance and investment contracts, are included based on a breakdown of the (discounted) balance sheet
amounts by expected maturity. Reference is made to the Liquidity risk paragraph in Note 52 ‘Risk management’ for a description on how
liquidity risk is managed.
Liabilities by maturity (2021)
2021
Less than
1 month 1-3 months 3-12 m onths 1-5 years Over 5 years
Maturity not
applicable Adjustment
1
Total
Liabilities
Subordinated debt
2
500 1,000 850 6 2,356
Debt securities issued 600 500 1,200 -8 2,292
Other borrowed funds 55 675 385 2,805 3,381 7,301
Customer deposits and other funds on
deposit 10,113 150 602 2,168 2,912 15,945
Financial liabilities at fair value through profit
or loss:
– non-trading derivatives 30 125 307 1,154 8,328 -8,040 1,904
Financial liabilities 10,198 1,550 1,794 7,6 27 16,671 - -8,042 29,798
Insurance and investment contracts 821 1,187 3,961 16,796 108,051 37,9 9 6 168,812
Liabilities held for sale
3
3,464 3,464
Deferred tax liabilities 4 6 -14 58 4,459 304 4,817
Other liabilities 7,853 495 516 287 633 -8 9,776
Non-financial liabilities 8,678 1,688 7,927 17,141 113,143 38,292 - 186,869
Total liabilities 18,876 3,238 9,721 24,768 129,814 38,292 -8,042 216,667
Coupon interest due on financial liabilities 15 25 102 660 1,924 2,726
1 This column reconciles the contractual undiscounted cash flow on financial liabilities to the balance sheet values. The adjustments mainly relate to valuation differences, the impact of discounting and, for
derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
2 Subordinated debt maturities are presented based on the first call date. For the legal date of maturity reference is made to Note 15 ‘Subordinated debt’.
3 Liabilities held for sale consist of the assets of the disposal groups classified as held for sale as disclosed in Note 12 ‘Assets and liabilities held for sale’. For these assets and liabilities, the underlying
contractual maturities are no longer relevant to NN Group. The assets and liabilities held for sale have been classified in accordance with the agreed or expected closing date.
Notes to the Consolidated annual accounts continued
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40 Liabilities by maturity continued
Liabilities by maturity (2020)
2020
Less than
1 month 1-3 months 3-12 months 1-5 years Over 5 years
Maturity not
applicable Adjustment
1
Total
Liabilities
Subordinated debt
2
1,500 850 33 2,383
Debt securities issued 1,100 600 -6 1,694
Other borrowed funds 124 303 1,254 3,373 2,488 7,542
Customer deposits and
other funds on deposit 9,915 128 595 2,188 2,977 15,803
Financial liabilities at fair value
through profit or loss:
– non-trading derivatives 71 361 290 1,036 2,630 -376 4,012
Financial liabilities 10,110 792 2,139 9,197 9,545 - -349 31,434
Insurance and investment contracts 1,148 1,063 4,523 17,74 4 112,395 33,799 170,672
Liabilities held for sale 93 93
Deferred tax liabilities 17 -4 -22 55 6,024 259 6,329
Other liabilities 14,093 526 640 400 710 69 16,438
Non-financial liabilities 15,258 1,585 5,234 18,199 119,129 34,127 - 193,532
Total liabilities 25,368 2,377 7,373 27, 3 9 6 128,674 34,127 -349 224,966
Coupon interest due on financial liabilities 65 30 119 709 2,007 2,930
1 This column reconciles the contractual undiscounted cash flow on financial liabilities to the balance sheet values. The adjustments mainly relate to the impact of discounting and, for derivatives, to the fact
that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net).
2 Subordinated debt maturities are presented based on the first call date. For the legal date of maturity reference is made to Note 15 ‘Subordinated debt’.
41 Assets not freely disposable
Assets not freely disposable of EUR136 million (2020: EUR161 million) relates to the mandatory reserve deposit at De Nederlandsche Bank
and cash balances held at BNG Bank regarding the structured entities Arena NHG, Hypenn RMBS entities and the Covered Bond companies.
Assets relating to securities lending are disclosed in Note 42 ‘Transferred, but not derecognised financial assets’. Assets in securitisation
programmes originated by NN Bank are disclosed in Note 47 ‘Structured entities’.
42 Transferred, but not derecognised financial assets
The majority of NN Group’s financial assets that have been transferred, but do not qualify for derecognition, are debt instruments used in
securities lending. NN Group retains substantially all risks and rewards of those transferred assets. The assets are transferred in return for
cash collateral or other financial assets. Non-cash collateral is not recognised in the balance sheet. Cash collateral is recognised as an
asset and an offsetting liability is established for the same amount as NN Group is obligated to return this amount upon termination of the
lending arrangement.
Transfer of financial assets not qualifying for derecognition
2021 2020
Transferred assets at carrying value
Available-for-sale investments 17,761 17,514
Associated liabilities at carrying value
Other borrowed funds 580 247
The table above does not include assets transferred to consolidated securitisation entities, as these related assets are not transferred from a
consolidated perspective. Reference is made to Note 47 ‘Structured entities’.
Notes to the Consolidated annual accounts continued
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43 Offsetting of financial assets and liabilities
The following tables include information about rights to offset and the related arrangements. The amounts included consist of all recognised
financial instruments that are presented net in the balance sheet under the IFRS-EU offsetting requirements (legal right to offset and
intention to settle on a net basis) and amounts presented gross in the balance sheet but subject to enforceable master netting arrangements
or similar arrangement.
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2021)
2021
Related amounts not offset
in the balance sheet
Balance sheet line item Financial instrument
Gross financial
assets
Gross financial
liabilities
offset in the
balance sheet
Net financial
assets in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 6,411 6,411 -1,152 -5,231 28
Financial assets at fair
value through profit or loss
6,411 - 6,411 -1,152 -5,231 28
Other items where
offsetting is applied
in the balance sheet
127 - 127 -56 -70 1
Total financial assets 6,538 - 6,538 -1,208 -5,301 29
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2020)
2020
Related amounts not offset in the
balance sheet
Balance sheet line item Financial instrument
Gross financial
assets
Gross financial
liabilities
offset in the
balance sheet
Net financial
assets in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 14,776 14,776 -3,214 -11,368 194
Financial assets at fair
value through profit or loss
14,776 - 14,776 -3,214 -11,368 194
Other items where
offsetting is applied
in the balance sheet
157 - 157 -63 -93 1
Total financial assets 14,933 - 14,933 -3,277 -11,461 195
Notes to the Consolidated annual accounts continued
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43 Offsetting of financial assets and liabilities continued
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2021)
2021
Related amounts not offset in the
balance sheet
Balance sheet line item Financial instrument
Gross financial
liabilities
Gross financial
assets
offset in the
balance sheet
Net financial
liabilities in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 1,679 1,679 -1,152 -495 32
Financial liabilities at fair
value through profit or loss
1,679 - 1,679 -1,152 -495 32
Other items where
offsetting is applied
in the balance sheet
58 58 -56 -2 -
Total financial liabilities 1,737 - 1,737 -1,208 -497 32
Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2020)
2020
Related amounts not offset in the
balance sheet
Balance sheet line item Financial instrument
Gross financial
liabilities
Gross financial
assets
offset in the
balance sheet
Net financial
liabilities in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 3,726 3,726 -3,214 -500 12
Financial liabilities at fair
value through profit or loss
3,726 - 3,726 -3,214 -500 12
Other items where
offsetting is applied
in the balance sheet
84 84 -63 -21 -
Total financial liabilities 3,810 - 3,810 -3,277 -521 12
44 Contingent liabilities and commitments
In the normal course of business NN Group is party to activities whose risks are not reflected in whole or in part in the Consolidated annual
accounts. In response to the needs of its customers, NN Group offers financial products related to loans. These products include traditional
off-balance sheet credit-related financial instruments.
Contingent liabilities and commitments (2021)
2021
Less than
1 month 1-3 months 3-12 months 1-5 years Over 5 years
Maturity not
applicable Total
Commitments 550 1,347 3,260 2,312 135 343 7,947
Guarantees 40 1 41
Contingent liabilities and commitments 550 1,347 3,300 2,313 135 343 7,9 8 8
Contingent liabilities and commitments (2020)
2020
Less than
1 month 1-3 months 3-12 months 1-5 years Over 5 years
Maturity not
applicable Total
Commitments 655 772 1,983 1,947 203 104 5,664
Guarantees 40 1 41
Contingent liabilities and commitments 655 772 2,023 1,948 203 104 5,705
NN Group has issued certain guarantees, other than those included in ‘Insurance contracts’, which are expected to expire without being
drawn on and therefore does not necessarily represent future net cash outflows. In addition to the items included in ‘Contingent liabilities’,
NN Group has issued guarantees as a participant in collective arrangements of national industry bodies and as a participant in government
required collective guarantee schemes which apply in different countries.
Notes to the Consolidated annual accounts continued
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44 Contingent liabilities and commitments continued
ING Group
During 2016, ING Group, NN Group’s former parent company, sold its remaining stake in NN Group. Therefore, ING Group has ceased to be a
related party of NN Group in the course of 2016. The following agreements with ING Group are still relevant:
Master claim agreement
In 2012, ING Groep N.V., Voya Financial Inc. (formerly ING U.S., Inc.) and ING Insurance Eurasia N.V. entered into a master claim agreement to
(a) allocate existing claims between these three parties and (b) agree on criteria for how to allocate future claims between the three parties.
The master claim agreement contains further details on claim handling, conduct of litigation and dispute resolution.
Indemnification and allocation agreement
ING Groep N.V. and NN Group N.V. have entered into an indemnification and allocation agreement, in which ING Group has agreed to
indemnify NN Group for certain liabilities that relate to the business of or control over certain (former) U.S. and Latin American subsidiaries of
NN Group in the period until 30 September 2013 or, if the relevant subsidiary was divested by NN Group after 30 September 2013, such later
date of divestment. These liabilities mainly include contingent liabilities that may arise as a result of the initial public offering of ING U.S. (such
as prospectus liability), the sales of the Latin American businesses (such as claims under warranties and other buyer protection clauses) and
the liabilities for the claims concerning the performance of certain interest-sensitive products that were sold by a former subsidiary of
NN Group in Mexico.
Other agreements
In connection with the initial public offering of NN Group N.V., ING Groep N.V. entered in 2014 into several other agreements with NN Group
N.V. which are currently, partly or wholly, in force, such as a joinder agreement, an equity administration agreement and a Risk Management
Programme (RMP) indemnity agreement. In 2015, NN Group N.V. and ING Groep N.V. entered into an agreement providing amongst others for
allocation between them of insurance payments under the public offering securities insurance taken out by ING Groep N.V. with respect to
the IPO of NN Group N.V.
45 Legal proceedings
General
NN Group is involved in litigation and arbitration proceedings in the Netherlands and in a number of foreign jurisdictions, involving claims by
and against NN Group which arise in the ordinary course of its business, including in connection with its activities as insurer, lender, seller,
broker-dealer, underwriter, issuer of securities and investor and its position as employer and taxpayer. In certain of such proceedings, very
large or indeterminate amounts are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate
outcome of all pending or threatened legal and regulatory proceedings, NN Group believes that some of the proceedings set out below may
have, or have in the recent past had, a significant effect on the financial condition, profitability or reputation of NN Group.
Because of the geographic spread of its business, NN Group may be subject to tax audits in numerous jurisdictions at any point in time.
Although NN Group believes that it has adequately provided for its tax positions, the ultimate outcome of these audits may result in liabilities
that are different from the amounts recognised.
Unit-linked products in the Netherlands
Since the end of 2006, unit-linked products (commonly referred to in Dutch as ‘beleggingsverzekeringen’) have received negative attention
in the Dutch media, from the Dutch Parliament, the Netherlands Authority for the Financial Markets (Autoriteit Financiële Markten) and
consumer protection organisations. Costs of unit-linked products sold in the past are perceived as too high and Dutch insurers are in general
being accused of being less transparent in their offering of such unit-linked products.
On 29 April 2015, the European Court of Justice issued its ruling on preliminary questions submitted by the District Court in Rotterdam,
upon request of parties, including Nationale-Nederlanden, to obtain clarity on principal legal questions with respect to cost transparency
in relation to unit-linked products. The main preliminary question considered by the European Court of Justice was whether European law
permits the application of information requirements based on general principles of Dutch law that extend beyond information requirements
as explicitly prescribed by laws and regulations in force at the time the policy was written. The European Court of Justice ruled that the
information requirements prescribed by the applicable European directive may be extended by additional information requirements included
in national law, provided that these requirements are necessary for a policyholder to understand the essential characteristics of the
commitment and are clear, accurate and foreseeable. Dutch courts will need to take the interpretation of the European Court of Justice into
account in relevant proceedings.
Notes to the Consolidated annual accounts continued
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45 Legal proceedings continued
In 2013 Woekerpolis.nl and in 2017 Consumentenbond and Wakkerpolis, all associations representing the interests of policyholders of
Nationale-Nederlanden, individually initiated so-called ‘collective actions’ against Nationale-Nederlanden. These claims are all based on
similar grounds and have been rejected by Nationale-Nederlanden and Nationale-Nederlanden defends itself in these legal proceedings.
Woekerpolis.nl requested the District Court in Rotterdam to declare that Nationale-Nederlanden sold products which are defective in various
respects. Woekerpolis.nl alleges that Nationale-Nederlanden failed to meet the required level of transparency regarding, cost charges and
other product characteristics, failed to warn policyholders of certain product related risks, such as considerable stock depreciations, the
inability to realise the projected final policy value, unrealistic capital projections due to differences in geometric versus arithmetic returns and
that certain general terms and conditions regarding costs were unfair. On 19 July 2017, the District Court in Rotterdam rejected all claims of
Woekerpolis.nl and ruled that Nationale-Nederlanden has generally provided sufficient information on costs and premiums. Woekerpolis.nl
has lodged an appeal with the Court of Appeal in The Hague against the ruling of the District Court in Rotterdam. On 23 February 2021, the
Court of Appeal in The Hague rendered an interim ruling submitting preliminary questions to the Dutch Supreme Court to obtain clarity on
the interpretation of certain principle questions of law that are relevant in disputes concerning unit-linked policies. The questions concern the
relationship between the specific Dutch regulations applicable to insurers regarding the provision of (pre)contractual information, and Dutch
civil law and the impact thereon by European law. On 11 February 2022, the Supreme Court answered the questions of law submitted to it by
the Court of Appeal in The Hague. The Supreme Court primarily considers that Dutch civil law is applicable to the legal relationship between
insurer and policyholder. It is up to lower courts to decide whether Dutch civil law entails obligations to provide information in addition to
the obligations arising from specific regulations and, if so, which obligations. The Supreme Court holds that potential additional information
obligations must satisfy the criteria formulated by the European Court of Justice in the abovementioned judgment of 2015. The Supreme
Court finds that, if the lower court were to decide that certain additional information obligations apply, the courts have to judge whether
these information obligations 1) pertain to information that is clear and accurate, 2) are necessary for a proper understanding of the essential
characteristics of the unit-linked policy, and 3) enable the insurer to identify with sufficient foreseeability the additional information that
must be provided and that the policyholder may expect. The judgment has no direct consequences for customers with a unit-linked policy.
The Court of Appeal in The Hague will now resume the collective proceedings between Woekerpolis.nl and Nationale-Nederlanden.
Consumentenbond alleges that Nationale-Nederlanden failed to adequately inform policyholders on cost charges, risk premium for life
insurance cover and the leverage and capital consumption effect and that Nationale-Nederlanden provided misleading capital projections.
Consumentenbond requested the District Court in Rotterdam to order a recalculation of certain types of unit-linked insurance products
and to declare that Nationale-Nederlanden is liable for any damage caused by a lack of information and misleading capital projections.
On 29 July 2020, the District Court in Rotterdam rejected all claims of Consumentenbond. The court ruled that Nationale-Nederlanden has
provided sufficient information on the effect of costs and risk premiums for life insurance cover included in the gross premium, leading to
agreement between parties (wilsovereenstemming) on these costs and risk premiums and on the manner in which these costs components
are set off during the term of the insurance. Consumentenbond has lodged an appeal with the Court of Appeal in The Hague against the
ruling of the District Court.
Wakkerpolis primarily concentrates on the recovery of initial costs for policyholders by claiming that there is no contractual basis for
charging initial costs and that the insurer is obliged to warn against the leverage and capital consumption effect. In an interim ruling in
the collective action initiated by Wakkerpolis rendered on 22 April 2020, the District Court in Rotterdam dismissed Wakkerpolis’ claim to
recalculate the value of unit-linked products without initial costs. With respect to unit-linked products issued after 1994, the District Court
concluded that Nationale-Nederlanden complied with the precontractual information requirements prescribed by law and regulations
applicable at the time and in principle all costs (including initial costs) were agreed upon by parties (wilsovereenstemming). With respect
to unit-linked products issued before 1994, Nationale-Nederlanden is to demonstrate that for these unit-linked products it provided
precontractual information on the (effect of) costs and risk premiums for life insurance cover included in the gross premium and net example
capitals. For unit-linked products issued before 1 August 1999, the District Court ruled that policyholders were not sufficiently informed by
Nationale-Nederlanden on the effect of costs on the surrender value or paid up value of a policy, leading to an absence in the agreement
between parties (leemte). Nationale-Nederlanden is requested to inform the District Court whether the allocation system used by Nationale-
Nederlanden to settle initial costs would negatively affect the value of policies in case of early surrendering or conversion into paid up
policies, compared to another common allocation system used in the insurance industry. On 2 June 2021, the District Court rendered an
interim judgment granting Wakkerpolis the right to supplement its claims. A final ruling in first instance is expected in Q2 2022.
Notes to the Consolidated annual accounts continued
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2021 Annual Report
45 Legal proceedings continued
There has been for some time and there continues to be political, regulatory and public attention focused on the unit-linked issue in general.
Elements of unit-linked policies are being challenged or may be challenged on multiple legal grounds in current and future legal proceedings.
There is a risk that one or more of those legal challenges will succeed. Customers of NN Group’s Dutch insurance subsidiaries have claimed,
among others, that (a) the investment risk, costs charged or the risk premium was not, or not sufficiently, made clear to the customer, (b)
the product costs charged on initial sale and on an ongoing basis were so high that the expected return on investment was not realistically
achievable, (c) the product sold to the customer contained specific risks that were not, or not sufficiently, made clear to the customer (such
as the leverage capital consumption risk) or was not suited to the customer’s personal circumstances, (d) the insurer owed the customer
a duty of care which the insurer has breached, (e) the insurer failed to warn of the risk of not realising the projected policy values and/or
that these projected policy values were incorrect, (f) the policy conditions were unfair, or (g) the costs charged or the risk premium had no
contractual basis. These claims may be based on general standards of contract or securities law, such as reasonableness and fairness, error,
duty of care, or standards for proper customer treatment or due diligence, such as relating to the fairness of terms in consumer contracts and
may be made by customers, or on behalf of customers, holding active policies or whose policies have lapsed, matured or been surrendered.
There is no assurance that further proceedings for damages based on aforementioned legal grounds or other grounds will not be brought.
The timing of reaching any finality in last instance on these pending legal claims and proceedings is uncertain and such uncertainty is likely to
continue for some time.
Rulings or announcements made by courts or decision-making bodies or actions taken by regulators or governmental authorities against
NN Group’s Dutch insurance subsidiaries or other Dutch insurance companies in respect of unit-linked products, or settlements or any other
actions to the benefit of customers (including product improvements or repairs) by other Dutch insurance companies towards consumers,
consumer protection organisations, regulatory or governmental authorities or other decision-making bodies in respect of the unit-linked
products, may affect the (legal) position of NN Group’s Dutch insurance subsidiaries and may force such subsidiaries to take (financial)
measures that could have a substantial impact on the financial condition, results of operations, solvency or reputation of NN Group and its
subsidiaries. As a result of the public and political attention the unit-linked issue has received, it is also possible that sector-wide measures
may be imposed by governmental authorities or regulators in relation to unit-linked products in the Netherlands. The impact on NN Group’s
Dutch insurance subsidiaries of rulings made by courts or decision-making bodies, actions taken by regulators or governmental bodies
against other Dutch insurance companies in respect of unit-linked products, or settlements or any other actions to the benefit of customers
(including product improvements or repairs), may be determined not only by market share but also by portfolio composition, product features,
terms and conditions and other factors. Adverse decisions or the occurrence of any of the developments as described above could result in
outcomes materially different than if NN Group’s Dutch insurance subsidiaries or its products had been judged or negotiated solely on their
own merits.
The book of policies of NN Group’s Dutch insurance subsidiaries dates back many years, and in some cases several decades. Over time,
the regulatory requirements and expectations of various stakeholders, including customers, regulators and the public at large, as well as
standards and market practice, have developed and changed, increasing customer protection. As a result, policyholders and consumer
protection organisations have initiated and may in the future initiate proceedings against NN Group’s Dutch insurance subsidiaries alleging
that products sold in the past fail to meet current requirements and expectations. In any such proceedings, it cannot be excluded that
the relevant court, regulator, governmental authority or other decision-making body will apply current norms, requirements, expectations,
standards and market practices on laws and regulations to products sold, issued or advised on by NN Group’s Dutch insurance subsidiaries.
Although the financial consequences of any of these factors or a combination thereof could be substantial for the Dutch insurance business
of NN Group and, as a result, may have a material adverse effect on NN Group’s business, reputation, revenues, results of operations,
solvency, financial condition and prospects, it is not possible to reliably estimate or quantify NN Group’s exposures at this time.
Dispute on reinsurance agreement
NN Group had reinsured with another insurance company part of the exposure on certain insured pension obligations. The counterparty
acknowledged the existence of a reinsurance arrangement, but disputed the applicability of fundamental aspects of the reinsurance
agreement. NN Group started legal proceedings in 2019. A provision was recognised in 2019. In 2021, both parties agreed on a settlement.
As a result, the reinsurance was cancelled and a settlement amount was received. The net positive impact of the settlement was recognised
in 2021.
Argentina
On 10 April 2019, NN Group filed a claim with the International Centre for Settlement of Investment Disputes (ICSID) under the Bilateral
Investment Treaty between Argentina and the Netherlands, in order to resolve a dispute with the Argentine Republic. The dispute relates
to the nationalisation of Orígenes – NN Group’s former pension fund manager in Argentina – by the Argentine Government in 2008.
These proceedings may last for several years. As the case is still pending, it is unclear at this stage whether and to what extent any
compensation will be granted to NN Group and therefore no compensation has been recognised.
Notes to the Consolidated annual accounts continued
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45 Legal proceedings continued
Australia
In April 2015, the Australian Taxation Office (ATO) commenced a Tax Audit on ING Australia Holdings Ltd. The Tax Audit concerns the
years 2007-2013 and focused on the currency denomination of and interest on intercompany loans which resulted from the transfer of the
insurance and asset management businesses in Australia. ING Australia Holdings was transferred by NN Group to ING Group in 2013 as part
of which it was agreed that NN Group remains liable for any damages resulting from tax claims. An Independent Review of the Tax Audit was
completed by the ATO in July 2017. In 2017, NN Group recognised a provision on the IFRS and Solvency II balance sheets for an amount of AUD
279 million (EUR185 million) to cover the costs of the expected ATO claim including penalties, interest and related expenses. In December
2020, a final agreement was reached with the ATO on all aspects of the Tax Audit resulting in a final payment to the ATO and the release of
the remainder of the provision (net of related expenses). The release of EUR109 million is recognised in 2020 in Result on disposal of group
companies (Result on divestments in the segment Other). The Tax Audit concerns a former subsidiary of NN Group and, therefore, does not
impact NN Group’s business or strategy going forward.
46 Companies and businesses acquired and divested
Acquisitions (2021)
In July 2021, NN Group announced it had reached agreement to acquire MetLife’s businesses in Poland and Greece for a consideration
of EUR584 million. This is in line with the strategy to consolidate NN Group’s leading positions in attractive growth markets in which NN
is already active. In January 2022 the acquisition of MetLife Greece was completed. The acquisition of MetLife Poland is expected to be
completed in 2022.
In July 2021 NN Group announced that it had reached an agreement to acquire a 70% stake in Dutch insurance broker and service provider
Heinenoord, for a total consideration of EUR179 million. In addition, NN Group refinanced the outstanding debt granted to Heinenoord
for an amount of EUR129 million. Furthermore, the agreement includes an option structure to acquire the remaining 30% of shares within
four years following the closing of the transaction. The acquisition closed in October 2021 and was accounted for in 2021. Heinenoord is
consolidated 100% by NN Group; a liability is recognised for the estimated remaining price to be paid under the put option of EUR85 million.
Intangible assets for the brand name and customer relationships were recognised for an amount of EUR120 million. In addition, goodwill was
recognised for an amount of EUR291 million. There are no other assets and liabilities in the balance sheet of Heinenoord that are significant
to NN Group. Heinenoord is included in the segment Netherlands Non-life.
Divestments (2021)
Bulgaria
In February 2021, NN Group announced that it has reached an agreement with KBC Group N.V. (KBC) to sell its Bulgarian operations for a
total consideration of EUR78 million to KBC’s Bulgarian insurance business DZI. The transaction closed in July 2021. The sale did not have a
significant impact on the net result, equity or the Solvency II ratio of NN Group.
NN IP
In August 2021, NN Group announced that it had reached an agreement to sell its asset management activities executed by NN Investment
Partners (NN IP) to Goldman Sachs for total cash proceeds of EUR1.7 billion. Closing of the transaction is subject to customary conditions,
and is expected to take place in the first half of 2022.
Following the announced disposal, the asset management activities are classified as Held for sale. Therefore, the assets and liabilities
of NN IP are presented in ‘Assets held for sale’ and ‘Liabilities held for sale’ in the balance sheet. Reference is made to Note 12 ‘Assets
and liabilities held for sale’. The results from NN IP are presented as Result from discontinued operations. Reference is made to Note 31
‘Discontinued operations’.
Closed book portfolio NN Belgium
In November 2021, NN Group’ssubsidiary NN Insurance Belgium sold a closed book life portfolio to AthoraBelgium. The closed book
portfolio, comprising life insurance policies that are no longer being sold, reflect approximately EUR3.3 billion of assets and liabilities.
The agreement has no impact on the services and guarantees that NN Group provides to its policyholders. The transaction is subject to
customary conditions, including obtaining the necessary regulatory and competition clearances and consultation of the NN Belgium works
council. Closing of the transaction is expected by mid-2022.
Following the announced disposal, the closed book life portfolio is classified as Held for sale. Therefore, the assets and liabilities of the closed
book life portfolio are presented in ‘Assets held for sale’ and ‘Liabilities held for sale’ in the balance sheet. Reference is made to Note 12
‘Assets and liabilities held for sale’.
Notes to the Consolidated annual accounts continued
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46 Companies and businesses acquired and divested continued
Acquisitions (2020)
VIVAT Non-life
In April 2020, NN Group announced the completion of its acquisition of VIVAT Schadeverzekeringen N.V. (‘VIVAT Non-life’). Included below is
an overview of the transaction, a description of VIVAT Non-life, the rationale for the transaction, the accounting at the acquisition date and
certain additional disclosures on the acquisition.
Overview of the transaction
On 7 June 2019, NN Group announced to acquire 100% of the voting equity interest of VIVAT Non-life for a consideration of EUR416 million.
NN Group announced that it would acquire VIVAT Non-life from Athora, following the acquisition of the VIVAT Group (VIVAT) by Athora.
In addition, NN Group announced that it would acquire the intercompany Tier 2 loans granted by VIVAT to VIVAT Non-life for a consideration
of EUR150 million plus accrued interest. The acquisition of the intercompany Tier 2 loans is considered part of the acquisition of VIVAT
Non-life for IFRS accounting purposes. The approvals for the acquisition were received in the first quarter of 2020. The transaction closed
on 1 April 2020. As a result, VIVAT Non-life is included in the consolidation from 1 April 2020.
Description of VIVAT Non-life
VIVAT Non-life is a Dutch insurance company that offers a variety of non-life insurance products. VIVAT Non-life provides mainly property &
casualty and disability insurance. VIVAT Non-life operates in the Netherlands. VIVAT Non-life was a 100% subsidiary of VIVAT N.V. VIVAT N.V,
was previously owned by Anbang Group Holdings Co Ltd until it was sold to Athora immediately before NN Group purchased VIVAT Non-life
from Athora.
Rationale for the transaction
The acquisition of VIVAT Non-life by NN Group is in line with NN Group’s strategic goal of long-term value creation for its stakeholders –
increasing operating capital generation and driving growth in attractive markets. The completion of the acquisition of VIVAT Non-life adds
additional scale and capabilities to NN Group’s non-life platform, enabling further improvement of customer propositions and increasing
NN Group’s ability to invest in digital capabilities and innovation.
The acquisition of VIVAT Non-life will help achieve the strategic goals, extracting the synergy benefits from the transaction and further
reducing expenses. This acquisition will enable NN Group to continue to optimise the Non-life business by building data capabilities and
leveraging on its additional scale.
Accounting at the acquisition date
The acquisition date of VIVAT Non-life by NN Group for acquisition accounting under IFRS is 1 April 2020. On this date, NN Group acquired
100% of the ordinary shares in VIVAT Non-life and thus obtained control. Therefore, VIVAT Non-life is included in the NN Group consolidation
from 1 April 2020.
NN Group has performed the accounting for the acquisition using the values below.
The accounting values of certain assets and liabilities acquired as at 1 April 2020 as disclosed below differ from the values of the assets
and liabilities in the balance sheet of VIVAT Non-life immediately before the acquisition by NN Group. This difference is mainly a result of the
following most significant amendments as a result of the purchase price allocation as required under IFRS:
∙ Insurance liabilities and reinsurance contracts were remeasured to fair value as defined in IFRS; this resulted in a decrease in insurance
liabilities. The fair value of the insurance liabilities was determined based on the price that a market participant would charge to assume the
insurance liabilities of VIVAT-Non-life in an orderly transaction at the measurement date. In arriving at the fair value of the insurance liabilities,
the future cash flows were estimated using current best estimate actuarial assumptions. The future cash flows were then adjusted for the
compensation a market participant would require for assuming the risks and uncertainties relating to the insurance liabilities. Where relevant
these adjusted future cash flows were discounted using a current market discount rate to reflect the time value of money. Whilst the
determination of the fair value of the insurance liabilities involved estimates and expert judgement, there are no elements in the valuation
where using reasonably supportable alternative assumptions would have had a material impact on NN Group. In accordance with IFRS 4
and in line with NN Group’s accounting policies, NN Group opted to recognise the difference between the fair value and the existing book
value of the insurance liabilities as an asset (Value of Business Acquired, or ‘VOBA’) and to report the Liabilities for insurance contracts in the
balance sheet at the existing book values.
∙ Subordinated debt was revalued from amortised cost to fair value. This resulted in an increase in the value of the subordinated debt.
∙ Acquisition related intangible assets were recognised. This mainly related to a distribution agreement. The distribution agreement was
valued using the excess earnings method. Under this method the fair value is calculated by adjusting the forecasted income for the
remaining useful life for contributory asset charges. This amount is then discounted using an adjusted cost of equity. The value of the
distribution agreement is estimated at EUR10 million and will be amortised through the profit and loss account over its useful life of 20 years.
Notes to the Consolidated annual accounts continued
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46 Companies and businesses acquired and divested continued
Acquisition date fair values of the assets and liabilities acquired (2020)
2020 Acquisition date
Cash paid to acquire shares -416
Cash paid to acquire the intercompany Tier 2 loans (including accrued interest) -152
Cash in company acquired 29
Cash flow on acquisition -539
2020 Acquisition date
Assets
Cash and cash equivalents 29
Financial assets at fair value through profit or loss:
– non-trading derivatives 62
Available-for-sale investments 1,517
Loans 43
Reinsurance contracts 70
Associates and joint ventures 21
Intangible assets 12
VOBA 141
Other assets 128
Total assets 2,023
Liabilities
Subordinated debt 171
Insurance and investment contracts 1,278
Deferred tax liabilities 18
Other liabilities 142
Total liabilities 1,609
Net assets acquired 414
Fair value of purchase consideration
- To acquire shares in VIVAT Non-life 416
- To acquire the intercompany Tier 2 loans (including accrued interest) 152
Total fair value of purchase consideration 568
Fair value of net assets acquired
- Net assets acquired VIVAT Non-life 414
- Acquired intercompany Tier 2 loans 166
Total fair value of net assets acquired 580
Difference -12
The purchase consideration paid was in total EUR12 million lower than the net assets acquired; the difference represents negative goodwill.
This negative goodwill is recognised in Other income in the profit and loss account immediately (presented in the segment Netherlands Non-
life). The (negative) goodwill is not taxable.
Other information
2020 Acquisition date
Acquisition-related costs recognised as expense 9
Total income recognised in profit and loss since date of acquisition 529
Net profit recognised in profit and loss since date of acquisition 27
Total income that would have been recognised in profit and loss if acquired from the start of the year
1
736
Net profit that would have been recognised in profit and loss if acquired from the start of the year
2
31
1 The sum of Total income since the date of acquisition plus the first quarter 2020 Total income for VIVAT Non-life stand-alone.
2 The sum of Net profit since the date of acquisition plus the first quarter 2020 Net profit for VIVAT Non-life stand-alone.
Notes to the Consolidated annual accounts continued
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46 Companies and businesses acquired and divested continued
No significant acquisition-related costs were recognised on this transaction. The financial assets acquired do not include any significant
receivables, other than investments in debt securities and Loans. There were no significant contingent liabilities that were recognised at the
date of acquisition.
Divestments (2020)
Sigorta Cini
In December 2020, NN Group sold Sigorta Cini, the intermediary business in Turkey, to BUBA Ventures. The transaction, which was completed in
December 2020, did not have a material impact on the result and capital position of NN Group.
47 Structured entities
NN Group’s activities involve transactions with structured entities in the normal course of business. A structured entity is an entity that
has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting
rights relate to administrative tasks only and the relevant activities are directed through contractual arrangements. NN Group’s involvement
in these entities varies and includes both debt financing and equity financing of these entities as well as other relationships. Based on its
accounting policies, as disclosed in Note 1 ‘Accounting policies’, NN Group establishes whether these involvements result in no significant
influence, significant influence, joint control or control over the structured entity.
The structured entities over which NN Group can exercise control are consolidated. NN Group may provide support to these consolidated
structured entities as and when appropriate, however, this is fully reflected in the Consolidated annual accounts of NN Group as all assets
and liabilities of these entities are included in the Consolidated balance sheet and off-balance sheet commitments are disclosed.
NN Group’s activities involving structured entities are explained below in the following categories:
∙ Consolidated NN Group originated liquidity management securitisation and covered bond programmes
∙ Investments – NN Group managed investment funds
∙ Investments – Third-party managed structured entities
Consolidated NN Group originated liquidity management securitisation and covered bond programmes
Mortgage loans issued are partly funded by issuing residential mortgage-backed securities under NN Group’s Dutch residential mortgage-
backed securities programmes (Hypenn and Arena) and covered bonds. The mortgage loans transferred to these securitisation vehicles
continue to be recognised in the balance sheet of NN Group. Total amounts of mortgage loans securitised (notes issued) and notes held by
third parties as at 31 December is as follows:
Mortgage loans securitised
Maturity year Related mortgage loans
RMBS issued and held by third
parties
2021 2020 2021 2020
Arena NHG 2016-I 337 223
Hypenn RMBS I 2023 1,169 1,304
Hypenn RMBS V 307 283
Hypenn RMBS VI 2022 503 578 333 385
Hypenn RMBS VII 2026 1,563 1,918
NN Conditional Pass-Through Covered Bond Company 2024-2039 2,925 2,923 2,587 2,585
Soft Bullet Covered Bonds 2030-2041 1,900 1,548 1,742 1,244
Total 8,060 8,915 4,662 4,720
NN Group companies hold the remaining notes.
NN Group managed investment funds
NN Group originates investment funds. NN Group may hold investments in these funds for its own account through the general account
investment portfolio of the insurance operations. Other investments in these funds may be held for the risk of policyholders or by third parties.
For the majority of these funds, NN Group also acts as the fund manager. NN Group considers both NN Group’s financial interests for own
risk and its role as asset manager to establish whether control exists and whether the fund is consolidated. In general, NN Group maintains
a minority interest in these funds and NN Group receives a fixed fee over assets under management, at arm’s length basis, for its asset
management activities. These funds are generally not consolidated by NN Group. Financial interests for risk of policyholders are not taken
into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the ‘power’) and
assume all risks and benefits on these investments (i.e. the policyholder assumes the variable returns).
Notes to the Consolidated annual accounts continued
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47 Structured entities continued
Reference is made to Note 5 ‘Available-for-sale investments’ in which investments in equity securities are specified by NN Group managed
investment funds and Third-party managed investment funds. The maximum exposure to loss for NN Group is equal to the reported carrying
value of the investment recognised in the balance sheet of NN Group.
Third-party managed structured entities
As part of its investment activities, NN Group invests both in debt and equity instruments of structured entities originated by third parties.
Most of the investments in debt instruments of third-party managed structured entities relate to Asset-backed securities (ABS), classified as
loans. Reference is made to Note 5 ‘Available-for-sale investments’ where the ABS portfolio is disclosed.
The majority of the investments in equity instruments of third-party managed structured entities relate to interests in investment funds that
are not originated or managed by NN Group. Reference is made to Note 5 ‘Available-for-sale investments’ in which investments in equity
securities are specified by NN Group managed investment funds and Third-party managed investment funds.
NN Group has significant influence for some of its real estate investment funds as disclosed in Note 7 ‘Associates and joint ventures’.
The maximum exposure to loss for NN Group is equal to the reported carrying value of the investment recognised in the balance sheet of
NN Group.
48 Related parties
In the normal course of business, NN Group enters into various transactions with related parties. Parties are considered to be related if one
party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties
of NN Group include, among others, associates, joint ventures, key management personnel and close family members and the defined benefit
and defined contribution plans. Transactions between related parties have taken place on an arm’s length basis and include distribution
agreements, sourcing and procurement agreements, human resources-related arrangements, and rendering and receiving of services.
There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with
related parties.
NN Group identifies the following (groups of) related party transactions:
Transactions with key management personnel
Transactions with members of NN Group’s Executive Board, Management Board and Supervisory Board and close family members are
considered to be transactions with key management personnel. Reference is made to Note 49 ‘Key management personnel compensation’
for more information on these transactions.
Transactions with consolidated entities
Entities over which NN Group can exercise control are considered to be related parties of NN Group. These entities are consolidated
by NN Group. Transactions with or between entities controlled by NN Group are eliminated in the Consolidated annual accounts.
More information on the NN Group originated liquidity management securitisation programmes is disclosed in Note 47 ‘Structured entities’.
Transactions with associates and joint ventures
Associates and joint ventures of NN Group are related parties of NN Group. The transactions with associates and joint ventures can be
summarised as follows:
Transactions with associates and joint ventures
2021 2020
Assets 210 205
Income
8 5
Transactions with post-employment benefit plans
Entities administering or executing post-employment benefit plans of the employees of NN Group are considered to be related parties of
NN Group. This relates to NN Group’s pensions funds, i.e. the ING Group DB pension fund (joint with ING Bank), the Stichting Pensioenfonds
Delta Lloyd, the NN CDC pension fund in the Netherlands and Instelling voor Bedrijfspensioenvoorziening Delta Lloyd Life OFP in Belgium.
For more information on the post-employment benefit plans, reference is made to Note 28 ‘Staff expenses’.
Notes to the Consolidated annual accounts continued
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48 Related parties continued
Transactions with other related parties
Investment funds
Other related parties include NN Group managed investment funds. Reference is made to Note 47 ‘Structured entities’ for more information.
Pension entities
NN Group operates several pension entities in the Netherlands, including BeFrank PPI N.V. and De Nationale Algemeen Pensioenfonds.
For these entities, all asset management and other services are provided by NN Group entities on an arm’s length basis. NN Group has no
financial interest in the pension schemes that are executed by these entities. These entities are considered related parties.
49 Key management personnel compensation
Transactions with key management personnel (Executive Board, Management Board and Supervisory Board) are transactions with related
parties. These transactions are disclosed in more detail as required by Part 9 Book 2 of the Dutch Civil Code in sections II and III in the
remuneration report in the financial report. These sections of the remuneration report are therefore part of the annual accounts.
2021
Executive Board and Management Board (2021)
amounts in thousands of euros
Executive
Board
Management
Board
3
Total
Fixed compensation:
– base salary (cash) 2,557 3,947 6,504
– base salary (fixed shares) 639 889 1,528
– pension costs
1
49 162 211
– individual saving allowance
1
692 953 1,645
Variable compensation:
– upfront cash 118 206 324
– upfront shares 118 206 324
– deferred cash 176 241 417
– deferred shares 176 309 485
Other
2
67 67
Fixed and variable compensation 4,525 6,980 11,505
Other benefits 350 322 672
Employer cost social security
4
131 270 401
Total compensation 5,006 7,57 2 12,578
1 The pension costs consist of an amount of employer contribution (EUR211 thousand) and an individual savings allowance (EUR1,645 thousand), which is 23.3% of the amount of base salary above
EUR112,189.
2 For the NN Investment Partners business, 50% of deferred awards are made in a deferred investment in funds managed by the business instead of awarding deferred cash. In this way, alignment of interests
is achieved between staff working in the NN Investment Partners business and the clients who invest in funds managed by that business.
3 Satish Bapat was appointed to the Management Board as CEO NN Investment Partners on 1 April 2017 and stepped down on 19 August 2021.
4 The employer cost social security do not impact the overall remuneration received by the Executive Board and Management Board members.
In the table above, ‘Executive Board’ refers to the two members of the Executive Board as at 31 December 2021. The two members of the
Executive Board are also members of the Management Board. In the table above, ‘Management Board’ refers to the six members of the
Management Board as at 31 December 2021, i.e. those members that are not also member of the Executive Board. In the table above ‘Total’
refers to all members of the Management Board during 2021.
Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in ‘Staff
expenses’ as part of ‘Total expenses’. The total remuneration as disclosed in the table above (for 2021: EUR12.6 million) includes all variable
remuneration related to the performance year 2021. Under IFRS-EU, certain components of variable remuneration are not recognised in the
profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses
in 2021 and therefore included in ‘Total expenses’ in 2021, relating to the fixed expenses of 2021 and the vesting of variable remuneration of
2021 and earlier performance years, is EUR13.4 million.
As at 31 December 2021, members of the Executive Board and Management Board held a total of 166,577 NN Group N.V. shares.
In 2021, 35,645 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board.
Notes to the Consolidated annual accounts continued
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49 Key management personnel compensation continued
Supervisory Board (2021)
amounts in thousands of euros
Supervisory
Board
Fixed fees 831
Expense allowances 71
Compensation Supervisory Board 902
The above mentioned amounts include VAT of EUR37 thousand for 2021. NN Group does not provide for any pension arrangement,
termination arrangements (including termination or retirement benefits) or variable remuneration, for members of the Supervisory Board.
As at 31 December 2021, members of the Supervisory Board held no NN Group N.V. shares.
Loans and advances to members of the Executive Board and Management Board (2021)
amounts in thousands of euros
Amount
outstanding
31 December
Average
interest rate Repayments
Executive Board members 5.28% 320
Management Board members 401 1.77% 74
Loans and advances 401 394
As at 31 December 2021, no loans and advances were provided to members of the Supervisory Board.
2020
Executive Board and Management Board (2020)
amounts in thousands of euros
Executive
Board
Management
Board
3
Total
Fixed compensation:
– base salary (cash) 2,557 3,376 5,933
– base salary (fixed shares) 639 639
– pension costs
1
48 148 196
– individual saving allowance
1
693 628 1,321
Variable compensation:
– upfront cash 107 392 499
– upfront shares 107 392 499
– deferred cash 159 494 653
– deferred shares 159 589 748
Other
2
95 95
Fixed and variable compensation 4,469 6,114 10,583
Other benefits 367 711 1,078
Employer cost social security
4
131 200 331
Total compensation 4,967 7,025 11,992
1 The pension costs consist of an amount of employer contribution (EUR196 thousand) and an individual savings allowance (EUR1,321 thousand), which is 23.3% of the amount of base salary above
EUR110,111.
2 For the NN Investment Partners business, 50% of deferred awards are made in a deferred investment in funds managed by the business instead of awarding deferred cash. In this way, alignment of interests
is achieved between staff working in the NN Investment Partners business and the clients who invest in funds managed by that business.
3 Bernhard Kaufmann was appointed Chief Risk Officer and Member of the Management Board NN Group on 1 June 2020. Leon van Riet was appointed CEO Netherlands Life & Pensions and Member of the
Management Board NN Group on 1 June 2020.
4 The employer cost social security do not impact the overall remuneration received by the Executive Board and Management Board members.
In the table above, ‘Executive Board’ refers to the two members of the Executive Board as at 31 December 2020. The two members of the
Executive Board are also members of the Management Board. In the table above, ‘Management Board’ refers to the seven members of the
Management Board as at 31 December 2020, i.e. those members that are not also member of the Executive Board. In the table above ‘Total’
refers to all members of the Management Board during 2020.
Notes to the Consolidated annual accounts continued
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49 Key management personnel compensation continued
Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in ‘Staff
expenses’ as part of ‘Total expenses’. The total remuneration as disclosed in the table above (for 2020: EUR12.0 million) includes all variable
remuneration related to the performance year 2020. Under IFRS-EU, certain components of variable remuneration are not recognised in the
profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses
in 2020 and therefore included in ‘Total expenses’ in 2020, relating to the fixed expenses of 2020 and the vesting of variable remuneration of
2020 and earlier performance years, is EUR10.7 million.
As at 31 December 2020, members of the Executive Board and Management Board held a total of 124,172 NN Group N.V. shares.
In 2020, 40,278 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board.
Supervisory Board (2020)
amounts in thousands of euros
Supervisory
Board
Fixed fees 870
Expense allowances 73
Compensation Supervisory Board 943
The above mentioned amounts include VAT of EUR164 thousand for 2020. NN Group does not provide for any pension arrangement,
termination arrangements (including termination or retirement benefits) or variable remuneration, for members of the Supervisory Board.
As at 31 December 2020, members of the Supervisory Board held no NN Group N.V. shares.
Loans and advances to members of the Executive Board and Management Board (2020)
amounts in thousands of euros
Amount
outstanding
31 December
Average
interest rate Repayments
Executive Board members 320 5.10% 95
Management Board members 476 1.71% 95
Loans and advances 796 190
As at 31 December 2020, no loans and advances were provided to members of the Supervisory Board.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
50 Fees of auditors
Fees of auditors
2021 2020
Audit fees 18 17
Audit related fees 4 2
Fees of auditors 22 19
Fees as disclosed above relate to the network of the NN Group’s auditors and are the amounts related to the respective years, i.e. on an
accrual basis (excluding VAT).
The audit related fees include the services in relation to prospectuses, internal control reports provided to external parties, reporting to
regulators and in 2021 IFRS 9 and 17.
Auditor fees are included in ‘External advisory fees’ as part of the Other operating expense.
51 Subsequent events
ABN AMRO life insurance subsidiary
In February 2022 NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen announced that they have reached an
agreement to sell the life insurance subsidiary of ABN AMRO Verzekeringen to Nationale-Nederlanden Levensverzekering Maatschappij N.V.
(NN Life). ABN AMRO Verzekeringen is a joint venture between NN Group (51%) and ABN AMRO Bank (49%). The life insurance subsidiary of
ABN AMRO Verzekeringen is already consolidated by NN Group and, therefore, this transaction will not have significant impact on NN Group.
Share buyback programmes
In February 2022 NN Group announced that it will execute an open market share buyback programme for an amount of EUR 250 million.
The programme will be executed within 12 months and commenced on 1 March 2022. NN Group also announced in February that it will
execute an additional open market share buyback programme for an amount of EUR 750 million after completion of the sale of NNIP.
This intended additional share buyback programme is expected to be completed before 1 March 2023. Both share buybacks will be deducted
in full from Solvency II Own Funds in the first half of 2022 and are estimated to reduce NN Group’s Solvency II ratio by approximately
10%-points.
52 Risk management
Introduction
Accepting and managing risks is an integral part of our insurance, banking and investment management business and therefore, risk
management is fundamental. Appropriate risk management enables NN Group to meet obligations towards clients, regulators and
other stakeholders.
The Risk Management paragraph has the following structure:
I. Covid-19; impact of the Covid 19 pandemic on NN Group during 2021
II. Risk Management System, consisting of:
III. Risk Governance, based on the Three lines of defence model; and
IV. Risk Control Cycle, covering Risk Strategy (incl. Risk Appetite Statements, Limits and Tolerances), Risk Assessment, Risk Monitoring, Risk
Reporting and Risk Culture
V. Risk Profile, categorised into:
VI. Strategic and emerging risks, including climate change;
VII. Financial risks (based on the structure of our Internal Model); and
VIII. Non-Financial risks
Notes to the Consolidated annual accounts continued
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I. Covid-19 pandemic
With reference to Note 2 on the Covid-19 pandemic, the most significant Covid-19 related risks that NN Group is facing in the current context
are related to the political and regulatory environment (how governments and supervisors respond to the crisis), volatility in financial markets
(including interest rates, equity prices, inflation and spreads) and operational risk (continuity and security of business processes). NN Group is
constantly monitoring the developments and the (potential) impact on NN Group through:
• A dedicated Covid-19 coordination team monitoring regularly developments in different areas, discuss our response, and set into motion
required actions. The Covid-19 coordination team has regular contact with internal and external stakeholders, such as with supervisors
DNB and AFM and senior management and employees, to communicate any changes to corporate policies, remedial actions required and
provide regular progress reporting.
• Monitoring of financial markets: To make sure financial positions are monitored, and losses are avoided or mitigated, several financial
indicators related to volatility and liquidity of markets are monitored, for example interest rates, inflation rates, equity prices, bond spreads,
etc.
• Applying stress testing and scenario analysis to assess impact of financial market developments on our solvency and liquidity positions.
As part of scenario analysis, we analysed both the impact of a prolonged Covid-19 crisis when vaccine-resistant mutations arise, as well
as scenarios where Covid-19 will become endemic. In other words the pandemic will not end with the virus disappearing, but that enough
people will gain immunity protection from vaccination or natural infection, such that there will be less transmission and much less Covid-19-
related hospitalisation and death, even as the virus continues to circulate.
• Monitoring of impact on customers: Monitoring morbidity and mortality rates (customers passing away due to Covid-19), claim rates from
customers getting sick by Covid-19 or longer disability where treatments are postponed, lapse and prepayment behaviour, and whether
products still fit customer’ needs.
• Monitoring of third parties and business partners: To ensure that services outsourced by NN, are delivered according to agreed service
levels, and to ensure that our sales and support networks via tied agents and brokers remain healthy, and extra measures are taken
as necessary.
• Monitoring business continuity and IT security: To make sure that customers can be serviced in a normal way using our digital channels,
where necessary via accelerated digital initiatives, to ensure that NN Group’s employees could work safely from home and to make sure
financial market operations and payments could continue as normally as possible, while potential IT (security) risks are mitigated.
We will continue to monitor further developments related to the Covid-19 pandemic, and adjust our response accordingly. Where relevant, in
the rest of this Note 52 we discuss the impact of the Covid-19 pandemic on the different risk types in more detail.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
II. Risk Management System
III. Risk Governance / System of Governance
NN Group’s System of Governance comprises amongst others the following elements:
• General governance elements, including amongst others reporting lines, decision structures, company policies, and segregation of duties,
• Remuneration,
• Persons who effectively run NN Group or have other key functions, who should be ‘Fit and Proper’,
• Key Functions: the Risk Management, Compliance, Actuarial and Internal Audit Functions,
• System of Risk Management and Internal Control,
• Investment activities,
• Capital Management, and
• Managing and overseeing outsourcing critical or important operational functions and activities.
In 2021, a review of NN Group’s System of Governance, as required under Solvency II was conducted by the Management Board and discussed
with the Supervisory Board. The review was based, amongst others, on self-assessments by each Key Function on its compliance with
requirements and on its operational effectiveness, as well as on a self-assessment by each Business Unit on the effectiveness of their local
System of Risk Management and Internal Control (challenged by the Risk Management and Compliance Key Functions). Overall, whilst some
improvement areas were identified with actions defined and taken, the Management Board concluded that NN Group’s System of Governance is
adequate and effective, supports its strategic objectives and operations and provides for sound and prudent management of the business.
NN Group’s risk governance follows the ‘three lines of defence’ concept, which outlines the decision-making, execution and oversight
responsibilities for NN Group’s risk management. This structure has been embedded at both Head Office and Business Unit level.
The prudent person principle stipulates that insurers may only invest in assets and instruments whose risks the undertaking concerned
can properly identify, measure, monitor, manage, control and report and appropriately take into account in the assessment of its overall
solvency needs.
Three lines of defence
The three lines of defence defines three risk management levels, each with distinct roles, decision authorities, execution responsibilities, and
oversight responsibilities. This concept helps to ensure that risks are managed in line with the risk appetite as defined by the Executive Board,
ratified by the Supervisory Board, and cascaded throughout NN Group.
• First line of defence consists of the CEO of NN Group and the CEOs of the Business Units, as well as their first line management board
members that collectively make business decisions, with primary accountability for financial performance, sales, operations, investments,
and related risks affecting their businesses. Business Units design and sell products that reflect local needs and thus know their customers
and are well-positioned to act in both the customers’ and NN Group’s best interest.
• Second line of defence consists of independent oversight functions at BU and head office level, most notably risk management, model
validation, actuarial, compliance, and legal functions. Those functions support the commercial departments in their decision-making, but
also provide sufficient countervailing power to prevent risk concentrations and other forms of unwanted or excessive risk taking. Second line
functions have the following responsibilities:
– Developing the policies, standards, guidance and charters for their specific risk and control area
– Encouraging and objectively challenging/monitoring sound risk management throughout the organisation and coordinating the reporting
of risks
– Supporting the first line of defence in making proper risk-return trade-offs
– Escalation power in relation to business activities that are judged to present unacceptable risks to NN Group
• Third line of defence: Corporate Audit Services (CAS) provides independent assurance on the effectiveness of NN Group’s business and
support processes, including governance, quality of risk management and quality of internal controls. CAS assesses first line of defence
activities as well as second line of defence activities.
Executive management – First line of defence
Management of our Business Units take business decisions and are the primary ‘risk-takers’ in our company. They are also responsible, both
on the executive as well as process level of the organisation, for properly managing risks on a daily basis.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
Executive Board and Management Board
The Executive Board is responsible for ensuring that the company has adequate internal risk management and control systems in place
so that it is aware, in good time, of any material risks the company has and that these risks can be managed properly. While the Executive
Board retains responsibility for NN Group’s risk management, it has entrusted the day-to-day management and the overall strategic direction
of the company, including the management of the structure, operation and effectiveness of NN Group’s internal risk management and
control systems, to the Management Board. The Executive Board (‘EB’) of NN Group has established four committees: Crisis, Disclosure,
Compensation and Asset and Liability Committee.
The crises committee is responsible for the content of the Preparatory Crisis Plan. More details regarding this plan can be found under
section Risk Reporting/Preparatory Crisis Plan.
Supervisory Board and its committees
The Supervisory Board is responsible for supervising the management of the Executive Board and the general course of affairs of NN Group
and its businesses. The Supervisory Board also assists the Executive Board with advice. Each entity in the NN Group legal structure has its
own Management and Supervisory Board. For supervising, advising and monitoring the Executive Board, the Supervisory Board is assisted by
two committees:
• The Risk Committee focuses on (1) NN Group’s risk appetite, risk strategy and policies, (2) risk exposures resulting from the strategy and
business plan, such as significant acquisitions and divestments, (3) the design, operation and effectiveness of the internal risk management
and control systems of the group and (4) NN Group’s public disclosures on risk and risk management.
• The Audit Committee focuses on (1) the related design, operation and effectiveness of the internal risk management and control systems;
(2) the integrity and quality of the financial reporting process including risks related to IT (security); and (3) the periodic financial reports and
any ad hoc financial information. As part of this role, the Audit Committee evaluates the findings and outcome as reported by the internal
auditor CAS and external auditor with regard to governance, risk management and internal control. The Audit Committee is the principal
contact for the external auditor, including matters such as (re)appointment, remuneration and monitoring independence.
For more details on these two committees, read more in the section ‘Report of the Supervisory Board’ of this Annual Report.
NN Group has a Head Office that gives direction toward Business Units around risk taking via the Risk Policy Framework and Risk Appetite
Framework (see Risk control cycle step 1: Risk strategy). NN Group’s risk policy framework ensures that all risks are managed consistently
and that NN Group as a whole operates within set risk appetite and related risk limits and tolerances. The policies and minimum standards
focus on risk measurement, risk management and risk governance. Policies and standards have to be approved by the Management Board
of NN Group. Any potential waivers to Group policies or standards require delegated approval of the CRO or General Counsel.
Business Units may independently perform all activities that are consistent with the strategy of NN Group and the approved (three year)
business plan (the ‘Business Plan’) as long as these are consistent and compliant with the internal risk management and control frameworks,
applicable laws and regulations, applicable collective agreements, NN Group’s risk appetite, NN Group Values, and provided that these
activities are not under the decision-making authority of the Management Board. Each business unit is expected to operate transparently
and must provide all relevant information to the relevant Management Board members and Support Function Head(s) at Head Office.
The Business Unit CEOs are responsible for:
• Execution of the strategy and the financial performance, of business and operational activities, in their respective area, as well as the
related risks
• Ensuring that the business operates in compliance with laws and regulations, NN Group policies and standards and internal controls
• Fulfilling their statutory responsibilities
• Operating a sound internal risk and control system and operating in accordance with NN Group’s values
• Viability of the corresponding business unit in the long term
Regular oversight interaction between Head Office and Business Units takes place with respect to, amongst others, product approval,
mandate approval, risk limit setting, risk reporting, Own Risk and Solvency Assessment (ORSA), policy setting and implementation monitoring,
model and assumption review and validation. These interactions cover all types of risks, both financial and non-financial risks.
Ad-hoc interactions also take place when a Business Unit proposes a material business initiative for which any Management Board member
has the right to initiate a risk review. A risk review may also be initiated to investigate a significant incident or unexpected significant adverse
business performance in and by Business Units. A risk review is an in-depth risk analysis of the object in scope concluded with a risk opinion
and advice when and where relevant.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
Risk, Compliance and Actuarial – Second line of defence
Risk Management Function:
Within the Management Board, the CRO is entrusted with the day-to-day execution of the Risk Management Function, while the Legal
Function and Compliance Function fall within the responsibility of the General Counsel.
The NN Group CRO steers an independent risk organisation which supports the first line in their decision-making with sufficient
countervailing power to prevent excessive risk taking. The NN Group CRO is also responsible for the organisation of Group Risk at Head
Office level. Each business unit has its own CRO, who reports hierarchically to the BU CEO, and has a functional line to the NN Group CRO.
The NN Group CRO must ensure that both the Management Board and the Supervisory Board are at all times informed of, and understand
the material risks to which NN Group is exposed.
Responsibilities of the Risk Management Function include:
• Setting and monitoring compliance with NN Group’s overall risk policies issued by the Risk Management Function
• Formulating NN Group’s risk management strategy and ensuring that it is implemented throughout NN Group
• Supervising the operation of NN Group’s risk management and business control systems
• Reporting of NN Group’s risks, as well as the processes and internal controls
• Making risk management decisions with regard to matters which may have an impact on the financial results of NN Group or its reputation,
without limiting the responsibility of each individual member of the Management Board in relation to risk management
• Sharing best practices across NN Group
Group Risk supports the NN Group CRO in the execution of his duties and responsibilities. To ensure solid understanding, oversight, and
support to the international Business Units, the NN Group CRO is supported by a dedicated CRO International and a CRO International
Organisation department at Group level. Risk governance and frameworks, as well as internal and external risk reporting, is supported by
the Enterprise Risk Management (ERM) team, which team also covers Operational Risk Management and IT Risk Management. The newly
established Risk Models & Analytics team takes care of the coordination, implementation and operation of NN Group’s Partial Internal Model.
A specialised ALM & Investment Risk Management team provides extra emphasis to the management of those risk types.
Model Validation Function:
Model Validation aims to ensure that NN Group’s models are fit for their intended use. For this purpose, Model Validation carries out
validations of risk and valuation models in particular those related to Solvency II. Any changes to models that have an impact larger than
certain pre-set materiality thresholds require approval from either the Group CRO, Group CFO, or the NN Group Management Board.
Model validation is not a one-off assessment of a model, but an ongoing process whereby the reliability of the model is verified at different
stages during its life cycle: at initiation, prior to approval, when the model has been redeveloped or modified, and on a regular basis, based on
a planning discussed and agreed with the Model Development departments. It is not only a verification of the mathematics and/or statistics
of the model but encompasses both a quantitative and qualitative assessment of the model. Accordingly, the validation process covers a mix
of developmental evidence assessment, process verification and outcome analysis.
The validation cycle determines the maximum period between two model validations, which can be up to five years. This means that each
model in scope will be independently validated at least once within the validation cycle. In general, the length of the validation cycle relates
to the relative materiality of the models in scope. Model Validation can also start validating before the due date, for example following
specific portfolio/market developments or regulatory changes. Materiality of a model is determined based on quantitative and qualitative
criteria. Quantitative criteria relate to, amongst others, a percentage of Market Value of Liabilities/Assets, or Solvency Capital Requirement.
Qualitative criteria cover model complexity, strategic importance and other factors. Depending on materiality of the model as well as the
severity of findings resulting from a model validation, models receive a Validation Opinion. Models with severe findings require remediation
actions by management, such as further adjustments of the model.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
Compliance Function:
To effectively manage business conduct risk, NN Group has an independent Compliance Function headed by a Chief Compliance
Officer who has a direct reporting line to the General Counsel and Management Board member. The Compliance Function is positioned
independently from the business it supervises. This independent position is, amongst others, warranted by independent reporting,
unrestricted access to senior management as well as structural, periodic meetings of the Chief Compliance Officer with the CEO and the
Chairman of the Risk Committee of the Supervisory Board. Within NN Group’s broader risk framework, the purpose of the Compliance
Function is to:
• Understand and advocate rules, regulations and laws for the effective management of risks in scope of the compliance function
• Proactively work with and advise the business to manage business conduct and product suitability risk throughout our products’ life cycle
and our business’ activities to meet stakeholder expectations
• Develop and enhance tools to strengthen the three lines of defence to detect, communicate, manage and to report on business
conduct risks
• Support NN Group’s strategy by establishing clear roles and responsibilities to help embed good compliance practices throughout the
business by using a risk-based approach to align business outcomes with NN Group’s risk appetite
• Deepen the culture of compliance by partnering with the business to increase the culture of trust, accountability, transparency and integrity
in evaluating, managing and in reporting on business conduct risk
• Developing and maintaining a framework to support the first line in adhering to material laws and regulations which is aligned with
NN Group’s Risk & Control framework
• Monitor that management and employees act in accordance with NN Group’s policies and standards in scope of the function, as well as
relevant material laws and regulation.
At the business unit level, management establishes and maintains a Compliance Function and appoints a Local Compliance Officer (LCO).
The LCO hierarchically primarily reports to the CEO.
The LCOs have a functional reporting line to the Chief Compliance Officer.
Actuarial Function:
The Actuarial Function reports hierarchically to the CRO and has in addition a functional reporting line to the CFO as of June 2021.
The primary objective of the Actuarial Function, is to ensure that technical provisions (under Solvency II and IFRS) are reliable and adequate,
and as such that NN Group is able to meet its obligations towards policyholders and to protect NN Group from loss or reputational damage.
The Actuarial Function operates within the context of NN Group’s broader Risk Management System. Within this system, the role of the
Actuarial Function is to:
• Understand and advocate the rules, regulations and laws for effective management of the calculation process of technical provisions,
covering elements such as data quality, assumption setting, models and methods, as well as underwriting and reinsurance arrangements;
proactively advise the business to manage the risk of unreliable and inadequate technical provisions
• Inform management and the supervisory board on its opinion on the adequacy and the reliability of the technical provisions, the adequacy of
reinsurance arrangements and the underwriting policy at least on an annual basis through the Actuarial Function Report
• Develop and enhance tools to strengthen the three lines of defence to detect, communicate, manage and to report on risks related to
unreliable or inadequate technical provisions
• Support NN Group’s strategy by establishing clear roles and responsibilities to help embed good (actuarial) practices throughout the
organisation by using a risk-based approach aligned with NN Group’s risk appetite
• Strengthen the culture of professional risk management by challenging management and experts to increase the culture of trust,
accountability, transparency and integrity in evaluating, managing of and reporting on risks to unreliable or inadequate technical provisions
• Provide second line opinion when first line business initiatives can materially impact the risk profile of a business unit or NN Group and/or
provide additional assurance for presented key first line risk related information
Corporate Audit Services – Third line of defence
Internal Audit Function:
Corporate Audit Services NN Group, the internal audit department within NN Group, is an independent assurance function and its
responsibilities are established by the Executive Board of NN Group, pre-discussed with the Audit Committee and approved by the
Supervisory Board of NN Group. CAS provides independent assurance on the effectiveness of NN Group’s business and support processes,
including governance, quality of risk management and quality of internal controls.
CAS keeps in close contact with home and local supervisors and regulators as well as with the external auditor via regular meetings in
which current (audit) issues are discussed, as well as internal and external developments and their impact on NN Group and CAS. CAS also
provides information like risk assessments and relevant (audit) reports.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
The General Manager and staff of CAS are authorised to:
• Obtain without delay, from General Managers within NN Group, information on any significant incident concerning NN Group’s operations
including but not limited to security, reputation and/or compliance with regulations and procedures
• Obtain without delay, from responsible managers within NN Group, a copy of all letters and reports received from external review agencies
(e.g. external auditor, supervisors, regulators and other agencies providing assurance related services)
• Have free, full, unrestricted and unfettered access, at any time deemed appropriate, to all NN Group departments, offices, activities, books,
accounts, records, files, information. CAS must respect the confidentiality of (personal) information acquired
• Require all NN Group staff and business management to supply such information and explanations, as may be needed for the performance
of assessments, within a reasonable period of time
• Allocate resources, set frequencies, select subjects, determine scope of work and apply appropriate techniques required to accomplish the
CAS’s objectives
• Obtain the necessary assistance of personnel in various departments/offices of NN Group where CAS performs audits, as well as other
specialised/professional services where considered necessary from within or outside NN Group. CAS should exercise its authority with the
minimum possible disruption to the day-to-day activities of the area being assessed
In compliance with the Dutch Corporate Governance Code, the Executive Board is responsible for the role and functioning of CAS,
supervised by the Supervisory Board, supported by the Audit Committee. The General Manager of CAS is accountable to the CEO and
functionally to the chair of the Audit Committee. On a day-to-day basis the General Manager of CAS reports to the CEO.
IV. Risk Control Cycle
NN Group’s business model exposes NN Group to inherent risks and obligations.
As such, the environment determines the playing field and rules against which to
calibrate risk management activities. These activities are carried out within NN
Group’s risk appetite and framework.
Every employee has a role in identifying risk in their area of responsibility and to
manage risk in a proactive way. It is paramount to know which risks we take and
why, to be aware of large existing and emerging risks and to ensure an adequate
return for the risk assumed in the business.
NN Group’s risk control cycle consists of four steps, supported by a sound risk
culture. The cycle starts with (1) setting business and risk objectives, resulting in
a risk strategy (risk appetite, policies and standards). The next steps of the cycle
are: (2) to identify and assess the risks that need to be managed; followed by (3)
effective mitigation through controls; and (4) continuous monitoring effectiveness
of controls, including reporting of risk levels. This cycle is supported by a sound
risk culture.
The risk control cycle ensures that BUs and NN Group operate within the risk appetite. The risk control cycle supports the NN Group strategy,
the Business Plan (financial control cycle) and the performance management (HR cycle) which enable BUs and NN Group to meet its
business objectives.
Step 1 of the risk control cycle: Risk Strategy
NN Group’s risk appetite is the key link between NN Group’s strategy, capital plan and regular risk management as part of business plan
execution. NN Group’s risk appetite, and the related risk limits and tolerances, is established in conjunction with the business strategy.
The Risk Appetite Statements define how NN Group weighs strategic decisions and communicates its strategy to key stakeholders and
BU CEOs with respect to accepting risk. The statements describe how NN Group wants to avoid unwanted or excessive risk taking and
aim to optimise use of capital. Risk limits and tolerances are the qualitative and quantitative boundaries for risk taking and are derived in a
consistent way from the risk appetite statements.
Notes to the Consolidated annual accounts continued
Risk
Assessment
Risk
Control
Risk Monitoring
& Reporting
Risk
Strategy
Risk
Culture
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NN Group expresses its risk appetite via three key risk appetite statements, which are then internally detailed further into ten sub-statements,
relevant risk limits and tolerances, control objectives and reporting. These three statements are also aligned with the NN Group’s strategy:
Risk Appetite Statement Description
Strategic Challenges
(Shaping the business)
We manage our portfolio of businesses on a risk-return basis to meet our
strategic objectives whilst considering the interests of all stakeholders.
Strong Balance Sheet
(Running the business – financially)
We would like to avoid having to raise equity capital after a 1-in-20 year event
and do not want to be a forced seller of assets when markets are distressed.
Sound Business Performance
(Running the business – operationally)
We conduct our business with the NN Group Values at heart and treat our
customers fairly. We aim to avoid human or process errors in our operations
and to limit the impact ofanyerrors.
Risk Taxonomy
NN Group has defined and categorised its generic risk landscape with the risk taxonomy as outlined below:
Risk Appetite Statement Risk Class Description
Strategic Challenges
(Shaping the business)
Emerging Risks Newly developing risks, or changing risks, that cannot yet be fully assessed
or quantified but that could, in the future, affect the viability of NN Group’s
strategy.
Strategic Risks Risks arising from making incorrect business decisions, implementing
decisions poorly, or being unable to adapt to changes in the operating
environment.
Strong Balance Sheet
(Running the business –
financially)
Market Risks Risks related to (the volatility of) financial and real estate markets. This
includes liquidity risk.
Counterparty Default Risks Risks related to counterparties failing to meet contractual debt obligations.
Non-Market Risks Financial risks related to the products NN Group markets.
Sound Business Performance
(Running the business –
operationally)
Non-Financial Risks Risks related to people, inadequate or failed internal processes, including
information technology and communication systems, and/or external events.
Risk Limits and Tolerances
Risk appetite statements are implemented within the business through the use of risk tolerances and limits, as prescribed in specific policies
for relevant risk categories. A risk limit is the maximum exposure of a risk, management is willing to accept, and should not be breached. A risk
tolerance is the level of exposure of a risk, where management wants to be actively informed – it is set to function as a trigger for reviewing
the exposure regularly and might lead to taking action.
Notes to the Consolidated annual accounts continued
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Risk Appetite Statement Primary Impact Area Key Risk Limits and Tolerances
Strategic Challenges
(Shaping the business)
License to operate Various metrics related to the Business Plan, such as progress on main
strategic initiatives.
Strong Balance Sheet
(Running the business –
financially)
Financial Solvency II ratio: the ratio of Eligible Own Funds (EOF) to Solvency
Capital Requirement (SCR). NN Group aims to capitalise its operating
units adequately at all times. To ensure adequate capitalisation, they are
managed to their commercial capital levels (based on the Solvency II ratio) in
accordance with the risk associated with the business activities.
Solvency II ratio sensitivities: assess the changes for both NN Group EOF and
SCR under various scenarios decided by NN Group Management Board.
Cash capital position at the holding company: cash capital is defined as
net current assets available at the holding company. NN Group holds a cash
capital position in the Holding company to cover stress events and to fund
holding company expenses and interest expenses.
Own Funds at Risk limits: NN Group has implemented limits to monitor the
impact of moderate stress events at Business Units and is monitoring the
required level of capital and financial flexibility at the holding level in relation
to this.
Interest Rate Risk limits: NN Group has implemented limits and tolerances for
interest rate risk exposures at NN Group and BU level.
Concentration Risk limits: in order to prevent excessive concentration risk,
NN Group has a concentration risk limit framework. The framework sets a risk
appetite and concentration limits on corporate and sovereign issuers, asset
type and country of risk.
Bank capitalisation: amount of capital NN Bank has to hold as required by the
regulator as part of Basel III framework, expressed as a capital adequacy ratio
of equity that must be held as a percentage of risk-weighted assets.
Liquidity risk: liquidity risks are monitored by assessing the ratio between
liquid assets and liquidity requirements for severe stress scenarios and
different time horizons.
Sound Business
Performance
(Running the business –
operationally)
Reputation, Operations Annual Loss Tolorance and materiality: Tolerances on potential yearly loss,
reputation impact and financial reporting accuracy.
Restricted List: to prevent investments in securities that are not in line with NN
Group’s values and/or applicable laws and regulations.
Step 2 of the risk control cycle: Risk Assessment
Risk assessments are regularly performed throughout NN Group. For market, counterparty default and non-market risks, NN Group’s internal
and associated models are leading in risk assessments/measurement. Risks that do not directly impact the balance sheet generally require
professional judgement in identification and quantification: qualitative risk assessments (non-financial risks) and scenario analysis (strategic/
emerging risks) are used to assess identified risks and set up adequate controls.
Risk Appetite Statement Risk Class Risk Assessment and main mitigation technique
Strategic Challenges
(Shaping the business)
Emerging Risks Strategic Risk Assessment, Scenario analysis and contingency planning.
Strategic Risks Scenario analysis and business planning.
Strong Balance Sheet
(Running the business –
financially)
Market Risks Quantified via NN Group’s Partial Internal Model.
Assessed in New Asset Class Assessment (NACA) ALM studies and Strategic
Asset Allocation(SAA).
Mitigated by limit structure and use of derivatives.
Counterparty Default Risks NN Group’s Partial Internal Model; Limit structure.
Non-Market Risks NN Group’s Partial Internal Model; product approval and review process
(PARP), Limit structure, reinsurance.
Sound Business
Performance
(Running the business –
operationally)
Non-Financial Risks Detailed risk assessments on (sub-) processes (including IT aspects, financial
economic crime, fraud, etc.); Business and key controls, control testing,
incident management and external insurance.
In the remainder of the paragraph, we describe some of the assessments as described above in more detail. Main mitigation techniques, such
as our limit structure for financial risks, are discussed in more detail in the Risk profile paragraph, where we discuss all our main risk types and
how we measure and manage them.
Notes to the Consolidated annual accounts continued
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environment
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performance
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governance
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52 Risk management continued
Own Risk and Solvency Assessment (ORSA)
As part of the regular Own Risk and Solvency Assessment (ORSA), a strategic risk assessment is performed at least annually. Detailed risk
assessments, performed bottom up by responsible managers throughout the organisation, serve as a main input. Outcomes of the
strategic risk assessment are key risks, that are potentially solvency threatening, or that may have a significant negative impact on the
achievement of one or more of the business objectives from NN Group’s strategy or business plan. NN Group, and each of its regulated (re)
insurance subsidiaries, prepares an ORSA at least once a year, including the non Solvency II entities Japan and Turkey. In the ORSA, NN
Group articulates its strategy and risk appetite, describes its key risks and how they are managed, analyses whether its risks and capital
are appropriately modelled, and evaluates how susceptible the capital position is to shocks through stress and scenario testing, including a
multi-year view. Stress testing examines the effect of severe but plausible scenarios on the capital position of NN Group. Stress testing can
also be initiated outside the ORSA, either internally or by external parties such as De Nederlandsche Bank (DNB) and European Insurance
and Occupational Pensions Authority (EIOPA). The ORSA includes a forward-looking overall assessment of NN Group’s solvency position
considering the risks it holds. As part of the ORSA, the emerging risks are covered, that in the longer run might impact our balance sheet,
including sustainability risks. For more information we refer to paragraph Risk Profile/Strategic and Emerging Risks. As part of the ORSA,
NN Group also assesses the ongoing appropriateness of its Internal Model which is used to calculate the EOF/SCR ratio. Group Risk also
prepares a separate annual report on the performance and appropriateness of the Internal Model for the Management Board and the Risk
Committee of the Supervisory Board.
Equivalent to the ORSA NN Bank and NN IP performed an Internal Capital Adequacy Assessment and Internal Liquidity Adequacy
assessment to assess whether current capital and liquidity positions, respectively, are adequate for the risks that our banking and asset
management entities bear.
The key risks as identified in 2021 by the Group Management Board in the strategic risk assessment are:
• Delivering on strategic commitments; Risk of not delivering on commitments towards our stakeholders due to undisciplined strategic
execution, too ambitious targets or a full strategic/inorganic growth agenda
• Change agility; Risk of NN Group not being able to timely identify threats and opportunities in the environment and to successfully and
sufficiently implement necessary change
• Data capabilities; Risk of not being able to attract, develop and/or apply best-in-class big data capabilities for pricing, underwriting
and distribution
• Sustainable cost levels; Risk of expenses levels remaining at a too high level compared to competitors
• Regulatory and (geo)political environment; Risk of disintegration of existing economic and political structures, adverse regulatory change or
increased supervisory scrutiny which may have a profound impact on our business model or performance (e.g. Solvency II regulation, Internal
Model, crisis measures, sustainable finance & reporting, (Anti) Money Laundering)
• Corporate social responsibility; Risk of NN Group not adequately balancing stakeholder interests, deviating from societal norms or not being
transparent, on areas like responsible investments, climate change, equality, diversity, taxes and remuneration
• Asset Liability Management (ALM) and investment risk; Risk of reduced available capital or lower investment returns, due to financial market
volatility, low interest rate environment or Environmental, Social and Governance (ESG) matters (such as climate change)
• Longevity risk; Risk of higher technical provisions or required capital if life expectancy increases faster than expected
• Product suitability; Risk that products do not appropriately cover customers’ interests over the full product lifetime
• IT & change risk; Risk of material failures, or insufficiently managed change, in IT systems, networks or platforms, leading to higher expenses,
operational losses or disruption of operations i.e. due to full change agenda, legacy data quality issues
• Cyber risk; Risk of cyber-attacks, leading to misuse, loss of information or privacy breaches, discontinuity of operations or financial or
reputation loss
For more information we refer to the section Managing our risks see page 61.
Product approval and review process (PARP)
The PARP has been developed to enable effective design, underwriting and pricing of all insurance products, as well as to ensure that they
can be managed throughout their lifetime. This process establishes requirements to the product risk profile features to ensure that products
are aligned with NN Group’s strategy. The PARP takes into account customer benefits and product suitability, expected sales volumes, value-
oriented pricing metrics and relevant policies. It includes requirements and standards to assess risks as per the risk categories, as well as the
assessment of the administration and accounting aspects of the product.
Notes to the Consolidated annual accounts continued
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environment
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52 Risk management continued
New asset class assessment (NACA) and investment mandate process
NN Group maintains a NACA for approving investments in new asset classes NN Group establishes a global list of asset classes in which
NN Group entities can invest. The investments in these asset classes are governed through investment mandates given by the insurance
entities to the asset manager(s).
Responsible Investment Framework policy and Restricted List
NN Group has a policy framework in place to ensure that our assets are invested responsibly. Amongst others, the policy includes
requirements to systematically incorporate environmental, social and governance (ESG) factors into the investment process. Furthermore,
the Restricted List should prevent investments in securities that are not in line with NN Group’s values, and/or applicable laws
and regulations.
Internal Capital Adequacy Assessment (ICAAP) and Internal Liquidity Adequacy assessment (ILAAP) for non-insurance entities
At least once a year, NN Group’s banking and asset management operations run a process for ICAAP, and the bank also for ILAAP, in
conformity with Basel III requirements. ICAAP and ILAAP test whether current capital and liquidity positions, respectively, are adequate for
the risks that our banking and asset management entities bear.
Step 3 of the risk control cycle: Risk Control
Risk Control refers to activities undertaken to ensure proper mitigating measures are designed, documented and executed such that risks
are managed within defined risk limits and tolerances.
Activities that theoretically are beyond the formulated risk appetite shall not be started. Inherent risks that are assessed as beyond the risk
appetite shall be controlled to the extent it meets the relevant risk appetite statement(s).
In the Risk Profile section we describe per risk type the mitigating activities.
Step 4 of the risk control cycle: Risk Monitoring (& Reporting)
Risk monitoring helps to assess and evaluate developments in the risk profile. It determines whether risks are within the risk appetite, related
limits and tolerances and in line with policies and standards. Results of the Risk monitoring are reported regularly to responsible managers
of departments, as well as management and supervisory boards of both NN Group and its operating entities. This includes information on
control effectiveness, control deficiencies and incidents, financial risk limits and developments, as well as second line opinion and advice.
Action shall be taken by management when monitoring indicates that risks are not adequately controlled.
Risk Appetite Statement Risk Reporting and Monitoring
Strategic Challenges
(Shaping the business)
We actively monitor and manage our products, distribution channels and
organisation, as well as key performance and risk drivers of our business.
We monitor alignment of investments with the Restricted List. This function is
performed by Corporate Citizenship.
Strong Balance Sheet
(Running the business – financially)
We monitor financial risks on our balance sheet via our Solvency II capital
position and related limits and tolerances.
We monitor our capacity to meet our payment and collateral obligations, even
under severe liquidity stress scenarios.
Sound Business Performance
(Running the business – operationally)
We monitor alignment with applicable laws and regulations, NN Group policies
and standards.
We actively monitor and manage employee conduct and foster a business
culture demonstrating that we live the NN Group values.
We accept but limit losses from non-financial risk and therefore manage to
agreed tolerances by regularly evaluating controls, deficiencies and incidents.
Notes to the Consolidated annual accounts continued
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environment
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performance
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52 Risk management continued
Risk Reporting
On a quarterly basis, the Management Board and Supervisory Board of NN Group are presented with an Own Funds and Solvency Capital
Requirement Report and an Enterprise Risk Management (ERM) Report.
The Own Funds and Solvency Capital Requirement Report aims to provide an overview of the quarterly Solvency II capital position and
development, including the Solvency II ratio sensitivities assessing the changes in various scenarios for both Eligible Own Funds and SCR at
NN Group level. The size and type of the shocks applied for each sensitivity is decided by the Management Board. The Solvency II SCR is a
Value at Risk-measure. Solvency II ratio sensitivities are therefore the alternative analysis for market risk sensitivities that NN Group needs to
disclose, instead of IFRS sensitivities, as required based on IFRS 7 Financial Instruments: Disclosures.
The ERM report is a quarterly report to provide one consistent, holistic overview of the risks of NN Group. It focuses on comparing current risk
levels to our risk appetite and aims to encourage forward-looking risk management. In the ERM report the different Business Units of
NN Group report back on their risk profile versus their risk appetite. This also includes a second line opinion by Risk, Legal and Compliance.
In addition, NN Group has determined via its Crisis Plan a set of measures for early detection of and potential response to a financial or
non-financial crisis, should it occur.
Following the entering into force of the Dutch law on Recovery and Resolution (as of now R&R Law) (in Dutch: ‘Wet Herstel en Afwikkeling
Verzekeraars’), NN Group N.V. (hereafter referred to as ‘NN Group’) has updated the 2020 edition of its Recovery Plan in 2021 to ensure there
are effective strategies in place to deal with severe financial distress.
The aim of this Preparatory Crisis Plan is to ensure that tools, measures and processes are in place that enable NN Group to:
• Avoid going into Recovery
• Timely anticipate an approaching financial distress and/or potential recovery situation
• Quickly recover to an acceptable minimum solvency (and liquidity) level when faced with financial distress and/or Recovery
• The Management Board is responsible for the Preparatory Crisis Plan and the plan is regularly reassessed and updated by Group Finance,
which is filed with DNB.
Risk Control Cycle: Risk Culture
Management plays a vital role in creating a sound risk culture as they are role models and the main messengers of sound risk management.
This includes to:
• show a solid risk management focus in decision making, with a view to long term stability of the business, including understanding and use of
risk models when relevant,
• foster diversity of thoughts and solicits different views in decision making,
• foster a culture of transparency in which early identification of risk issues and material incidents are communicated timely to relevant parties,
• ensure operational management take their proper responsibilities in the risk control cycle,
• address dysfunctional behaviour of staff,
• ensure adequate staffing and ensure employees are well trained for their roles, and
• actively manage risks throughout the lifetime of products and not just at the moment of sale.
Within our risk management cycle, we perform regular assessments with regard to risk culture and maturity, to assess and learn whether
this supports the effective functioning of the risk control cycle. The ECF Maturity Reflection is an assessment that provides the BU CEO with
a periodical confirmation that the framework is still materially complete and operated by first and second line as intended, ensuring he will
be timely informed on things he needs to know from risk perspective, either by lower first line levels or by the second line, and if not, what the
ambition is. In addition it creates awareness on what a good (risk) culture entails and fosters internal discussions on the same. We refer to the
Safeguarding Value Creation for further information.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
V. Risk profile
VI. Strategic and emerging risks
• Business Model Risk: Risk of NN Group’s business model not being able to timely adapt to changing market circumstances (resulting
in lower revenues vs. our cost base) (this includes risks related to NN Group’s strategy, M&A, product portfolio, legal structure and
operating model)
• HR Risk: Risk of not being able to attract, retain and pay competent employees, including world class talents, to shape and build NN
Group’s business
• Disruptive Technology Risk: Risk of technological developments having a profound impact on the businesses of NN Group
• Political & Regulatory Risk: Risk of political and regulatory developments having a profound impact on the businesses of NN Group
• Societal Risk: Risk of evolving norms and values in society, including its view on dealing with the environment, having a profound impact on
the business of NN Group
Strategic risks
Risk profile
Economic, technological, ecological and demographic developments are impacting the strategic context in which we operate. To remain
relevant to our customers in the long run, we need to timely anticipate these developments. Strategic risks are risks arising from making
incorrect business decisions, implementing decisions poorly, or being unable to adapt to changes in the operating environment.
NN Group manages its portfolio of businesses on a risk-return basis to meet strategic objectives whilst considering the interests of
all stakeholders.
In the annual Strategic Risk assessment (for more detail see section: Steps 2 & 3 of the risk control cycle: Risk Assessment & Control) the
Management Board of NN Group identified the following strategic and emerging risks: Delivering on strategic commitments, Change agility,
Lack of data capabilities, Sustainable cost levels, Regulatory and (geo)political environment and Corporate social responsibility. For more
details on these key risks we refer to Managing our risks.
Risk mitigation
Strategic risks are mainly managed by undertaking strategic projects to adjust our organisation, products or businesses to address new
regulatory, technological or demographic developments. We realise organic growth in the markets we are active by developing new
ecosystems or products. Further, we undertake targeted acquisitions or sale of businesses in markets where we feel we can grow/withdraw.
Recent transactions include the divestment of NN Investment Partners, the acquisition of MetLife entities in Poland and Greece and the
majority stake we acquired in broker Heinenoord to further strengthen our Dutch non-life business. The Risk, Compliance and Legal teams
are involved in M&A activities through providing a second line opinion prior to decision making, or involvement in the integration/separation
programmes. We also undertake scenario analysis to analyse potential future events that can impact our strategy and/or capital position,
among others in the ORSA.
Risk measurement
Strategic risks are not fully quantified, instead several metrics are reported, such as (externally) progress versus our strategic commitments
and (internally) progress on strategic initiatives. We refer to Our strategy & performance for more details.
Emerging risks (including risks related to ESG matters)
Risk profile
Emerging risks are newly developing risks, or changing risks, that cannot yet be fully assessed or quantified but that could, in the future,
affect the viability of NN Group’s strategy. Most of these risks have a high degree of uncertainty with regard to how they can impact us, or the
size of the impact.
An important topic that receives significant attention are risks related to ESG matters, including climate change. They represent drivers that
create risks in multiple parts of our operations. The Group Management Board identified the following key risks, partially driven by ESG and
climate change developments: ALM and investment risk (physical and transitional) which covers the financial risks impacting our business,
Corporate social responsibility that covers the reputational part and Regulatory and (geo)political environment that covers the regulatory
changes that impact our business (a.o. sustainability regulations). For more information on these specific risks, we refer to the section
Managing our risks.
Notes to the Consolidated annual accounts continued
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performance
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52 Risk management continued
With regard to impact of climate change on ALM and investment risk, we distinguish physical and transition climate risks. Physical risk is
most prominent on the short term in our Dutch Non-life business, caused by weather events such as windstorms or hail, resulting in higher
expenditures, influencing the margins of our property & casualty insurance products.
For our life & pension and banking businesses, transition risk is most important. Transition risk, meaning risks related to transition to lower
carbon economies which may adversely affect individual businesses, sectors and the broader economy, thereby also having an impact on
our investment portfolio and related results. Pricing and investment returns of financial assets may be influenced by such factors as public
policy (carbon tax, subsidies, etc.), technological developments (resulting in invested companies that will be able to profit, or that will be
negatively impacted, by the transition) and changing consumer preferences (e.g. customers favouring greener products). Climate risk is
further discussed in the section Safeguarding value creation – How NN deals with climate change – our response to the Financial Stability
Board’s Task Force on Climate-related Financial Disclosures (TCFD).
Risk mitigation
NN Group manages emerging risks by performing regular risk assessments, that help to further understand how emerging risks evolve,
and how a combination of events can impact us. An important tool is scenario analysis to further understand how our risk profile would be
impacted under certain circumstances, but also creating backup and contingency plans in case events would realise. Our main mitigant is
adjusting our strategy to proactively react to these risks.
Around climate change the main mitigating activities are:
• Dealing with climate change is an integral part of our strategy. We have set specific non-financial targets, as part of our strategic
commitment Society a.o. to integrate ESG aspects in our investments and our net zero commitments.
• For all our life businesses, we further integrate Environmental, Social & Governance (ESG) aspects in our investment strategy, as laid down
in the Responsible Investment Framework, where we are phasing out our investments in certain industries, as well as shifting to others.
Furthermore we use concentration limits to avoid concentration risk in certain counterparties/industries, as well as apply stress testing to
further understand sensitivities of our investments.
• In our non-life business: (1) helping customers to take precautionary measures, (2) monitor claims experience and reprice or adjust contract
conditions where necessary, (3) develop and use catastrophe models for underwriting, and (4) making use of a groupwide catastrophe
reinsurance programme.
• Deploying qualitative and quantitative scenario based analysis, a.o. as part of our ORSA, helps us to better understand the impact of both
physical and transitional risks on our investments and products, for different time horizons. We use the insights gained as further input for
formulating our investment strategy and integrating climate change aspects in our risk management practices. In the TCFD section we give
more insight in these scenarios.
• In 2022, an amendment to the Solvency II directive aims to integrate ESG risks into the risk management framework, amongst others
considering ESG risks in actuarial and risk management and performing a mandatory risk assessment that assesses material risks to which
NN is exposed (as part of ORSA). NN has composed a project to implement these requirements.
Risk measurement
Emerging risks are assessed via scenario analysis and stress testing. We refer to TCFD for more details.
VII. Financial risks
Partial Internal Model (PIM)
The Solvency Capital Requirement (SCR) is calculated based on actual NN Group risks exposure. Under Solvency II, the SCR is defined as
the loss in basic own funds of the Solvency II balance sheet resulting from a 1-in-200-year adverse event over a one-year horizon. The risk-
based framework for calculating solvency capital requirements at NN Group is a combination of Internal Model and Standard Formula
components. The largest component covering major Dutch insurance entities uses internally developed methodologies for modelling the
market, counterparty default, business and insurance risks to determine the solvency position for local reporting and Group consolidation
purposes. For the EU-based international insurance businesses and smaller insurance undertakings in the Netherlands, NN Group uses the
Solvency II Standard Formula to calculate the SCR for local reporting and for Group consolidation. The capital requirement for operational
risk is based on the Standard Formula approach across the group.
The non-insurance businesses (e.g. Pension funds, NN Bank) and international insurance undertakings not based in the EU (e.g. Japan,
Turkey) are consolidated in the group SCR based on the local applicable (sectoral) capital requirements. The Solvency II concept of
Equivalence is granted to capital frameworks that are deemed to have similarity with the Solvency II framework and/or principles and as
such can be relied-upon to assess capital requirements, at NN Group this applies to Japan. The total group SCR is obtained from the Internal
Model and Standard Formula capital requirements using EIOPA’s integration technique 3.
Notes to the Consolidated annual accounts continued
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The choice for a Partial Internal Model is based on the conviction that an Internal Model better reflects the risk profile of the major Dutch
insurance entities and has additional benefits for risk management purposes, whilst the Standard Formula adequately captures the risk
profile of the international businesses and smaller Dutch entities:
• An Internal Model approach can better reflect the specific assets and therefore the market risk in the portfolio of Dutch businesses e.g.,
sovereign and other credit spread risks
• The approach used for most significant non-market risks within the Life businesses such as longevity (trend uncertainty) and expense
risk (closed block treatment) and within the Non-Life business (morbidity and P&C) can be better tailored to NN Group’s specific portfolio
characteristics. Diversifications effects that intuitive to the business model can be captured in a more adequate way
• Variable Annuity risks in a portfolio of NN Re are not adequately addressed by the Standard Formula, while the Internal Model captures the
integrated market risks and hedging programmes more accurately if not adequate for re insurance business
• The granularity of the PIM and close alignment of the modelling techniques and parameters to NN’s risk management approach also means
that it can support a wide range of business decisions
Assumptions and limitations
Risk-free rate and volatility adjustment:
The assumptions regarding the underlying risk-free curve are crucial in discounting future cash flows when calculating the market values
of assets and liabilities. For liabilities, NN Group uses the methodology prescribed by EIOPA for the risk-free rate including the credit risk
adjustment (CRA) and the ultimate forwards rate (UFR). Where appropriate, the risk-free rate is adjusted with the volatility adjustment for the
calculation of Own Funds.
Valuation assumptions – replicating portfolios:
NN Group uses replicating portfolio techniques to represent the insurance product-related cash flows, options and guarantees by means of
standard financial instruments in the risk calculations. This approach is also used for a small part of the mortgages. The replications are used
to determine and revalue insurance liabilities and mortgages under a large number of Monte Carlo scenarios.
Diversification and correlation assumptions:
As for any integrated financial services provider offering a variety of products across different business segments and geographic regions,
and investing into wide range of assets, diversification is key to NN Group’s business model. The resulting diversification reflects the fact that
not all potential worst-case losses are likely to materialise at the same time. The Internal Model takes diversification effects into account
when aggregating results between different risk types as well as at Group level. Diversification benefits result from diversification across
regions, Business Units and risk categories.
Where possible, correlation parameters are derived through statistical analysis based on historical data. In case historical data or other
portfolio-specific observations are insufficient or not available, correlations are set by expert judgement via an established, well-defined and
controlled process. Similar to other risk models, correlations and expert judgements are also monitored for appropriateness given availability
of more historical data (e.g. inclusion of Covid-19 related market stress), and are subject to regular development, validation and regulatory
oversight. Based on these correlations, industry-standard aggregation approaches such as Gaussian copula and VaR–CoVaR approach are
used to determine the dependency structure of quantifiable risks.
Model limitations
NN Group’s Partial Internal Model (PIM) resulted from balancing between (1) an easy-to-communicate methodology and (2) efficient
calculations with appropriate accuracy and granularity in the underlying risks. Despite several limitations stemming from this, the overall PIM
is considered to be materially robust, appropriate and compliant with Solvency II.
As a result of the granular modelling approach and the wide variety of NN Group’s assets and liabilities, the PIM is more complex than the
Standard Formula.
Inherent model limitations related to the calibration of a 1-in-200-year stress events for a full spectrum of market and non-market risks
include the use of limited historical data to determine a distribution of forward-looking risk factor stresses as well as the use of modelling
assumptions and expert judgements.
Risks that cannot be directly modelled in the same way as Market Risk or Insurance Risk, for example strategic, reputational and model
risks, and also emerging risks are managed through qualitative risk assessments. In addition, and as part of the ORSA, NN Group holistically
assesses its risk exposure to both quantifiable and non-quantifiable risks in order to agree mitigating actions as required.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
The components of NN Group’s Partial Internal Model for market and counterparty default risk and the models risk aggregation and
replication have been developed centrally by Group Risk, with the inherent risk that the developed models have aspects which might be
less appropriate for individual entities. On a regular basis the Business Units perform Fit For Local Use assessments and model reviews are
performed by independent model validation department. Such reviews could result in additional monitoring and locally calculated and further
centrally processed adjustments.
The Risk Management Function informs the Management and Supervisory Board on an annual basis on the performance of the
Internal Model.
EIOPA Solvency II 2020 review
EIOPA’s Opinion on the Solvency II review to the European Commission (EC) was published on 17 December 2020. The Opinion consists of a
proposed package of measures and will be used as input for the European Commission to draft a legislative proposal which will be discussed
with the European Council and European Parliament in the coming years.
On 22 September 2021 the European Commission published as part of the Solvency II 2020 Review the proposed Level I texts (Directive)
and insights in the upcoming Level II (Delegated Acts) regulations. Since this proposal mainly contains details on the Solvency II Directive, full
detailed specifications of Delegated Acts are not yet clear. Furthermore, this EC proposal forms the basis for the upcoming political process,
which can take several quarters and can lead to further changes in the proposals. The EC advice is on many items broadly in line with the
earlier EIOPA proposal published in December 2020. However, some noteworthy changes in the EC advice can be summarised as follows:
• Interest rate curve: The implementation of the alternative extrapolation methodology used for the valuation of (long) insurance cash-flows
will lead to a higher valuation of liabilities. The phasing-in of this negative impact will follow a simpler phasing-in mechanism and the initial
impact on the Solvency II ratio is expected to be smaller compared to the original EIOPA proposals.
• Risk margin: EC proposes to lower the cost-of-capital rate from 6% to 5%. Furthermore, it is proposed to remove the floor in the so called
‘lambda approach’ that was part of the EIOPA advice. These changes will lower the valuation of the risk margin. The exact details will be part
of the Level II regulations, but the EC already included in its communication that these changes are considered.
• Volatility adjustment and Enhanced Prudency Principle: The entity specific liquidity haircut for volatility adjustment is not included in the
proposals of the EC. This will increase the effectiveness of the volatility adjustment compared to the EIOPA advice and it impacts the
Enhanced Prudency Principle.
The resulting updated legislation is currently expected to be implemented at the earliest in 2024.
Solvency Capital Requirement
Solvency II ratio of NN Group
The following table shows the NN Group Solvency II ratio as at 31 December 2021 and 31 December 2020, respectively.
Solvency II ratio of NN Group
2021 2020
Eligible Own Funds 20,927 20,028
Solvency Capital Requirement 9,840 9,534
NN Group Solvency II ratio (Eligible Own Funds/SCR) 213% 210%
The Solvency Capital Requirement is based on NN Group’s Partial Internal Model. This comprises Internal Model calculation for NN Life, NN
Non-life, NN Re and the main holding companies owned by NN Group N.V., and Standard Formula calculation for ABN AMRO Life and ABN
AMRO Non-life, NN Insurance Services and the European international insurance entities of NN Group and operational risk SCR. The capital
requirements of non-Solvency II entities, in particular NN Life Japan, Pension Funds, NN Investment Partners and NN Bank were calculated
using local sectoral rules.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
Solvency Capital Requirement
The following table shows the NN Group Solvency Capital Requirement as at 31 December 2021 and 31 December 2020 respectively.
Solvency II Capital Requirements
2021 2020
Market risk 7,397 5,493
Counterparty default risk 200 315
Non-market risk 5,903 6,933
Total BSCR (before diversification) 13,500 12,741
Diversification -3,603 -3,102
Total BSCR (after diversification) 9,897 9,639
Operational risk 711 758
LACDT -2,225 -2,225
TCLI 116
Other 7 -6
Solvency II entities SCR 8,506 8,166
Non-Solvency II entities 1,334 1,368
Total SCR 9,840 9,534
The Solvency II total Basic Solvency Capital Requirements (Total BSCR after diversification) includes both the Internal Model businesses’
BSCR and the Standard Formula businesses’ BSCR. This figure also reflects the diversification benefits between the business units using
Internal Model and Standard Formula.
The general developments of the SCR:
• higher Market risk (mainly due to refinement of Interest Rate risk SCR calculation)
• lower Counterparty default risk (mainly driven by the decrease in exposure)
• lower Non-market risk (mainly driven by updated Longevity risk models and new reinsurance contract and decrease due to higher
interest rates)
• lower Operational risk
• stable LACDT
• inclusion of TCLI
• lower Non-Solvency II entities
The breakdown of the market and non-market risk SCR in specific risk types and explanations for the most important changes in the risk
profile and Solvency Capital Requirement over the year of 2021 are presented in the next sections.
The loss-absorbing capacity of deferred taxes (LACDT) offset remains stable. In the above table, ‘Other’ includes loss-absorbing capacity of
technical provisions (LACTP), capital for non-modelled Solvency II entities and some minor non-modelled risks including those required by
the regulator.
Solvency Capital Requirement for Non-Solvency II entities include mainly NN Life Japan, Pension Funds, NN Investment Partners and
NN Bank.
On 31 December 2020, Nationale-Nederlanden Schadeverzekering Maatschappij N.V. (NN Schade) entered into a legal merger with VIVAT
Schadeverzekeringen N.V. (VIVAT Non-life). As a result, VIVAT Non-life ceased to exist as a separate legal entity and NN Schade assumed all
assets and liabilities of VIVAT Non-life under universal title of succession. NN Non-life is in the process of expanding its Partial Internal Model
(NN PIM) to include the former VIVAT Non-life business. Prior to the formal completion thereof, NN Schade calculates the SCR for the merged
entity using the NN PIM including a Transitional Capital Lock-In (TCLI). The TCLI amounts to EUR 116 million and resembles the impact of
reporting the former VIVAT Non-life business on the Solvency II standard formula versus the NN PIM. Once the inclusion of the former Vivat
Non-life business in the NN PIM is formally approved, the TCLI will cease to exist.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
In 2021, DNB issued further guidance related to the treatment of contract boundaries for individual disability contracts. NN Group intends to
reflect the consequence of this guidance in the solvency calculations of NN Non-life in first half of 2022, which is expected to have an impact
of approximately -2%-points on the Solvency II Ratio of NN Group.
Solvency II ratio sensitivities
Along with the Solvency II Capital Requirement, NN Group regularly calculates the sensitivities of the Solvency II ratio under various
scenarios, by assessing the changes for both Eligible Own Funds and SCR. The Solvency II ratio sensitivities are primarily designed to support
the NN Group Management Board and the Risk Management functions in having a forward-looking view on the risks to solvency of the
company, and to analyse the impacts of market or other events. The sensitivities are selected to reflect plausible, realistic scenarios that
could materialise within the foreseeable future and are not calibrated on a pre-defined confidence interval or time horizon.
The effect on the Solvency II ratio is calculated based on applying an instantaneous stress on the balance sheet, and on ceteris paribus
basis. For all insurance entities including NN Life Japan, the after stress own funds are calculated for each of the sensitivity scenarios; the
SCR impacts are recalculated for BSCR and Operational risk SCR. LACDT is recalculated keeping the LACDT percentage fixed. ‘Other’ SCR
components including the LACTP are kept constant.
The Solvency II sensitivities are disclosed for main market risks in the below sections.
Main types of risks
In the next sections the main risks associated with NN Group’s business are discussed. Each risk type is analysed through the risk profile, risk
mitigation and risk measurement. For Market and Non-market risks more detailed quantification of risk exposures is provided.
Market risk
Market risk comprises the risks related to the impact of changes in various financial markets indicators on NN Group’s balance sheet.
Market risks are taken in pursuit of returns for the benefit of customers and shareholders. Accordingly, risk and return consideration and
optimisation are paramount for both policyholder and shareholder. In general, market risks are managed through a well-diversified portfolio
under a number of relevant policies within clearly defined and monitored limits. NN Group reduces downside risk through various hedging
programmes, in particular risks for which NN Group has no or only a limited appetite like interest rate, inflation and foreign exchange risk.
NN Group also integrates Environmental, Social, and Governance (ESG) factors in the investment decision-making framework.
Market risk capital requirements
2021 2020
Interest rate risk 1,455 4,519
Equity risk 3,474 3,463
Credit spread risk 4,725 4,345
Real estate risk 2,124 1,776
Foreign exchange risk 730 668
Inflation risk 135 313
Basis risk 74 101
Diversification market risk -5,320 -9,692
Market risk 7,3 97 5,493
In 2021, the Market Risk SCR increased to EUR7,397 million, driven by higher exposure to mortgages and real estate and significantly lower
diversification of the market risks. Interest Rate SCR decreased due to higher rates and the refinement of Interest Rate risk SCR calculation.
Credit spread risk SCR increase was driven by the increase of the duration of government bonds, the shift to higher-yielding assets and
additional investments in mortgages. Real estate SCR increase was mainly driven by additional investments and market revaluations.
Diversification decreased as a result of decreased interest rate risk and increased real estate and spread risks, which are dominant market
risks: adding risks to the more dominant risks in general leads to lower diversification.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
The table below sets out NN Group’s market value of assets for each asset class as at the end of 2021 and 2020. The values in these tables
may differ from those included in the consolidated IFRS balance sheet as derivatives are excluded from this overview and furthermore due to
classification and valuation differences to reflect a risk management view.
Investment assets
Market value % of total Market value % of total
2021 2021 2020 2020
1
Fixed income 163,876 83% 165,855 81%
Government bonds and loans 63,126 32% 69,773 34%
Financial bonds and loans 10,063 5% 10,779 5%
Corporate bonds and loans 26,838 13% 26,029 13%
Asset-backed securities 3,850 2% 4,206 2%
Mortgages
2
58,499 30% 53,555 26%
Other retail loans 1,500 1% 1,513 1%
Non-fixed income 22,512 11% 20,641 10%
Common & preferred stock
3
5,830 3% 6,073 3%
Private equity 1,215 1% 881 1%
Real estate
4
12,492 6% 10,725 5%
Mutual funds (money market funds excluded)
5
2,975 1% 2,962 1%
Money market instruments (money market funds included)
6
11,455 6% 17,4 5 5 9%
Total investments 197,8 4 3 100% 203,951 100%
1 Restated due to reclassification between different buckets
2 Mortgages are on amortised cost value. The mortgage value on the consolidated IFRS balance sheet differs from the value in the current table due to the acquisition premium of mortgages and the inclusion
of mortgages underlying the mortgage structure vehicles. Mortgage mutual funds are reported under mortgages as of this year. Last year, they were reported as ‘other retail loans’. Comparative figures have
been restated as a result of this change.
3 All preference shares are included in ‘common & preferred stock’, even when preference shares are modelled as bonds.
4 The real estate values exclude the real estate forward commitments, since NN Group has no price risk related to them.
5 Fixed income mutual funds are included in mutual funds. Short term bonds purchased through the NNIP’s money market mandate do not hedge long term liabilities but serve NN Group’s cash management. Given the
growing size of this portfolio, these short term bonds are reported under ‘Money market instruments (money market funds included)’ as of this year. Comparative figures have been restated as a result of this change.
6 Money market mutual funds and commercial papers are included in the Money market instruments.
Total investment assets have decreased from EUR203,951 million at the end of 2020 to EUR197,843 million at the end of 2021. The decrease
is mainly due to a lower NN Group cash position (money market instruments). This is due to higher interest rates and the decrease of the
swap portfolio, which implies a lower volume of cash collateral received. Main developments in the NN Group risk profile in 2021 are a
reflection of the strategy of NN Group to increase operating capital generation by shifting to higher-yielding assets: gradual reduction in the
exposure to low yielding core government bonds and an increase in allocation to mortgages, loans, real estate and private equity.
Interest rate risk
Interest rate risk is defined as the possibility of decrease in the Solvency II Own Funds due to adverse changes in the level or shape of the
risk-free interest rate curve used for discounting assets and liabilities cash flows. Exposure to interest rate risk arises from asset or liability
positions that are sensitive to changes in this risk-free interest rate curve. As of the second half of 2021, NN Group’s Partial Internal Model
SCR includes the change in value of the Solvency II technical provisions and the risk margin due to interest shocks.
Risk profile
The interest rate risk SCR of NN Group decreased from EUR4,519 million in 2020 to EUR1,455 million in 2021. The decrease is mainly driven
by a refinement of Interest Rate risk SCR calculation. Moreover, it is reflecting market and portfolio movements during the year such as an
increase of the risk-free interest curve (Euro-Zone 20-year swap rate increased by 55 bps) and also investments in long term government
bonds to replace swaps. Volatility adjustment (VOLA) decreased by 4 bps from 7 bps to 3 bps at the end of 2021. The decrease of interest
rate risk SCR also contributes to the decrease of the diversification across market risks.
Risk mitigation
The interest rate SCR indicates to what extent assets and liabilities are matched on a Solvency II basis. The majority of NN Group liability
cash flows are predictable and stable, since exposure to policyholder behaviour and profit-sharing mechanisms is very limited. Until year
30, where markets for fixed income instruments are sufficiently deep and liquid, best estimate liability cash flows (excluding risk margin)
are closely matched with government bonds, corporate bonds, mortgages and loans. Cash flows after 30 years are partially hedged on a
duration basis with long term government bonds and interest rate swaps, due to price and illiquidity of markets.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
NN Group has implemented limits and tolerances for interest rate risk exposures at NN Group level as well as for relevant Business Units.
We continuously monitor and work on mitigating solutions for our new business and products, such as an development of defined
contribution pension products in the Netherlands and a shift towards protection products in our markets in general.
Risk measurement
For the purpose of discounting EUR-denominated asset cash flows, NN Group uses market swap curves to value assets. For the asset cash
flows denominated in other currencies, the relevant swap or government curve is used for that specific currency.
For the purpose of discounting the EUR-denominated liability cash flows NN Group uses a swap curve less credit risk adjustment (CRA)
plus VOLA in line with definitions under the Solvency II. For the liability cash flows denominated in other currencies, the relevant swap or
government curve is used where this curve is also lowered by the credit risk adjustment and adding the volatility adjustment specific for each
currency. In line with Solvency II regulations, NN Group extrapolates the EUR swap curve starting from the last liquid point onwards to the
Ultimate Forward Rate for each relevant currency in its portfolio. The last liquid point (LLP) used for EUR is 20 years. As such, the sensitivity of
SCR for interest rate risk primarily depends on the level of cash flow matching between assets and liabilities up to the 20-year point, and the
difference between the swap curve and the curve extrapolated to the UFR for longer cash flows.
The sensitivity of the Solvency II ratio to changes in interest rates is monitored on a quarterly basis. The table below presents the Eligible Own
Funds, SCR and Solvency II ratio sensitivities to various changes in interest rates.
Solvency II Ratio sensitivities for interest rate comprise the following set of shocks, each of them is calculated independently as a standalone
scenario: a parallel up and a parallel down shift of the discount curve, a steepening scenario for the interest rate used to discount asset cash
flows after the last liquid point and a change of the ultimate forward rate.
NN Group’s Solvency II ratio decreases when interest rates increase or the UFR decrease. The more stable SCR due to refinement of the SCR
calculation for interest rate risk contributed to the change of interest rate sensitivity from -3% for a -50bps move in 2020 to +5% in 2021 (and
+3% for +50bps in 2020 to -4% in 2021). UFR level for Euro decreased from 3.75% to 3.6% as of 1 January 2021, which had a negative effect
on the Solvency II ratio of NN Group in line with the calculated sensitivity. The volatility adjustment decreased by 4bps to 3bps at year-end
2021 from 7bps at year-end 2020.
Solvency II ratio sensitivities: interest rate risk at 31 December 2021
2021
Own Funds
impact SCR impact
Solvency II ratio
impact
Interest rate: Parallel shock +50 bps -624 -101 -4%
Interest rate: Parallel shock -50 bps 803 153 5%
Interest rate: 10 bps steepening between 20y-30y -580 96 -8%
UFR: Downward adjustment of 15 bps (EUR UFR at 3.45%) -261 66 -4%
Solvency II ratio sensitivities: interest rate risk at 31 December 2020
2020
Own Funds
impact SCR impact
Solvency II ratio
impact
Interest rate: Parallel shock +50 bps -882 -554 3%
Interest rate: Parallel shock -50 bps 1,197 730 -3%
Interest rate: 10 bps steepening between 20y-30y -725 -2 -8%
UFR: Downward adjustment of 15 bps (EUR UFR at 3.6%) -314 49 -4%
Under the parallel shock scenarios, the base risk-free interest rate curves for each currency are shocked by +/-50 bps for all tenors up
until the last liquid point. The other components of the basic risk-free interest rate curve – namely UFR, Credit Risk Adjustment, volatility
adjustment and extrapolation technique towards UFR remain unchanged. The asset interest rate curves are shocked with the parallel shocks
for all tenors.
In the interest rate steepening scenario, the EUR asset valuation curve is shocked after the last liquid point (the last liquid point for EUR is set
at 20 years under Solvency II). The steepening is applied for interest rate curve tenors between 20 and 30 years (a linear increase from 0 to
10 bps of 1bp per tenor). After the 30 years point, the shift in the interest rate curve remains constant at 10bps. The discount curve for liability
cash flows is not impacted in this scenario, asset only shock.
Notes to the Consolidated annual accounts continued
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For 2021, the UFR for EUR under Solvency II is set at 3.60%. In line with the EIOPA methodology, the calculated value of the UFR for EUR
was 3.60% with annual changes to the UFR not higher than 15 bps. In 2021 EIOPA published the applicable UFR for 1 January 2022 to be at
3.45%. It will be for the first time when the calculated and updated UFR are same, meaning that further drops in the next few years might be
lower than 15 bps per annum, as currently. The UFR downward adjustment scenario provides the impact in Own Funds and SCR using the
applicable UFR downward adjustment of 15bps for each currency. The other components of the basic risk-free interest rate curve – namely
the Credit Risk Adjustment, volatility adjustment and extrapolation technique towards UFR – are kept constant in this sensitivity.
Equity risk
Equity risk is defined as the possibility of decrease Solvency II Own Funds due to adverse changes in the level of equity market prices.
Exposure to equity risk arises from direct or indirect asset or liability positions, including equity derivatives such as futures and options, that
are sensitive to equity prices.
Risk profile
The table below sets out the market value of NN Group’s equity assets as at the 31 December 2021 and 2020, respectively.
Equity assets
2021 2020
Common & preferred stock 5,830 6,073
Private equity 1,215 881
Mutual funds (money market funds are excluded, fixed income mutual funds are included) 2,975 2,962
Total 10,020 9,916
NN Group is mostly exposed to public listed equity but also invests in private equity funds and equity exposures through mutual funds.
The equity exposure is diversified mainly across the Netherlands (25% in 2021 and 2020) and remaining exposure in other countries,
predominantly in EU (50% in 2021 compared with 55% in 2020). Note that mutual funds are classified as equity in the table above but include
predominantly fixed income funds.
As shown in the ‘Market risk capital requirements’ table above, the Equity Risk SCR of NN Group remains stable (EUR3,463 million in 2020
and EUR3,474 million in 2021). Over 2021 parts of the public equity portfolio were disposed to benefit from attractive valuations.
Risk mitigation
Exposure to equities provides additional diversification and upside return potential in the asset portfolio of an insurance company with long-
term illiquid liabilities. The concentration risk on individual issuers is mitigated by having issuer risk limits in place in investment mandates as
well as at NN Group level. There is no natural hedge for equity risk on the liability side of the balance sheet. NN Group has the possibility to
protect the downside risk of the equity portfolio by selling equity or buying put options and other hedge instruments.
Risk measurement
The sensitivity of the Solvency II ratio to changes in the value of equity is monitored on a quarterly basis. This scenario estimates the impact
of an instantaneous shock of -25% applied to the value of direct equity and equity mutual funds. Derivatives like equity options or equity
forwards which have equity as underlying are also revalued using the same shock applied to the underlying equities or equity indices.
The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in equity prices at 31 December
2021 and 2020.
Solvency II ratio sensitivities: equity risk
Own Funds impact SCR impact Solvency II ratio impact
2021 2020 2021 2020 2021 2020
Equity Downward shock -25% -1,840 -1,863 -489 -305 -9% -13%
Notes to the Consolidated annual accounts continued
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52 Risk management continued
Credit spread risk
The credit spread risk is defined as the possibility of decrease in Solvency II Own Funds due to adverse movements in the credit spreads
of fixed income assets. The credit spread widening (or narrowing) reflects market supply and demand, rating migration of the issuer and
changes in expectation of default. Changes in liquidity and other risk premiums that are relevant to specific assets can play a role in the
value changes.
In the calculation of the SCR for the Partial Internal Model entities, NN Group assumes no change to the volatility adjustment on the liability
side of the balance sheet after a shock-event, but instead reflects the illiquidity of liabilities in the asset shocks to ensure appropriate
solvency capital requirements. This approach ensures appropriate risk incentives and is approved by DNB. NN Group also shocks all
government bonds and its mortgage portfolio in the calculation of spread risk capital requirements for the Partial Internal Model entities.
The main asset classes in scope of the credit spread risk module for Partial Internal Model entities are government and corporate bonds,
mortgages and loans.
For the calculation of the SCR for credit spread risk of the Standard Formula insurance entities, the main asset classes in scope are
corporate bonds and loans.
Risk profile
As shown in the ‘Market risk capital requirements’ table, the credit spread risk SCR of NN Group increased from EUR4,345 million in 2020 to
EUR4,725 million in 2021. This increase is mainly driven by new investments in government bonds with very long duration and shift to higher-
yielding assets.
The government securities market value delta can mostly be explained by valuation changes (60%). Transactions and redemptions count for
40% of the decrease. The corporate securities market value delta is explained by valuation (50%) and transactions (50%).
The table below shows the market value of NN Group’s fixed-income bonds which are subject to credit spread risk SCR by type of issuer as
at the 31 December 2021 and 31 December 2020, respectively.
Fixed-income bonds and loans by type of issuer
Market value Percentage
2021 2020
1
2021 2020
1
Sovereign 63,126 69,773 61% 63%
Manufacturing 8,022 8,093 8% 7%
Finance and Insurance 10,063 10,779 9% 10%
Asset-backed securities 3,850 4,206 4% 4%
Utilities 2,928 3,442 3% 3%
Information 2,365 2,263 2% 2%
Transportation and Warehousing 2,947 2,872 3% 2%
Real Estate and Rental and Leasing 2,070 1,879 2% 2%
Other 8,506 7,4 8 0 8% 7%
Total 103,877 110,787 100% 100%
1 Restated due to reclassification between different buckets, see footnotes 2 and 5 in table ‘Investment assets’.
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The table below sets out the market value of NN Group’s assets invested in government bonds and loans by country and maturity.
Market value government bond and loans exposures (2021)
Market value of government bond and loans in 2021 by number of years to maturity
4
2021 Rating
1
Domestic
exposure
2
0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+
Total
2021
France AA 0% 47 68 52 129 212 3,881 750 5,290 10,429
Japan A+ 99% 644 461 503 889 1,919 2,571 1,682 737 9,406
Belgium AA- 33% 401 243 37 173 790 3,723 1,218 950 7, 535
Germany AAA 0% 30 95 488 140 1,977 3,030 733 396 6,889
Netherlands AAA 99% 45 618 210 404 2,339 2,034 13 5,663
Austria AA+ 0% 171 11 190 517 737 1,303 1,048 2,012 5,989
Spain A- 27% 24 15 136 155 420 1,999 648 59 3,456
Multilateral
3
AAA 0% 194 48 135 175 202 969 732 15 2,470
United States AAA 0% 1 1 282 2,085 2,369
Italy BBB 0% 43 101 35 50 745 283 11 1,268
Finland AA+ 0% 5 3 166 82 981 1,237
Other
5
– Above Investment Grade 551 180 258 899 2,029 1,139 462 20 5,538
Other
5
– Below Investment Grade 107 119 141 144 208 139 19 877
Total 2,263 1,962 1,975 3,648 9,725 21,658 12,403 9,492 63,126
1 NN Group uses the second-best rating across Fitch, Moody’s and S&P to determine the credit rating label of its bonds.
2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands.
3 Includes EIB, ECB, EFSF, EU and ESM.
4 Based on legal maturity date.
5 Investment Grade reflects a rating of BBB or higher; Below Investment Grade reflects a rating below BBB.
Market value government bond and loans exposures (2020)
Market value of government bond and loans in 2020 by number of years to maturity
4
2020 Rating
1
Domestic
exposure
2
0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+
Total
2020
France AA 0% 52 47 70 125 268 3,022 2,460 6,057 12,101
Japan A+ 98% 342 492 484 1,069 2,028 2,798 1,603 707 9,523
Belgium AA- 35% 51 432 250 86 1,026 2,839 3,173 20 7,877
Germany AAA 0% 79 116 102 787 1,681 3,954 785 98 7,602
Netherlands AAA 99% 319 81 772 320 908 2,522 2,382 15 7,319
Austria AA+ 0% 189 184 11 204 1,425 1,438 1,174 1,818 6,443
Spain A- 26% 9 25 24 255 483 1,707 1,169 5 3,677
Multilateral
3
AAA 0% 81 198 60 177 519 1,399 795 35 3,264
United States AAA 0% 1 1 1 176 2,184 2,363
Italy BBB- 0% 8 46 104 51 810 546 26 1,591
Finland AA+ 0% 43 5 4 274 143 1,079 1,548
Other
5
– Above Investment Grade 172 508 208 731 2,467 1,312 305 1 5,704
Other
5
– Below Investment Grade 62 45 113 201 152 155 33 761
Total 1,408 2,180 2,202 4,281 11,910 21,868 17,168 8,756 69,773
1 NN Group uses the second-best rating across Fitch, Moody’s and S&P to determine the credit rating label of its bonds.
2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands.
3 Includes EIB, ECB, EFSF, EU and ESM.
4 Based on legal maturity date.
5 Investment Grade reflects a rating of BBB or higher; Below Investment Grade reflects a rating below BBB.
60% (or EUR38 billion) of NN Group total sovereign debt exposure is invested in AAA and AA rated eurozone countries in 2021 as compared to
62% in 2020. Of the EUR38 billion core eurozone government bonds and loans held by NN Group, 78% will mature after year 10 and 40% after
year 20 in 2021 while those for 2020 were EUR42 billion, 76% and 43% respectively. The proceeds of the sales of government bonds were used
partly to fund investments in mortgages and loans and partly to invest in government bonds with very long duration to reduce the NN Group’s swap
portfolio. With regard to Central and Eastern Europe, the government bond exposures are mainly domestically held. Exposure to Belgium decreased
and United States remains stable. In the Partial Internal Model, all government bonds contribute to credit spread risk, including those rated AAA.
The tables below shows the market value of non-government fixed-income securities (excluding mortgages and derivatives) by rating and maturity.
Notes to the Consolidated annual accounts continued
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Market value non-government bond securities and loans (2021)
Market value of non-government bond securities and loans in 2021 by number of years to maturity
2021 0-1 1-2 2-3 3-5 5 -10 10-20 20-30 30+ Total 2021
AAA 153 201 257 597 352 1,017 1,365 2,097 6,039
AA 507 358 139 540 663 569 241 173 3,190
A 1,270 1,543 1,210 2,691 3,468 1,204 810 614 12,810
BBB 1,204 1,650 2,113 2,602 3,260 1,781 1,050 118 13,778
BB 271 242 282 777 1,253 51 31 30 2,937
B and below 126 262 219 661 500 21 1,789
No rating available 138 3 4 63 208
Total 3,669 4,259 4,220 7,8 6 8 9,500 4,643 3,497 3,095 40,751
Market value non-government bond securities and loans (2020
1
)
Market value of non-government bond securities and loans in 2020 by number of years to maturity
2020 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2020
AAA 392 245 271 406 543 1,183 1,225 2,684 6,949
AA 634 593 376 439 924 430 190 55 3,641
A 837 1,483 1,652 2,750 3,907 804 428 559 12,420
BBB 1,059 1,466 1,877 3,654 3,619 1,250 660 101 13,686
BB 215 164 478 862 1,211 29 33 28 3,020
B and below 79 161 218 334 321 16 9 1,138
No rating available 116 3 4 4 2 32 161
Total 3,332 4,115 4,876 8,449 10,527 3,712 2,536 3,468 41,015
1 Restated due to reclassification between different buckets, see footnotes 2 and 5 in table ‘Investment assets’.
The table below shows NN Group’s holdings of loans and other debt securities as at the 31 December 2021 and 2020, respectively.
Market value all loans and other debt securities (per credit rating)
2021 2020
1
AAA 22,479 26,755
AA 30,545 33,899
A 27,772 27,3 6 6
BBB 17,181 17,68 8
BB 3,868 3,749
B and below 1,824 1,169
No rating available 70 46
Mortgages
2
58,499 53,555
Other Retail Loans 1,638 1,628
Total 163,876 165,855
1 Restated due to reclassification between different buckets, see footnotes 2 and 5 in table ‘Investment assets’.
2 Mortgages refer to all mortgages using the same criteria and is aligned with the Mortgages figure in Investment assets above.
Mortgages
The required capital for mortgages within entities under the Partial Internal Model is calculated in the credit spread risk module while the
required capital for mortgages within entities under Standard Formula is calculated in the counterparty default risk module. The credit spread
risk module within the Partial Internal Model captures the behaviour of Own Funds when the valuation of mortgages changes with market
mortgage rates, while the counterparty default risk module within Standard Formula captures the behaviour of Own Funds as a result of
unexpected loss or default of mortgages.
The Loan-to-Value (LTV) for residential mortgages (which is based on the net average loan to property indexed value) at NN Life, the Banking
business, NN Non-life and NN Belgium stood at 59%, 57%, 65% and 60% respectively at the end of December 2021 while those were 68%,
66%, 72% and 71% respectively at the end of December 2020. Sharply increasing house prices in 2021 (+17.5%) resulted in a migration
towards lower LTV buckets. The average LTV for NN Group portfolio is 59% in 2021 (67% in 2020).
Notes to the Consolidated annual accounts continued
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The inherent credit risk of mortgages is backed primarily by means of the underlying property, but also through the inclusion of mortgages
guaranteed by the Nationale Hypotheek Garantie (NHG) and other secondary covers like savings, investments and life insurance policies.
Mortgages with NHG accounted for 26%, 32%, 20% and 28% at NN Life, the Banking business, NN Non-life, and NN Belgium respectively
at the end of 2021 and 29%, 33%, 23% and 29% at NN Life, the Banking business, NN Non-life and NN Belgium respectively at the end of
2020. The relative NHG coverage is decreasing in the portfolios mostly due to the high house prices, so overall less mortgages are eligible
for NHG coverage. Since the change in the Dutch tax regime in 2014 with regards to mortgage interest deductibility, a shift from interest-only
mortgages to annuity and linear payment type mortgages is being observed.
Loan-to-Value on mortgage loans
1
2021 2020
NHG 28% 30%
LTV <= 80% 65% 53%
LTV 80% – 90% 5% 11%
LTV 90% – 100% 1% 5%
LTV > 100% 1% 1%
Total NN Group 100% 100%
1 Risk figures and parameters do not include third party originated mortgages and collateralised mortgages although they are on the balance sheet of NN Group.
The mortgage portfolio is under regular review to ensure troubled assets are identified early and managed properly. The loan is categorised
as a non-performing loan (NPL) if the loan is 90 days past due, or the client was in default the previous month, and the minimum holding
period (MHP) is active or the loan is classified as Unlikely To Pay (UTP) by the problem loans department. A loan is re-categorised as a
performing loan again when the amount past due has been paid in full (and the UTP-status is withdrawn).
The main criterion for lifting the default status will be that no arrears greater than EUR 250 occurred during the Minimum Holding Period
(MHP). For defaulted clients that are classified as ‘distressed restructuring’, the MHP is 12 months. For all other defaulted clients, the MHP is
3 months.
The impact of the definition of default is limited. Combined with low levels of unemployment, the outstanding non-performing loans
decreased in 2021. Provisions decreased due to sharply increasing house prices in 2021 (+17.5%) and a decrease in non-performing loans.
The net exposure decreased because of increasing house prices.
Credit quality: NN Group mortgage portfolio, outstanding
1,2
Life business Banking business Other
3
Total
2021 2020 2021 2020 2021 2020 2021 2020
Performing mortgage loans that are not
past due 25,285 23,189 20,322 19,764 5,304 5,132 50,911 48,085
Performing mortgage loans that are past due 128 111 161 146 24 27 313 284
Non-performing mortgage loans
4
77 113 104 116 12 22 193 251
Total 25,490 23,413 20,587 20,026 5,340 5,181 51,417 48,620
Provisions for performing mortgage loans 2 3 2 3 1 1 5 7
Provisions for non-performing mortgage loans 5 11 1 8 1 6 20
Total
5
7 14 3 11 1 2 11 27
1 Risk figures and parameters do not include third party originated mortgages and collateralised mortgages although they are on the balance sheet of NN Group.
2 Amounts are excluding partial transfer of mortgages.
3 Other’ column includes numbers for the Non-life entities, Belgium business and other small entities.
4 The non-performing loans include ‘unlikely to pay’ mortgage loans, which may not be past due.
5 Mortgage provisions have decreased as a result of the increase in the house prices, a decrease in non-performing loans due to low unemployment and an update in the default policy following ECB guidance
on the definition of default.
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52 Risk management continued
Collateral on mortgage loans
Life business Banking business Other
1
Total
2021 2020 2021 2020 2021 2020 2021 2020
Carrying value
2
25,490 23,413 20,587 20,026 5,340 5,181 51,417 48,620
Indexed collateral value of real estate 49,536 38,902 41,478 34,793 9,685 8,041 100,699 81,736
Savings held
3
985 1,006 1,408 1,416 75 77 2,468 2,499
NHG guarantee value
4
5,480 5,600 5,328 5,463 1,113 1,152 11,921 12,215
Total cover value
5
+ including
NHG guarantee capped at carrying value 25,474 23,391 20,576 20,007 5,337 5,177 51,387 48,575
Net exposure 16 22 11 19 3 4 30 45
1 ‘Other’ column includes numbers for the Non-life entities, Belgium business and other small entities.
2 Amounts are based on outstanding, excluding deduction of constructions deposits and excluding partial transfer of mortgages.
3 Savings held includes life policies excluding the effect of partial transfer of mortgages.
4 The NHG guarantee value follows an annuity scheme and is corrected for the 10% own risk (on the granted NHG claim).
5 The cover value of the real estate does not include haircuts, which are applied in the determination of loan loss provisions.
Risk mitigation
Our mortgages are subject to strict underwriting criteria and are well collateralised. NN Group has concentration risk limits for individual
issuers which depend on the credit quality of the issuer. These limits ensure that large risk concentrations are avoided. In order to diversify
the credit spread risk further, NN Group has increased its investments in non-listed assets.
Risk measurement
The sensitivity of the Solvency II ratio to changes in credit spreads is monitored on a quarterly basis. The table below presents the Eligible
Own Funds, SCR and Solvency II ratio sensitivities to various changes in credit spreads.
Solvency II ratio sensitivities: credit spread risk at 31 December 2021
2021
Own Funds
impact SCR impact
Solvency II ratio
impact
Credit spread: Parallel shock for AAA-rated government bonds +50 bps -628 89 -8%
Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -938 120 -12%
Credit spread: Parallel shock spreads corporates +50 bps 697 -209 12%
Credit spread: Parallel shock spreads mortgages +50 bps -1,075 31 -12%
Solvency II ratio sensitivities: credit spread risk at 31 December 2020
2020
Own Funds
impact SCR impact
Solvency II ratio
impact
Credit spread: Parallel shock for AAA-rated government bonds +50 bps -706 3 -7%
Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -968 -124 -8%
Credit spread: Parallel shock spreads corporates +50 bps 997 -161 14%
Credit spread: Parallel shock spreads mortgages +50 bps -897 -7 -9%
NN Group has exposure to government, corporate and financial debt and is exposed to spread changes for these instruments. Furthermore,
the volatility adjustment in the valuation of liabilities introduces an offset to the valuation changes on the asset side. The Solvency II
sensitivities for spread changes cover four possible scenarios – spread widening for AAA rated government bonds, spread widening for
non-AAA rated government bonds, spread widening for corporates and spread widening for mortgages. For all scenarios, a parallel widening
of the respective spread curves of +50bps is assumed. There is a corresponding translation of the spread widening on asset valuations on
the volatility adjustment according to EIOPA reference portfolio in each of the scenarios.
Government bond shocks are applied to the following asset classes: government bonds and loans, government-linked instruments
(sub-sovereigns and supranational). Corporate spread shocks are applied to the following asset classes: corporate bonds (financials
and non-financials), covered bonds, subordinated bonds, asset-backed securities and loans. Mortgages are subject to spread shocks
in a separate scenario.
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NN Group’s sensitivity to credit spread changes is mainly driven by the difference between NN’s investment portfolio and the EIOPA reference
portfolio. The reference portfolio represents the weights of an average European insurers’ portfolio to different fixed income assets and is
used to determine the level of the volatility adjustment to be applied for the valuation of liabilities. Asset spread changes impact the level
of the volatility adjustment and therefore also the valuation of liabilities, and thus provide an offset to asset valuation changes. NN Group
is exposed to widening in government bond spreads due to a higher exposure to well rated government debt compared with the reference
portfolio. At the same time, the exposure to widening of credit spreads on corporate and financial bonds has a positive impact on the ratio
due to a lower exposure of NN Group to these asset classes compared with the reference portfolio. Mortgages spread widening has a
negative impact on the Solvency II Ratio, as mortgages are not part of the reference portfolio.
Real estate risk
Real estate risk is defined as the possibility of decrease in Solvency II Own Funds due to adverse changes in the value of real estate.
Exposure to real estate risk arises mainly from holding direct real estate properties or positions in real estate mutual funds. With the long-
term nature of the liabilities of NN Group, illiquid assets such as real estate play an important role in the asset allocation.
Risk profile
NN Group’s real estate exposure (excluding forward commitments) increased from EUR10,725 million at the end of 2020 to EUR12,492 million
at the end of 2021. The market value change is mainly (75%) due to valuation increase. The new investments count for 25% of market value
increase. The real estate exposure is mainly present in the portfolios of NN Life, NN Non-life and NN Belgium Life.
NN Group has various categories of real estate: investments in real estate funds and joint-ventures, real estate directly owned and
investments in buildings occupied by NN Group. Several of the real estate funds, in which NN Group participates, include leverage and
therefore the actual real estate exposure is larger than NN Group’s value of participation in real estate funds. The real estate portfolio is
held for the long-term and is illiquid. Furthermore, there are no hedge instruments available in the market to effectively reduce the impact of
market volatility.
The table below sets out NN Group’s real estate exposure per region as at 31 December 2021 and 2020, respectively.
Real estate assets per region
1
2021 2020
Western Europe 60% 60%
Southern Europe 17% 19%
Nordics 7% 7%
Central and Eastern Europe 5% 5%
UK and Ireland 11% 9%
Total 100% 100%
1 Excludes real estate forward commitments, since NN Group has no price risk related to them.
As shown in the ‘Market risk capital requirements’ table, the real estate risk SCR of NN Group increased from EUR1,776 million in 2020 to
EUR2,124 million in 2021. This increase is mainly due to increase in property investment valuations and new investments.
Risk mitigation
Exposure to real estate provides for additional diversification for the asset portfolio. The concentration risk on individual assets is limited
under the relevant investment mandates. Real estate portfolio is also well diversified across European countries and sectors.
Risk measurement
The sensitivity of the Solvency II ratio to changes in the value of real estate is monitored on a quarterly basis. This scenario estimates the
impact of an instantaneous shock of -10% to the value of direct real estate exposures and real estate within mutual funds. The table below
presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in the value of real estate at 31 December 2021
and 2020.
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Solvency II ratio sensitivities: real estate risk
Own Funds impact SCR impact Solvency II ratio impact
2021 2020 2021 2020 2021 2020
Real estate Downward shock -10% -921 -794 -58 -12 -8% -8%
Foreign exchange risk
Foreign exchange (FX) risk measures the impact of losses related to changes in currency exchange rates.
Risk profile
FX transaction risk can occur on a local entity level, while FX translation risk can occur when non-Euro entities are consolidated at the level
of NN Group and show a risk in regard to NN Group’s reporting currency, the Euro.
The SCR for foreign exchange risk increased from EUR668 million in 2020 to EUR730 million in 2021. This is mainly due to higher exposures
to non-Euro currencies.
Risk mitigation
The FX risk at the local entity level is mitigated by limiting investment to the non-local currency assets or by hedging through FX forwards and
cross currency swaps.
Inflation risk
Inflation risk is defined as the risk of adverse changes in inflation that result into decrease in Solvency II Own Funds. Inflation risk is calculated
for the Dutch entities applying the Partial Internal Model for the SCR calculation.
Risk profile
The SCR for inflation risk decreased to EUR135 million from EUR313 million at the end of 2020. Inflation risk is limited and hedged to a large
extent with inflation-linked swaps or bonds, which are exposed to lower inflation rates. The impact of the increase in inflation in 2021 on the
NN Group Solvency II Ratio was approximately -3%-points. The impact of this scenario reduced as a result of higher inflation rates in 2021.
Note that the vast majority of NN’s pension contracts do not include any guaranteed pay-out linked to inflation developments.
Risk mitigation
The inflation risk is managed through the use of inflation swaps and investments in inflation bonds.
Basis risk
The SCR Basis risk is defined as a risk that the underlying asset or liability behaves differently than the underlying hedge instrument, which
results in the loss in the Solvency II balance sheet.
Risk profile
The SCR for basis Foreign exchange risk from EUR101 million in 2020 to EUR74 million in 2021, mostly due to model changes.
Risk mitigation
The Basis Risk is mitigated by fund mapping of the underlying funds to risk factors, and also by constant monitoring of the fund performance
compared to the benchmark.
Concentration risk
For SF entities there is an additional SCR for Concentration Risk calculated under SF, which is defined as the risk of loss in the Basic Own
Funds as a result of the default of an issuer in which NN Group has a concentrated investment position.
Risk profile
The SCR for Concentration Risk remained at nil in 2021.
Risk mitigation
This Concentration Risk is mitigated by concentration risk limits aiming to have a well-diversified portfolio with credit risk concentrations in
any particular issuer within the NN Group risk appetite.
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Market risks within separate account businesses
The separate account businesses are those in which the policyholder bears the majority of the market and credit risk. NN Group’s earnings
from the separate account businesses are primarily driven by fee income. However, in the case of variable annuities and the guaranteed
separate account pension business in the Netherlands, NN Group retains risk associated with the guarantees provided to its policyholders.
Businesses in this separate account category are (i) the group pension business in the Netherlands for which guarantees are provided and
(ii) other separate account business, primarily the unit-linked business and variable annuities (VA).
Separate account guaranteed group pension business in NN Life
Risk profile
In the Dutch separate account guaranteed group pension portfolio, investments are held in separate accounts on behalf of the sponsor
employer who concluded their contract with a business unit of NN Group. Regardless of actual returns on these investments, pension
benefits for the beneficiaries are guaranteed under the contract. The value of the provided guarantee is sensitive to interest rates,
movements in the underlying funds and the volatility of those funds.
The Assets under Management for NN Life’s portfolio decreased from EUR3.2 billion 31 December 2020 to EUR2.9 billion 31 December
2021 mainly driven by interest rate changes. In general, the materiality of the separate account business within NN Group has reduced in the
past few years due to the runoff of the portfolio.
Risk mitigation
NN Group currently hedges the value of the guarantees it provided under group pension contracts in the Netherlands. For the purpose of
hedging, the exposure under such guarantees is discounted at the swap curve without the extrapolation to the UFR. The hedge programme
includes equity basket options, swaps and equity futures. Upon contract renewal, NN Group offers policyholders defined contribution
products with investments in portfolios that NN Group can more easily hedge, thus reducing the risk to NN Group.
Other separate account businesses
Risk profile
The other separate account business primarily consists of unit-linked insurance policies and variable annuity (VA) portfolios. Unit-linked
insurance policies provide policyholders with selected fund returns combined with an insurance cover. The investment risk is borne by
the policyholder, although there are some unit-linked products where NN Group has provided guarantees on the performance of specific
underlying funds. Unit-linked products without guarantees do not expose NN Group to market risk, except to the extent that the present
value of future fees is affected by market movements of the underlying policyholder funds. The variable annuities in the Japan Closed Block
VA and VA Europe business consist of guaranteed minimum accumulation benefit products, guaranteed minimum death benefit products
and guaranteed minimum withdrawal benefit products.
Risk mitigation
The market risks of the unit-linked and other separate account business are managed by the design of the product. Currently, NN Group
does not hedge the market risks related to the present value of future fee income derived from this business (with the exception of the Japan
Closed Block VA). For the Japan Closed Block VA business and European VA business NN Group has hedging programmes in place targeting
equity, interest rate, credit spread and FX risk as well as volatility risk.
Risk measurement
NN Group determines eligible own funds for the market and credit risks of the separate account business through modelling the risks of the
fee income and the guarantees including the impact of the hedge programmes.
Counterparty default risk
Counterparty default risk is the risk of loss due to default or deterioration in the credit standing of the counterparties and debtors (including
reinsurers) of NN Group. The SCR for counterparty default risk is primarily based on the issuer’s probability of default (PD) and the loss-given-
default (LGD) of each individual position taking into account diversification across these positions.
The counterparty default risk module also covers any credit risk exposures which are not covered in the spread risk sub-module.
Risk profile
As shown in the ‘Solvency II Capital Requirements’ table above, the Counterparty default risk SCR of NN Group decreased from
EUR315 million at the end of 2020 to EUR200 million at the end of 2021, due to lower cash positions and lower mortgage portfolio due to
indexation of properties. In the Partial Internal Model the mortgages do not get the capital charge under the Counterparty default risk and
are under Credit Risk SCR sub module for these Business Units.
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Risk mitigation
NN Group uses different credit risk mitigation techniques. For OTC derivatives, the exchange of collateral under the International Swaps and
Derivatives Associations contracts accompanied with Credit Support Annexes is an important example of risk mitigation. Other forms of
credit risk mitigation include reinsurance collateral exchange. For cash and money market funds, limits per counterparty are put in place.
Risk measurement
The Counterparty default risk (CDR) module comprises two sub-modules:
• CDR Type I: applicable to exposures which might not be diversified and where the counterparty is likely to be (externally) rated, e.g.,
reinsurance contracts, derivatives and money market exposures. The underlying model is the Ter Berg model (which was also the basis for
Standard Formula calibration under Solvency II)
• CDR Type II: applicable to exposures that are usually (well) diversified and where the counterparty is likely to be unrated, like retail loans, but
also other forms of term lending not covered in Type I
The capital charges for CDR Type I and CDR Type II exposures are calculated separately and subsequently aggregated.
Liquidity risk
Liquidity risk is the risk that one of NN Group’s entities does not have sufficient liquid assets to meet its financial obligations when they
become due and payable, at reasonable cost and in a timely manner. Liquidity in this context is the availability of funds, or certainty that
funds will be available without significant losses, to honour all commitments when due. NN Group manages liquidity risk via a liquidity risk
framework: ensuring that – even after shock – NN Group’s businesses can meet immediate obligations. Liquidity stress events can be caused
by a market-wide event or an idiosyncratic NN Group specific event. These events can be short-term or long-term and can both occur on a
local, regional or global scale.
Subsidiaries that trade derivatives are responsible for maintaining sufficient liquidity levels to meet their collateral requirements. For this
purpose, liquidity buffers are set to ensure sufficient liquidity is available in an adverse scenario and to ensure the liquidity thresholds are
being met.
Risk profile
Liquidity risk covers three areas of attention. Operational liquidity risk is the risk that funds are unavailable to meet financial obligations when
due. Market liquidity risk, is the risk that an asset cannot be sold on short-term without significant losses. Funding risk is the risk related to not
being able to refinance maturing debt instruments and may lead to higher funding costs. The connection between market and operational
liquidity risk stems from the fact that when payments are due and not enough cash is available, investment positions need to be converted
into cash; if market liquidity is low or an adverse market movement took place in this situation, this could lead to a loss.
Risk mitigation
NN Group aims to match day-to-day cash in- and outflows and at the same time wants to be able to have sufficient cash in case of a liquidity
stress event.
NN Group Liquidity Management Principles defines three levels of Liquidity Management:
• Short-term liquidity (including operational liquidity) management covers the day-to-day cash requirements under normal business conditions
• Long-term liquidity management considers business conditions, in which market liquidity risk materialises
• Stress liquidity management looks at the company’s ability to respond to a potential crisis situation
Risk measurement
NN Group Liquidity Risk Management Standard measures liquidity risk in a stress event through the gap between liquidity needs and
liquidity sources compared to available liquid assets for sale. This is calculated for different time horizons and different levels of availability of
liquidity sources.
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Non-market risk
Within the SCR Partial Internal Model a differentiation is made for the classification of non-market risks for different NN Group entities
depending on the model applied.
For the Business Units applying Partial Internal Model, non-market risks are split between:
• Insurance risk: is the risk related to the events insured by NN Group and comprise actuarial and underwriting risks like Life risk (mortality,
longevity), Morbidity risk and Property & Casualty risk which result from the pricing and acceptance of insurance contracts
• Business risks: are the risks related to the management and development of the insurance portfolio but exclude risks directly connected to
insured events. Business risk includes policyholder behaviour risks, expense risk, persistency risk and premium re-rating risk. Business risks
can occur because of internal, industry, regulatory/political or wider market factors. Policyholder behaviour risk is the risk that policyholders
use options available in the insurance contracts in a way that is different from that expected by NN Group. Depending on the terms and
conditions of the insurance policy, and the laws and regulations applicable to the policy, policyholders could have the option to surrender,
change premiums, change investment fund selections, extend their contracts, take out policy loans, and make choices about how to
continue their annuity and pension savings contracts after the accumulation phase, or even change contract details. Policyholder behaviour
therefore affects the profitability of the insurance contracts. Changes in tax laws and regulations can affect policyholder behaviour,
particularly when the tax treatment of their products affects the attractiveness of these products for customers
For the Business Units applying Standard Formula, non-market risks are split between:
• Life risk: the life portfolio is mainly attributed to the individual and group business in the international entities of NN Group (mainly
Belgium, Spain Life, Poland) and ABN AMRO Life. This risk comprises the mortality, longevity, disability-morbidity, expense, lapse and life
catastrophe risks
• Health risk: this covers the Similar to Life Techniques (SLT) Health portfolio risk, the Non-SLT (NSLT) Health portfolio risk and the Health
Catastrophe risk. Within NN Group, the health risk stems from morbidity riders in Belgium, Czech, Poland, Slovakia, Romania, from the
yearly renewable health insurance portfolio of Greece. This risk is split between the SLT Health risk (comprising mortality, longevity,
disability-morbidity, expense and lapse risks), the NSLT Health risk (comprising premium and reserve risk and lapse risk) and the Health
Catastrophe risk
• Non-life risk: this covers non-life portfolio mainly contributed by ABN AMRO Non-life and NN Insurance Services. This risk covers the
premiums and reserve risk, non-life catastrophe risk and lapse risk
Risk profile
The table below presents the non-market risk SCR composition at the end of 2021 and at the end of 2020 respectively. The main changes in
the risk profile are explained in the subsequent section of this document.
Non-market risk capital requirements
2021 2020
Insurance risk (IM entities) 4,326 5,144
Business risk (IM entities) 1,536 1,712
Life risk (SF entities) 957 871
Health risk (SF entities) 236 582
Non-life risk (SF entities) 113 341
Diversification non-market risk -1,265 -1,717
Non-market risk 5,903 6,933
The insurance risk decreased mainly driven by a refinement of the Longevity risk models, by a transfer of longevity risk of approximately
EUR4 billion of liabilities via reinsurance contract and due to higher interest rates. Health risk and Non-life risk decreased due to the transfer
of VIVAT Non-life to IM entities. Life risk SCR for Standard Formula entities remained relatively stable. The fact that VIVAT Non-life is reported
on Standard Formula method is captured via TCLI (as an outside the model adjustment) which was the main trigger of the decrease in Health
risk and Non-life risk for SF entities. The changes to the standalone risk drivers, lead to lower diversification.
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Risk mitigation
Proper pricing, underwriting, claims management and diversification are the main risk mitigating actions for insurance risks.
By expanding insurance liabilities to cover multiple geographies, product benefits, lengths of contract and both life and non-life risk,
NN Group reduces the likelihood that a single risk event will have a material impact on NN Group’s financial condition.
Management of the insurance risks is done by ensuring that the terms and conditions of the insurance policies that NN Group underwrites
are correctly aligned with the intended policyholder benefits to mitigate the risk that unintended benefits are covered. This is achieved
through NN Group’s underwriting standards, product design requirements, and product approval and review processes – as referred to under
Risk Management Policies, Standards and Processes.
Insurance risks are diversified between Business Units. Risk not sufficiently mitigated by diversification is managed through concentration
and exposure limits and through reinsurance: retention limits for non-life insurance risks are set by line of business for catastrophic events
and individual risk.
Insurance Risk
Insurance risk is the risk that the future insurance claims and other contractual benefits cannot be covered by premiums, policy fees and/
or investment income or that insurance liabilities are not sufficient because claims and benefits might differ from the assumptions used in
determining the best estimate liability. Insurance risk manifests itself in the life as well as in the non-life portfolio of NN Group.
Risk profile
The table below presents the Partial Internal Model insurance risk SCR for the Dutch NN insurance entities of NN Group (namely NN Life,
NN Non-life and NN Re) as at 31 December 2021 and 31 December 2020 respectively.
Insurance risk capital requirements
2021 2020
Mortality (including longevity) risk 4,149 5,049
Morbidity risk 818 623
Property & Casualty risk 669 521
Diversification insurance risk -1,310 -1,049
Insurance risk (IM entities) 4,326 5,144
The SCR for insurance risk is mostly driven by longevity risk which is included in mortality risk, for the Netherlands pension business.
The insurance risk decreased mainly driven by the redesign of the Longevity risk models and by new reinsurance contract.
Mortality risk occurs when claims are higher due to higher mortality experience (for instance in relation to term insurance). Longevity risk is
the risk that insured persons live longer than expected due to mortality improvements like better living conditions, improved health care and
medical breakthrough. While NN Group is exposed to both longevity and mortality risks, these risks do not fully offset one another as the
impact of the longevity risks in the pension business in the Netherlands is significantly larger than the mortality risk in the other businesses,
which is not only due to the size of the business. Changes in mortality tables impact the future expected benefits to be paid and the present
value of these future impacts is reflected directly in measures like Own Funds.
Morbidity risk is borne primarily by the health insurance portfolio which pays out a fixed amount benefit, reimburses losses (e.g. in the case of
loss of income), or pays for expenses of medical treatment related to certain illness or disability events. The main exposures to morbidity risks
within NN Group are the disability insurance policies underwritten in Netherlands Non-life.
The Netherlands Non-life portfolio includes Property & Casualty (P&C) products covering risks such as fire damage, car accidents, personal
and professional liability, windstorms, hail, and third-party liabilities. The P&C risk is primarily underwritten by Netherlands Non-life and
catastrophic losses are partially reinsured to external reinsurers through NN Re.
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Risk mitigation
Insurance risk is mitigated through diversification between mortality and longevity risks within NN Group Business Units, appropriate pricing
and underwriting policies and risk transfer via reinsurance, which are used to reduce the Own Funds volatility.
In addition to the existing index-based longevity hedge and longevity reinsurance transaction of 2020 that were already in place,
in December 2021 NN Group reinsured the longevity risk related to approximately EUR4 billion of pension liabilities externally.
Concentration risk is mitigated through spreading the risk over multiple counterparties. CPD risk is further mitigated through collateral
mechanisms in place for these transactions.
The risks that are not sufficiently mitigated by diversification are managed through concentration and exposure limits and
through reinsurance:
• Retention limits for life insurance risks are set per insured life and significant mortality events affecting multiple lives such as pandemics
• Retention is used to manage risk levels (such as non-life reinsurance and risk morbidity reinsurance in the COLI business in Japan Life)
• Retention limits for non-life insurance risks are set by line of business for catastrophic events and individual risk
For NN Non-Life natural catastrophic events are a major risk. One of the main natural catastrophe threatening the Netherlands is storms
causing severe wind damage. NN Non-Life purchased a reinsurance contract offering protection against severe storms and other natural
perils. In addition, reinsurance contracts per risk group are in place, covering NN Non-Life against large one- off events such as fires.
Reinsurance creates credit risk which is managed in line with the Reinsurance Standard of NN Group.
Business risk
Business risk include risks related to the management and development of the insurance portfolio risk, policyholder behaviour risks,
persistency risk and expense risks. These risks occur because of internal, industry, regulatory/political, or wider market factors.
Risk profile
The table below presents the Partial Internal Model business risk SCR for the Dutch NN insurance entities of NN Group as at 31 December
2021 and 31 December 2020 respectively.
Business risk capital requirements
2021 2020
Persistency risk 408 357
Premium risk 12 13
Expense risk 1,387 1,598
Diversification business risk -271 -256
Business risk (IM entities) 1,536 1,712
The main contributors to persistency risk are NN Non-Life and NN Czech business and the Corporate Owned Life Insurance (COLI) business
in Japan Life ( both reinsured by NN RE). Persistency risk increased due to the assumption changes.
The risk that policyholders maintain their contracts longer than NN Group has assumed is specific to the variable annuity business when
guarantees are higher than the value of the underlying policyholder funds, the pension business in the Netherlands, and the older, higher
interest rate guaranteed savings business in Europe. The risk that policyholders hold their contracts for a shorter period than NN Group has
assumed relates to the life business in Japan and the unit-linked businesses in Central and Eastern Europe. Within NN Group NN Re reinsures
parts of the life business in Japan and Central and Eastern Europe.
Expense risk decreased due to regular assumption updates throughout NN Group, which is partially offset by the increase in inflation rates.
This risk relates primarily to the variable part of NN Group’s expenses and is the risk that future actual expenses exceed the expenses
assumed. Total administrative expenses for NN Group for 2021 were EUR2,280 million compared with EUR2,121 million in 2020. Parts of these
expenses are variable, depending on the size of the business and sales volumes, and parts are fixed and cannot immediately be adjusted to
reflect changes in the size of the business.
Expense risk of NN Group mainly comprises the expense level and expense inflation risks in NN Life. A significant portion of it is incurred
in the closed block operations of Netherlands Life, where NN Group is exposed to the risk that the expenses will not decrease in line with
the gradual decrease of the in-force book, leading to a per policy expense increase. Furthermore, expense risk is also driven by the Group
pension business in the Netherlands which includes long-term best estimate expense assumptions, discounted over a long period of time.
Notes to the Consolidated annual accounts continued
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environment
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52 Risk management continued
Risk mitigation
Policyholder behaviour risks, such as persistency and premium risk, are managed through the product development, product approval and
review processes and by ensuring that appropriate advice is given to the customer, not only at the point of sale but also during the lifetime of
the product. The policyholder behaviour experience of in-force policies is assessed at least annually.
As part of its strategy, NN Group has put several programmes in place to own and improve the customer experience. These programmes
improve the match between customer needs and the benefits and options provided by NN Group’s products. Over time, NN Group’s
understanding and anticipation of the choice policyholders are likely to make, will improve, thereby decreasing the risk of a mismatch
between actual and assumed policyholder behaviour.
Ongoing initiatives are in place to manage expense risk throughout NN Group, especially in the Netherlands where company targets are
in place to reduce expenses, thus, lowering expense risk going forward. These initiatives seek to reduce expenses through the number of
underlying contracts in place. This is particularly relevant for the Dutch individual life closed-block business that can only reduce in number
of contracts.
Besides the already described mitigating actions, proper pricing, underwriting, claims management, and diversification are also risk
mitigating actions for business risk.
Life Risk
Life risk includes risks arising from the underwriting of life insurances of the Business Units applying Standard Formula and is split into
mortality risk, longevity risk, disability/morbidity risk, persistency risk, expense risk, revision risk and catastrophic risk. These risks refer to the
adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the conduct
of business.
Risk profile
Life risk capital requirements
2021 2020
Mortality risk 142 138
Longevity risk 103 116
Morbidity risk 11 10
Expense risk 435 384
Lapse risk 546 500
Catastrophe risk 113 102
Diversification life risk -393 -379
Life risk (SF entities) 957 871
As shown in the table above, the life risk SCR Business Units increased from EUR871 million in 2020 to EUR957 million in 2021 mainly due to
model and assumption changes performed by the Business Units.
Risk mitigation
The majority of life risk is comprised of lapse, expense and mortality risks (in Standard Formula entities) mainly from the international
NN Group entities (Belgium, Poland, Spain) as well as ABN AMRO Life.
The NN Group Standard Formula entities manage the expense risk through detailed budgeting and monitoring the costs using
activity-based costing.
Lapse risk management serves an important objective for NN Group entities. When deviations from assumed lapse rates are observed over
a prolonged period of time, a product review and further management actions will be taken to address the underlying reasons.
Health Risk
Health risk arises from issuing health insurance contracts, which is divided in Similar to Life Techniques (SLT) risk, Non-Similar to Life
Techniques (NSLT) risk and catastrophe risk. SLT risk is associated to health obligations pursued on a similar technical basis to that of life
insurance, while NSLT risk applies to health obligations not pursued on a similar technical basis to that of life insurance. These risks refer
to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the
conduct of business.
Notes to the Consolidated annual accounts continued
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environment
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performance
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52 Risk management continued
Risk profile
Health risk capital requirements
2021 2020
SLT 220 545
NSLT 20 40
Catastrophe risk 19 48
Diversification health risk -23 -51
Health risk (SF entities) 236 582
As shown in the table above, the health risk SCR of the Business Units applying Standard Formula decreased from EUR582 million in 2020 to
EUR236 million in 2021. The decrease is mainly explained by the fact that VIVAT Non-life is reported on a Standard Formula via TCLI captured
outside Health risk module.
Risk mitigation
The majority of Health risk originates from international NN Group entities (Belgium, Czech, Poland, Slovakia, Romania, Greece).
They mitigate the risks by strict acceptance policies and stringent claims-handling procedures. An acceptance policy is developed for
each product line maintained by those entities. Random checks are also carried out to check whether underwriters are following the rules
and regulations.
Non-life Risk
Non-life risk involves risks arising from the underwriting of non-life insurance, which includes premium and reserve risk, persistency risk and
catastrophic risk. These risks refer to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour
and the processes used in the conduct of business.
Risk profile
Non-life risk capital requirements
2021 2020
Premium and reserve risk 99 302
Lapse risk 18 36
Catastrophe risk 33 96
Diversification non-life risk -37 -93
Non-life risk (SF entities) 113 341
As shown in the table above, the non-life risk SCR of the Business Units applying Standard Formula decreased from EUR341 million in 2020
to EUR113 million in 2021. Just as for Health risk the decrease is mainly explained by the fact that VIVAT Non-life is reported on a Standard
Formula via TCLI adjustment which is captured outside Non-life risk module.
Risk mitigation
Non-life risk is mitigated through appropriate pricing and underwriting policies and through risk transfer via reinsurance. Most of the non-life
risk comes from ABN AMRO Non-life and NN Insurance Services, and they manage the risk using various reinsurance contracts.
Within our non-life business, weather-related risks are managed through the use of catastrophe risk modelling in underwriting and
risk assessment. We use external vendor models to estimate the impact and damage caused by large natural catastrophes such as
windstorms, considered to be the main natural peril for the NN Group portfolio. Reinsurance covers are placed with strongly capitalised
external reinsurers.
Natural catastrophic losses can become more severe and more frequent because of climate change. Although most of our non-life business
is annually renewable, to accurately price our business it is essential that we monitor and understand linkages between natural disasters and
climate change. NN Group therefore liaises with our external vendors and participates in industry initiatives to improve our knowledge, data
and models to better prepare for changing weather patterns.
Notes to the Consolidated annual accounts continued
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environment
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performance
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52 Risk management continued
VIII. Non-financial risks
• Business operations risk: risks related to inadequate or failed processes, including information technology and communication systems
• Business continuity & security risk: risks of accidents or external events impacting continuation or security of (people or assets in) our
business operations
• Business conduct risk: is the risks related to unethical or irresponsible corporate behaviour, inappropriate employee behaviour and
suitability of products
Business operations and continuity & security risk
Risk profile
Business operations and continuity & security risks are non-financial risks that include direct or indirect losses resulting from inadequate or
failed processes (including as a result of fraud and other misconduct), systems failure (including information technology and communications
systems), human error, and certain external events.
The business operations risk management areas covered within NN Group are:
• Operational control risk: the risk of not (timely) detecting adverse deviations from strategy, policies, procedures, work instructions or
authorised activities
• Operational execution risk: the risk of human errors during (transaction) processing
• Financial accounting risk: the risk of human errors during general ledger/risk systems processing and subsequent financial reporting
• Information (technology) risk (including cyber-risk): the risk of data (information) corruption, misuse or unavailability in IT systems, either
through external causes (e.g. cybercrime) or internal causes
• Operational change risk: the risk that actual results of changes to the organisation (this includes changes in processes, products, IT,
methods and techniques) differs adversely from the envisaged results
• Outsourcing risk: the risk that outsourced activities or functions perform adversely as compared to performing them in-company.
This includes the risk of unclear mutual expectations as documented in the outsourcing agreement, risk of unreliable outsourcing partner
(both (un)intentional), operational control, information security and continuity risk of the outsourcing partner
• Legal risk: the risk that agreements, claims, regulatory inquiries or disclosures potentially result in damage to NN Group’s brand and
reputation, legal or regulatory sanctions or liability resulting in financial loss
• External fraud risk: the risk of intended acts by a third party to defraud, misappropriate property or circumvent the law
The business continuity & security risk management areas covered within NN Group are:
• Continuity risk: the risk of primary business processes being discontinued for a period beyond the maximum outage time
• Personal & physical security risk: the risk of criminal acts or environmental threats that could endanger NN Group employees’ safety,
NN Group’s assets (including physically stored data/information) or NN Group’s offices
Risk mitigation
Mitigation of risks can be preventive in nature (e.g. training and education of employees, preventive controls, etc.) or can be implemented
upon discovery of a risk (e.g. enforcement of controls, disciplinary measures against employees). Risk mitigating actions or controls are based
on a balance between the expected cost of implementation and execution, and the expected benefits.
Business operations and continuity risks are mitigated through controls. For specific areas like financial reporting, outsourcing of activities,
and business continuity, specific Policies and Standards apply. In the case of outsourcing, an appropriate outsourcing agreement is required
between outsourcing parties and the performance under the outsourcing agreement is required to be monitored regularly.
NN Group conducts regular risk and control monitoring to measure and evaluate the effectiveness of key controls. It determines whether
the risks are within the norms for risk appetite and in line with requirements from policies and standards. The exposure of NN Group to
non-financial risks is regularly assessed through risk assessments and monitoring. After identification of the risks, each quantifiable risk is
assessed as to its likelihood of occurrence as well its potential impact, should it occur. Actions required to mitigate the risks are identified and
tracked until the risk is either reduced, if such a reduction is possible, or accepted as a residual risk if the risk cannot be mitigated.
The business process owners are responsible for the actual execution of the controls and for assessing the adequacy of their controls.
The Chief Information Officer (CIO) function ensures Business Continuity Management, Cyber risk management and Business
Information Security.
Notes to the Consolidated annual accounts continued
Our operating
environment
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performance
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52 Risk management continued
For IT risks, CIO has adopted the Standard of Good Practice of the Information Security Forum (ISF) as the basis to manage IT, cyber and
cloud risks within NN Group. ISF forms the basis of our ISF Policy and Standard, and ensures a consistent view and treatment of our risks in
this area. Cyber security is an integral part of our risk management strategy. Within Group IT, the Enterprise Security & Compliance (ESC)
Function leads all efforts within NN Group to further enhance our activities with regard to information security. ESC collaborates with BU
Security Officers (BSOs) to provide 24/7 protection against cyberthreats. Education and awareness-raising are part of our security strategy
at all levels of the organisation.
Main regular activities undertaken to manage this risk are amongst others:
• Regular IT risk assessments are performed on critical business environments, applications and supporting systems/networks, and testing of
security measures is performed on a regular basis. Identified risks are documented, classified and monitored in the Security Action Plans.
• User identification and access management are in place, based on defined authorisation matrices and enforcing segregation of duties
(especially for administrative accounts). Password parameters are system-enforced for user accounts on the network and critical
applications. Multi-factor authentication on business-critical applications is required as an additional measure for protecting against
unauthorised access.
• Anti-malware and anti-virus tooling and file integrity checking are implemented and kept up-to-date.
• Effective security logging and monitoring is defined, and corrective actions are taken for identified vulnerabilities. A security incident process
is in place, and incidents are registered, assessed and solved within a predefined timeframe.
• Networks are protected by intrusion detection and prevention systems. All hardware and software on the network are monitored so that
only authorised devices and software is granted access. The security configuration of laptops, servers, and workstations is managed via a
configuration management and change control process.
• Data is classified based on its relevance and confidentiality. Depending on the risk classification, data is secured and encrypted according
to required security standards.
• A change management process exists and is required for relevant systems and infrastructure, including relevant steps to ensure security
such as impact analyses, testing, fall back scenarios and post implementation review.
Information Risk Management, as part of the second line of defence, is responsible for providing management with an objective assessment
of the effectiveness of NN Group’s risks and controls.
Risk measurement
NN Group’s SCR for operational risk decreased from EUR758 million as at the end of 2020 to EUR711 million at the end of 2021 respectively.
The SCR is calculated based on the Standard Formula. As it is additive to the modelled SCR, it should be considered as net of diversification
with other NN Group risks. Business conduct risk is considered to be a part of the Operational Risk SCR and is therefore not specifically
calculated. Progress is also tracked through monitoring control effectiveness and timeliness as well as tracking progress of open issues.
Business conduct risk
Risk profile
Through NN Group’s retirement services, insurance, investments and banking products, NN Group is committed to help our customers care
for what matters most to them. To fulfil this purpose, we base our work on three core values: care, clear, commit. Our values set the standard
for conduct and provide a compass for decision-making. Further, NN Group is committed to the preservation of its reputation and integrity
through compliance with applicable laws, regulations and ethical standards in each of the markets in which it operates. All employees
are expected to adhere to these laws, regulations and ethical standards and management is responsible for ensuring such compliance.
Compliance is therefore an essential ingredient of good corporate governance. NN Group continuously enhances its business conduct risk
management programme to ensure that NN Group complies with international standards and laws.
Risk mitigation
NN Group separates business conduct risk into three risk areas: sound business conduct, employee conduct and product suitability.
In addition to effective reporting systems, NN Group has also a Whistleblower Policy and procedure which protects and encourages staff
to speak up if they know of or suspect a breach of external regulations, internal policies or our values. NN Group also has policies and
procedures regarding anti-money laundering, anti-terrorist financing, sanctions, anti-bribery and corruption, product suitability, conflicts of
interest and confidential and inside information, as well as a Code of Conduct for its personnel. Furthermore, NN Group designates specific
countries as ‘ultra-high risk’ and prohibits client engagements and transactions (including payments of facilitation) involving those countries.
Notes to the Consolidated annual accounts continued
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52 Risk management continued
NN Group performs a product approval and review process for our products and continuously invests in the maintenance of risk
management, legal and compliance procedures to monitor current sales practices. Customer protection regulations as well as changes
in interpretation and perception of acceptable market practices by both the public at large and governmental authorities might influence
customer expectations. The risk of potential reputational and financial impact from products and sales practices exists because of the
(changing) market situation, customer expectations, and regulatory activity. The Compliance Function and the business work closely
together with the aim to anticipate changing customers’ needs.
53 Capital and liquidity management
Objectives, policies and processes
Objective
The goal of NN Group’s capital and liquidity management is to adequately capitalise NN Group and its operating entities at all times to
meet the interests of our stakeholders, including our customers and shareholders. The balance sheet is assessed in line with our capital
management framework which is based on regulatory, economic and rating agency requirements. NN Group closely monitors and manages
the following metrics: Own Funds/Solvency Capital Requirement (SCR), cash capital at the holding company, financial leverage, fixed cost
coverage, capital generation and liquidity.
Governance
The NN Group Capital Management and Corporate Treasury Department reports to the NN Group CFO. Activities of the department are
executed on the basis of established policies, guidelines and procedures.
Capital Management is responsible for the sufficient capitalisation of NN Group entities, which involves the management, planning and
allocation of capital within NN Group. Corporate Treasury is responsible for the management and execution of debt capital market
transactions, term (capital) funding, cash management and risk management transactions.
Capital management and framework
The capital framework takes into account regulatory, economic and rating agency requirements:
∙ As a first principle, NN Group aims to capitalise its operating entities adequately at all times. Operating entities have to comply with the
local statutory capital frameworks that are under supervision of local regulators. To ensure adequate capitalisation, they are managed to
commercial capital target levels which are set in accordance with the risk associated with the business activities, commercial requirements
and other relevant factors. The commercial capital target levels are set in local legal entity capital policies and approved by the Management
Board of NN Group. Capital adequacy is ensured through the capital planning process which starts with the annual budgeting process in
which a capital plan is prepared for NN Group and its operating entities with a time horizon of 5 years. NN Group’s risk appetite statements,
as further described in Note 52 ‘Risk Management’, drive the target setting and are cascaded down to the operating entities in line with
NN Group’s risk management strategy. Other important factors which are considered in the capital plan are efficient capital allocation, the
cost of capital and capital generation. Capital positions of operating entities are closely monitored and, if necessary, measures are taken to
ensure capital adequacy. At the end of 2021, all operating entities were capitalised above their local regulatory requirements.
∙ In addition, cash capital is held at the holding company. The cash capital position is available to cover capital needs of the entities after a
stress event and to cover financial leverage costs and holding company expenses for a period of at least 12 months. Stress tests are based
on 1-in-20 year scenarios and specific stress scenarios that might change from time to time. The free cash flow to the holding is the cash
made available to NN Group, which can be distributed to shareholders (reference is made to Note 14 ‘Equity’ for information on distributable
reserves), used to reduce debt or for other corporate purposes. The free cash flow to the holding is closely monitored and forecasted on a
regular basis.
∙ NN Group assesses its funding mix via the financial leverage and fixed-cost coverage ratio. Financial leverage measures the amount of debt
that NN Group issued to capitalise its operations. Debt used for funding or liquidity needs for the operating companies is not considered
financial leverage. The fixed-cost coverage ratio measures the ability of NN Group to pay its fixed financing expenses and is defined as the
earnings before interest and tax (EBIT) divided by interest before tax on financial leverage. Special items, revaluations on derivatives that are
non-eligible for hedge accounting, market and other impacts and amortisation of acquisition intangibles are excluded from EBIT.
Liquidity management
NN Group monitors and manages its liquidity risk based on certain severe stress scenarios, assessed by operating entities and aggregated
at the group level. Liquidity positions are periodically reported and monitored both on an individual entity and on a consolidated basis.
Liquidity risk is measured through the Required Sales Ratio, calculated as: (i) the difference between liquidity needs and liquidity sources in
certain stress scenarios, divided by (ii) the available liquid assets for sale, subject to a reduction applied to the value of assets. This ratio is
calculated for different time horizons and different levels of liquidity sources. The ratios of the entities should meet the predefined tolerance
levels on a standalone entity basis. At 31 December 2021, the liquidity position of all entities was adequate and within the risk tolerance
(reference is made to Note 52 ‘Risk management’ for more information on liquidity risk management).
Notes to the Consolidated annual accounts continued
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53 Capital and liquidity management continued
For the Banking business, Dutch Central Bank (DNB) requires an annual internal evaluation of capital adequacy, liquidity position and the
risk management framework, including stress testing. This internal evaluation is performed using an Internal Capital and Liquidity Adequacy
Assessment Process (ICLAAP) and reviewed by DNB in its Supervisory Review & Evaluation Process (SREP). The ICLAAP and SREP show
that NN Bank has a robust capital and liquidity position.
NN Group has a syndicated revolving credit facility in place with maximum size of EUR1.75 billion which will mature in 2025. There was no
amount drawn from the facility in 2021 and 2020.
Significant events of 2021 are listed below in chronological order
On 11 February 2021, NN Group announced that it has reached an agreement with KBC Group N.V. (KBC) to sell its Bulgarian operations for a
total consideration of EUR78 million to KBC’s Bulgarian insurance business DZI. The transaction was closed in July 2021.
On 18 February 2021, NN Group announced an open market share buyback programme for an amount of EUR250 million within 12 months,
that commenced on 1 March 2021. This share buyback was executed by financial intermediaries under an open market share buyback
programme which was completed on 28 February 2022.
On 16 June 2021, NN Group paid a 2020 final dividend of EUR1.47 per ordinary share, equivalent to EUR454 million in total. To neutralise the
dilutive effect of the stock dividend on earnings per share, NN Group repurchased ordinary shares for a total amount of EUR202 million.
This share buyback was executed by financial intermediaries under an open market share buyback programme which was completed on
22 September 2021.
On 5 July 2021, NN Group announced to acquire MetLife’s businesses in Poland and Greece for a consideration of EUR584 million. This is in
line with the strategy to consolidate NN Group’s leading positions in attractive growth markets in which NN is already active. On 31 January
2022 the acquisition of MetLife Greece was completed. The acquisition of MetLife Poland is expected to be completed in 2022.
On 8 July 2021, NN Group announced that it has reached an agreement to acquire a 70% stake in insurance broker and service provider
Heinenoord, for a total consideration of EUR179 million. In addition, NN Group refinanced the outstanding debt granted to Heinenoord for an
amount of EUR129 million. Furthermore, the agreement includes an option structure to acquire the remaining 30% of shares within four years
following the closing of the transaction. The transaction closed on 14 October 2021.
On 19 August 2021, NN Group announced that it has reached an agreement to sell its asset management activities executed by NN
Investment Partners (NNIP) to Goldman Sachs for total cash proceeds of EUR1.7 billion. Closing of the transaction is subject to customary
conditions, including obtaining the necessary regulatory and competition clearances and consultation of the NN IP works council in the
Netherlands, and is expected to take place in the first half of 2022.
On 8 September 2021, NN Group paid a 2021 interim dividend of EUR0.93 per ordinary share, or approximately EUR287 million in total.
To neutralise the dilutive effect of the stock dividend on earnings per share, NN Group repurchased ordinary shares for a total amount of
EUR127 million. This share buyback was executed by financial intermediaries under an open market share buyback programme which was
completed on 26 November 2021.
In November 2021, NN Group’s subsidiary NN Insurance Belgium sold a closed book life portfolio to Athora Belgium. The closed book
portfolio, comprising life insurance policies that are no longer being sold, reflect approximately EUR3.3 billion of assets and liabilities.
Closing of the transaction is expected by mid-2022.
On 16 November 2021, NN Group announced that it had priced EUR600 million senior unsecured notes with a fixed coupon at 0.875%
per annum and a maturity of 10 years. The notes are rated by Standard & Poor’s (BBB+) and Fitch (A), and listed on Euronext Amsterdam.
The notes are issued under the Debt Issuance Programme of NN Group N.V., for which the Base Prospectus is dated 10 June 2021, as
supplemented on 12 November 2021. NN Group intends to use the proceeds of the notes to repay the existing EUR600 million senior
unsecured notes that matures on 18 March 2022.
At the end of December 2021, NN Group entered into a longevity reinsurance transaction to transfer the full longevity risk associated with
approximately EUR4 billion of pension liabilities. This will reduce NN Group’s exposure to longevity risk, and consequently reduce the required
capital and further strengthen NN Group’s capital position. The transaction is expected to have limited financial impact on NN Group.
Notes to the Consolidated annual accounts continued
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53 Capital and liquidity management continued
On 15 February 2022, NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen (AAV) announced that they have
reached an agreement to sell the life insurance subsidiary of AAV to NN Life for a total amount of EUR253 million. This transaction will be
financed from existing cash resources of NN Life. AAV is a joint venture between NN Group (51%) and ABN AMRO Bank (49%). Following the
transaction, AAV intends to distribute the proceeds from the transaction, after deduction of costs related to the transaction, to its
shareholders NN Group and ABN AMRO Bank. The transaction is expected to have a limited negative impact on NN Group’s Solvency II ratio
on closing, which is expected to change into a limited positive impact following the envisaged legal merger of AAV’s life insurance business
and NN Life and the application of NN Group’s Partial Internal Model. The transaction is subject to regulatory approvals and is expected to
close in the second half of 2022.
Solvency II
Solvency II is the regulatory framework for (re-)insurance undertakings and groups domiciled in the EU.
Under the Solvency II regime, required capital (Solvency Capital Requirement) is risk-based and calculated as the post-tax value-at-risk at
the confidence interval of 99.5% on a one-year horizon. Available capital (Own Funds) is determined as the excess of assets over liabilities,
both based on economic valuations, plus qualifying subordinated debt. The EU Solvency II directive requires that (re-)insurance undertakings
and groups hold sufficient Eligible Own Funds to cover the SCR.
NN Group is the holding company of licensed insurers, asset management and banking businesses. Regulated entities which from local
regulatory perspective are not subject to the Solvency II regime (e.g. pension funds in Central Europe, NN Investment Partners, NN Bank,
BeFrank and BeFrank PPI) are included in Own Funds based on their local available capital and in SCR based on required capital defined by
sectoral supervisory rules. NN Life Japan is included in Own Funds and SCR based on its available and required capital determined according
to the local solvency regime recognised by the European Commission as provisionally equivalent.
NN Group uses the Partial Internal Model (PIM) to calculate capital requirements under Solvency II. The group capital model is named as
such due to the fact that an Internal Model is used to calculate the capital requirements for the Dutch insurance entities (namely NN Life,
NN Non-life and NN Re in the Netherlands), while the Standard Formula is used to calculate capital requirements for operational risk (across
the group), for the international insurance entities that fall under Solvency II, for ABN AMRO Life and ABN AMRO Non-life. NN Non-life is in
the process of expanding the PIM to include the former VIVAT Non-life business.
Further details on the NN Group capital requirements at 31 December 2021 are provided in Note 52 ‘Risk Management’.
The Solvency II ratios of NN Group and its Dutch insurance entities do not include any contingent liability potentially arising from unit-linked
products sold, issued or advised on by NN Group’s insurance entities (including ABN AMRO Life) in the past, as this potential liability cannot
be reliably estimated or quantified at this point. Reference is made to Note 45 ‘Legal proceedings’ for more information.
On 17 December 2020, EIOPA published its opinion to the European Commission (the ‘Opinion’). The Opinion, which consists of a proposed
package of measures, was used as input for the European Commission to draft a legislative proposal. On 22 September 2021, the European
Commission published its draft proposals on the Solvency II 2020 review. These proposals, which are partly based on the Opinion, but differ
in important elements, will be discussed with the European Council and European Parliament in the coming years. The resulting legislation is
currently expected to be implemented at the earliest in 2024. Based on the draft proposals by the European Commission and current market
conditions, NN Group remains comfortable with its Solvency position and do not expect changes to its capital return policy caused by the
issuance of the opinion.
In 2021, the Dutch Central Bank (DNB) issued further guidance related to the treatment of contract boundaries for individual disability
contracts. NN Group intends to reflect the consequence of this guidance in the solvency calculations of Nationale-Nederlanden
Schadeverzekering Maatschappij N.V. (NN Schade) in the first half of 2022, which is expected to have an impact of approximately -2%-points
on the Solvency II Ratio of NN Group.
NN Group was adequately capitalised at 31 December 2021 with a Solvency II ratio of 213% based on the Partial Internal Model.
Notes to the Consolidated annual accounts continued
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53 Capital and liquidity management continued
Eligible Own Funds and Solvency Capital Requirement
2021 2020
Shareholders’ equity 32,888 36,731
Minority interest 266 277
Elimination of deferred acquisition costs and other intangible assets -2,149 -1,669
Valuation differences on assets 2,268 2,611
Valuation differences on liabilities, including insurance and investment contracts -18,687 -25,582
Deferred tax effect on valuation differences 4,649 6,039
Difference in treatment of non-Solvency II regulated entities -951 -1,082
Excess assets/liabilities 18,284 17,32 5
Qualifying subordinated debt 4,383 4,498
Foreseeable dividends and distributions -646 -595
Basic Own Funds 22,021 21,228
Non-available Own Funds 1,094 1,200
Eligible Own Funds to cover Solvency Capital Requirements (a) 20,927 20,028
– of which Tier 1 unrestricted 13,377 12,484
– of which Tier 1 restricted 1,875 1,927
– of which Tier 2 2,422 2,484
– of which Tier 3 848 733
– of which non-Solvency II regulated entities 2,404 2,400
Solvency Capital Requirements (b) 9,840 9,534
– of which from Solvency II entities 8,506 8,166
– of which from non-Solvency II entities 1,334 1,368
NN Group Solvency II ratio (a/b)
1
213% 210%
1 The Solvency ratios are not final until filed with the regulators.
The final amount of the Solvency Capital Requirement is still subject to supervisory assessment.
The Solvency II ratio of NN Group increased to 213% at the end of 2021 from 210% at the end of 2020. The increase mainly reflects operating
capital generation and favourable market impacts. This was partly offset by other movements including the impact of model and assumption
changes (reference is made to Note 52 ‘Risk management’ for more information about model changes) and asset portfolio changes, capital
flows to shareholders as well as the impact of UFR reduction from 3.75% to 3.60%. Market impacts mainly reflect the positive impact of
credit spreads tightening and real estate revaluations.
Eligible Own Funds increased to EUR20,927 million from EUR20,028 million at 31 December 2020 mainly driven by the above mentioned
favourable market impacts and operating capital generation, partly offset by capital flows to shareholders.
The SCR of NN Group increased to EUR 9,840 million from EUR 9,534 million at 31 December 2020 mainly as a result of model and
assumption changes, as well as the impact of changes in the asset portfolio.
Notes to the Consolidated annual accounts continued
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282
NN Group N.V.
2021 Annual Report
53 Capital and liquidity management continued
Structure, amount and quality of Own Funds
Subordinated liabilities included in NN Group Own Funds
Solvency II value
Interest rate Issue Year of issue Notional Due date First call date Own Funds tier 2021 2020
4.500% NN Group N.V. 2014 1,000 Perpetual 15 January 2026 Tier 1 1,078 1,111
4.375% NN Group N.V.
1
2014 750 Perpetual 13 June 2024 Tier 1 797 816
4.625% NN Group N.V. 2014 1,000 8 April 2044 8 April 2024 Tier 2 1,075 1,100
4.625% NN Group N.V. 2017 850 13 January 2048 13 January 2028 Tier 2 912 940
9.000% Nationale-Nederlanden
Levensverzekering N.V.
2
2012 500 29 August 2042 29 August 2022 Tier 2 521 530
1 These securities were originally issued by Delta Lloyd N.V. which was merged into NN Group N.V. at the end of 2017.
2 These securities were originally issued by Delta Lloyd Levensverzekering N.V. which was merged into Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NN Life) on 1 January 2019.
The perpetual subordinated notes issued in 2014 with a notional amount of EUR1 billion have a coupon of 4.50% and are fully paid in.
NN Group N.V. has the right to redeem these notes on the first call date on 15 January 2026 or on any interest payment date thereafter.
The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering). These subordinated
notes are grandfathered for a maximum period of 10 years until 1 January 2026.
The perpetual subordinated notes (originally issued by Delta Lloyd N.V. in 2014) with a notional amount of EUR750 million have a coupon of
4.375% are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 June 2024 or on any interest payment
date thereafter. The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering).
These notes are grandfathered for a maximum period of 10 years until 1 January 2026.
The dated subordinated notes issued in 2014 with a notional amount of EUR1 billion have a coupon of 4.625% and maturity date on
8 April 2044 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 8 April 2024 or on any interest
payment date thereafter. These subordinated notes are classified as Tier 2 capital based on the transitional provisions (grandfathering).
The subordinated notes are grandfathered for a maximum period of 10 years until 1 January 2026.
The dated subordinated notes issued in 2017 with a notional amount of EUR850 million have a coupon of 4.625% with maturity date on
13 January 2048 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 January 2028 or on any
interest payment date thereafter. These subordinated notes are classified as Tier 2 capital.
The dated subordinated notes, originally issued by Delta Lloyd Levensverzekering N.V. in 2012 and assumed by Nationale-Nederlanden
Levensverzekering N.V. following the legal merger effective as of 1 January 2019, with a notional amount of EUR500 million have a coupon
of 9% and maturity date on 29 August 2042 and are fully paid in. Nationale-Nederlanden Levensverzekering N.V. has the right to redeem
these notes on the first call date on 29 August 2022 or on any interest payment date thereafter. The subordinated notes are classified as
Tier 2 capital based on the transitional provisions (grandfathering). These notes are grandfathered for a maximum period of 10 years until
1 January 2026.
Eligible Own Funds
NN Group Own Funds are classified into three tiers as follows:
∙ The excess of assets over liabilities on the basis of consolidated accounts excluding net Deferred Tax Asset is classified as (unrestricted)
Tier 1
∙ The proportional share in the Own Funds of NN Investment Partners, BeFrank, BeFrank PPI and pension funds in Central Europe is classified
as (unrestricted) Tier 1
∙ The proportional share in the Eligible Own Funds of NN Life Japan is classified as (unrestricted) Tier 1 (European Commission recognised
the solvency regime applied to the insurance undertakings in Japan as provisionally equivalent to Solvency II according to Commission
Delegated Decision (EU) 2016/310 of 26 November 2015)
∙ The proportional share in the Own Funds of NN Bank is classified as (unrestricted) Tier 1 with the exception of the subordinated loans which
are classified as Tier 2
∙ Perpetual subordinated notes are classified as (restricted) Tier 1 based on the transitional provisions (grandfathering)
∙ Dated subordinated debt is classified as Tier 2 including that based on the transitional provisions (grandfathering)
∙ The Net Deferred Tax Asset (Deferred tax assets and liabilities are offset only where such assets and liabilities relate to taxes levied by the
same tax authority on the same taxable undertaking) is classified as Tier 3
As at 31 December 2021 and 2020, NN Group had no ancillary Own Funds.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
53 Capital and liquidity management continued
There are a number of regulatory restrictions on the amounts classified as Restricted Tier 1, Tier 2 and Tier 3 capital. The following restrictions
have to be taken into account:
∙ Restricted Tier 1 capital cannot exceed 20% of the total Tier 1 amount
∙ The proportion of Tier 1 items in the Eligible Own Funds should be higher than one third of the total amount of Eligible Own Funds
∙ Tier 2 and Tier 3 capital together cannot exceed 50% of the SCR
∙ Tier 3 capital cannot exceed 15% of the Solvency Capital Requirements
∙ Tier 3 capital cannot exceed one third of the total amount of Eligible Own Funds
The application of the regulatory restrictions as at 31 December 2021 is reflected in the table below.
Eligible Own Funds to cover the Solvency Capital Requirement
Available
Own Funds
2021
Eligibility
Own Funds
2021
Available
Own Funds
2020
Eligibility
Own Funds
2020 Eligibility restriction
Tier 1 15,252 15,252 14,411 14,411 More than one third of total EOF
Of which:
– Unrestricted Tier 1 13,377 13,377 12,484 12,484 Not applicable
– Restricted Tier 1 1,875 1,875 1,927 1,927 Less than 20% of Tier 1
Tier 2 + Tier 3 3,270 3,270 3,217 3,217 Less than 50% of SCR
Tier 2 2,422 2,422 2,484 2,484
Tier 3 848 848 733 733
Less than 15% of SCR;
Less than one third of total EOF
Non-Solvency II regulated entities 2,404 2,404 2,400 2,400
Total Own Funds 20,927 20,927 20,028 20,028
Transferability and fungibility of Own Funds
NN Group adjusts the group Own Funds taking into account the value of own fund items that cannot effectively be made available to cover
the group SCR. These are the own fund items of related undertakings subject to legal and regulatory constraints that restrict the ability of
those items to absorb all types of loss within the group and/or transferability of assets. Based on NN Group’s assessment these own fund
items mainly include:
∙ Differences between valuations of assets and liabilities based on Solvency II principles and according to principles that related undertakings
use to prepare respective local annual accounts
∙ For NN Life Japan, own fund items according to local rules but which are not part of shareholders’ equity
∙ For NN Bank, own funds covering pillar II guidance issued by regulator
∙ The transitional measures on risk-free interest rates and technical provisions
∙ Legal reserves set up according to local company law
∙ Any minority interest in a related undertaking
These own fund items are included in NN Group Own Funds to the extent they are eligible for covering contribution of the respective related
undertaking to NN Group’s SCR. On 31 December 2021 excess non-available own funds amounted to EUR1,094 million. On 31 December
2020, this amount was EUR1,200 million.
Cash capital position at the holding company
NN Group holds a cash capital position in the holding company to cover stress events and to fund holding company expenses and interest
expenses. Cash capital is defined as net current assets available at the holding company. It is NN Group’s aim for the cash capital position
at the holding company to be in a target range between EUR0.5 billion and EUR1.5 billion. Another related metric is the free cash flow
at the holding which is defined as the change in the cash capital position at the holding company over the period, excluding acquisitions,
divestments and capital transactions with shareholders and debtholders.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
53 Capital and liquidity management continued
Cash capital position at the holding company
2021 2020
Cash capital position — opening balance 1,170 1,989
Remittances from subsidiaries
1
1,835 1,310
Capital injections into subsidiaries
2
-19 -56
Other
3
-344 -183
Free cash flow to the holding
4
1,472 1,070
Cash divestment proceeds 76
Acquisitions -358 -572
Capital flow from/to shareholders -960 -1,017
Increase/decrease in debt and loans 597 -300
Cash capital position — closing balance 1,998 1,170
1 Includes interest on intragroup subordinated loans provided to subsidiaries by the holding company.
2 Includes the change of subordinated loans provided to subsidiaries by the holding company.
3 Includes interest on subordinated loans and debt with external debtholders, holding company expenses and other cash flows.
4 Free cash flow to the holding company is defined as the change in cash capital position of the holding company over the period, excluding acquisitions, divestments and capital transactions with
shareholders and debtholders.
The cash capital position at the holding company increased to EUR1,998 million at 31 December 2021 from EUR1,170 million at 31 December
2020. The increase is mainly due to EUR1,835 million remittances from subsidiaries and a temporary increase from the proceeds of the
issuance of senior debt which is intended to be used for the repayment of an existing EUR600 million senior note that matures on 18 March
2022. This is partly offset by EUR960 million of capital flows to shareholders, EUR358 million paid for acquisitions mainly reflecting the
acquisition of Dutch insurance broker and service provider Heinenoord and other movements of EUR344 million that include holding
company expenses, interest on loans and debt and other holding company cash flows. Capital flows to shareholders represents the cash
part of the 2020 final dividend and the 2021 interim dividend for a total amount of EUR412 million and the repurchase of EUR548 million of
own shares. Cash divestment proceeds of EUR76 million reflect the sale of the Bulgarian business.
Financial leverage
The financial leverage and fixed-cost coverage ratio are managed in accordance with a single A financial strength rating target.
Financial leverage
2021 2020
Shareholders’ equity 32,888 36,731
Adjustment for revaluation reserves
1
-11,730 -17,790
Minority interests 266 277
Capital base for financial leverage (a) 21,424 19,219
– Undated subordinated notes
2
1,764 1,764
– Subordinated debt 2,356 2,383
Total subordinated debt 4,120 4,146
Debt securities issued 2,292 1,694
Financial leverage (b) 6,412 5,840
Total debt 6,412 5,840
Financial leverage ratio (b/(a+b)) 23.0% 23.3%
Fixed-cost coverage ratio
3
19.9x 11.9x
1 Includes revaluations on debt securities, on the cash flow hedge reserve and on the reserves crediting to life policyholders
2 The undated subordinated notes classified as equity are considered financial leverage in the calculation of the financial leverage ratio. The related interest is included on an accrual basis in the calculation of
the fixed-cost coverage ratio.
3 Measures the ability of earnings before interest and tax (EBIT) to cover funding costs on financial leverage. Special items, revaluations on derivatives that are non-eligible for hedge accounting, market and
other impacts and amortisation of acquisition intangibles are excluded from EBIT
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
53 Capital and liquidity management continued
The financial leverage ratio of NN Group decreased to 23.0% at 31 December 2021 from 23.3% at 31 December 2020, reflecting the increase
of the capital base partly offset by a temporary increase of the financial leverage as a result of the issuance of EUR600 million of senior debt.
The capital base for financial leverage increased by EUR2,205 million mainly driven by the 2021 net results of EUR3,278 million partly offset
by capital flows to shareholders of EUR960 million.
The fixed-cost coverage ratio increased to 19.9x at the end of 2021 from 11.9x at the end of 2020, mainly driven by higher capital gains on the
sale of public equities and government bonds and higher positive real estate revaluations that increased EBIT.
Proposed 2021 final dividend
At the annual general meeting on 19 May 2022, a final dividend will be proposed of EUR1.56 per ordinary share, or approximately
EUR476 million in total based on the current number of outstanding shares (net of treasury shares). The final dividend will be paid either
fully in cash, after deduction of withholding tax if applicable, or fully in ordinary shares, at the election of the shareholders. Dividends paid
in the form of ordinary shares will be delivered from NN Group treasury shares or issued from the share premium reserve. To neutralise the
dilutive effect of the stock dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. If the proposed
dividend is approved by the General Meeting, NN Group ordinary shares will be quoted ex-dividend on 23 May 2022. The record date for
the dividend will be 24 May 2022. The election period will run from 25 May up to and including 8 June 2022. The stock fraction for the stock
dividend will be based on the volume weighted average price of NN Group ordinary shares on Euronext Amsterdam for the five trading days
from 2 June through 8 June 2022. The dividend will be payable on 15 June 2022. (For more information: https://www.nn-group.com/investors/
shareinformation/dividend-policy-and-dividend-history.htm)
On 16 June 2021, NN Group paid a 2020 final dividend of EUR1.47 per ordinary share.
On 8 September 2021, NN Group paid an interim dividend of EUR0.93 per ordinary share. The proposed 2021 final dividend of EUR1.56 per
ordinary share plus the 2021 interim dividend of EUR0.93 per ordinary share gives a total dividend for 2021 of EUR2.49 per ordinary share.
Share buyback
On 17 February 2022, NN Group announced that it will execute an open market share buyback programme for an amount of EUR250 million.
The programme will be executed within 12 months and commenced on 1 March 2022. NN Group also announced that it will execute an
additional open market share buyback programme for an amount of EUR750 million after completion of the sale of NN IP. This intended
additional share buyback programme is expected to be completed before 1 March 2023. Both share buybacks will be deducted in full from
Solvency II Own Funds in the first half of 2022 and are estimated to reduce NN Group’s Solvency II ratio by approximately 10%-points.
In addition, NN Group intends to repurchase shares to neutralise the dilutive effect of any stock dividends. NN Group intends to cancel any
repurchased NN Group shares under the programmes unless used to cover obligations under share-based remuneration arrangements or to
deliver stock dividend.
The share buyback programmes will be executed within the limitations of the existing authority granted by the General Meeting on 20 May
2021 and such authority to be granted by the General Meeting on 19 May 2022. The shares will be repurchased at a price that does not
exceed the last independent trade or the highest current independent bid on the relevant trading platform. The programmes will be executed
by financial intermediaries and will be performed in compliance with the safe harbour provisions for share buybacks.
On 18 February 2021, NN Group announced an open market share buyback programme for an amount of EUR250 million over a period of
12 months, commencing on 1 March 2021. This share buyback programme was completed on 28 February 2022.
Following payment of the 2020 final dividend, NN Group announced that it would repurchase ordinary shares for a total amount of
EUR202 million, equivalent to the value of the stock dividends, to neutralise the dilutive effect. This share buyback programme was
completed on 22 September 2021.
Following the payment of the 2021 interim dividend, NN Group announced that it would repurchase ordinary shares for a total amount of
EUR127 million, equivalent to the value of the stock dividends, to neutralise the dilutive effect. This share buyback programme was completed
on 26 November 2021.
NN Group reports on the progress of the share buyback programmes on its corporate website (https://www.nn-group.com/investors/share-
information/share-buyback-programme.htm) on a weekly basis.
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
53 Capital and liquidity management continued
Share capital
In 2021, a total number of 12,828,981 ordinary shares for a total amount of EUR548 million were repurchased.
The Executive Board of NN Group has decided to cancel 7,878,210 treasury shares representing shares that NN Group repurchased as part
of the share buyback programmes. This cancellation is subject to a two-month creditor opposition period which will ended on 3 May 2022.
If no opposition is made the cancellation of shares will take effect on 4 May 2022.
On 4 March 2022, the total number of NN Group shares outstanding (net 13,286,783 of treasury shares) was 304,591,427.
Credit ratings
On 9 December 2021, Standard & Poor’s published a report affirming NN Group’s ‘A’ financial strength rating and ‘BBB+’ credit rating with a
stable outlook.
On 5 November 2021, Fitch Ratings published a report affirming NN Group’s ‘AA-’ financial strength rating and ‘A+’ credit rating with a
stable outlook.
Credit ratings on NN Group N.V. on 9 March 2022
Financial
Strength
Rating
NN Group N.V.
Counterparty
Credit Rating
Standard & Poor’s A BBB+
Stable Stable
Fitch AA- A+
Stable Stable
Notes to the Consolidated annual accounts continued
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NN Group N.V.
2021 Annual Report
Authorisation of the Consolidated annual accounts
The Consolidated annual accounts of NN Group N.V. for the year ended 31 December 2021 were authorised for issue in accordance with a
resolution of the Executive Board on 9 March 2022. The Executive Board may decide to amend the Consolidated annual accounts as long as
these are not adopted by the General Meeting.
The General Meeting may decide not to adopt the Consolidated annual accounts, but may not amend these during the meeting. The General
Meeting can decide not to adopt the Consolidated annual accounts, propose amendments and then adopt the Consolidated annual
accounts after a normal due process.
The Hague, 9March 2022
The Supervisory Board
D.A. (David) Cole, chair
H.M. (Hélène) Vletter-van Dort, vice-chair
I.K. (Inga) Beale
H.J.G. (Heijo) Hauser
R.W. (Robert) Jenkins
R.J.W. (Rob) Lelieveld
C. (Cecilia) Reyes
J.W. (Hans) Schoen
C.C.F.T. (Clara) Streit
The Executive Board
D.E. (David) Knibbe, CEO, chair
D. (Delfin) Rueda, CFO, vice-chair
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NN Group N.V.
2021 Annual Report
Parent company balance sheet
As at 31 December before appropriation of result notes 2021 2020
Assets
Investments in group companies 2 34,507 38,535
Available-for-sale investments 3 3,918 4,509
Intangible assets 4 264 455
Other assets 5 5,822 6,036
Total assets 44,511 49,535
Equity
Share capital 38 39
Share premium 12,575 12,574
Share of associates reserve 16,651 21,853
Retained earnings 346 361
Unappropriated result 3,278 1,904
Shareholders’ equity 32,888 36,731
Undated subordinated notes 1,764 1,764
Total equity 6 34,652 38,495
Liabilities
Subordinated debt 7 1,836 1,834
Other liabilities 8 8,023 9,206
Total liabilities 9,859 11,040
Total equity and liabilities 44,511 49,535
References relate to the notes starting with Note 1 ‘Accounting policies for the Parent company annual accounts’. These form an integral part
of the Parent company annual accounts.
Parent company balance sheet
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NN Group N.V.
2021 Annual Report
Parent company profit and loss account
For the year ended 31 December 2021 2020
Result group companies 3,494 2,022
Other income 63 65
Total income 3,557 2,087
Amortisation of intangible assets and other impairments 21 24
Interest expenses 122 121
Operating expenses 166 146
Total expenses 309 291
Result before tax 3,248 1,796
Taxation -30 -108
Net result 3,278 1,904
Parent company profit and loss account
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2021 Annual Report
Parent company statement of changes in equity
Parent company statement of changes in equity (2021)
Share
capital
Share
premium
Share of
associates
reserve
Other
reserves1
Shareholders’
equity
Undated
subordinated
notes
Total
equity
Balance at 1 January 2021 39 12,574 21,853 2,265 36,731 1,764 38,495
Unrealised revaluations available-for-sale
investments and other -2,899 -202 -3,101 -3,101
Realised gains/losses transferred to the
profit and loss account -1,431 -1,431 -1,431
Changes in cash flow hedge reserve -3,383 -3,383 -3,383
Deferred interest credited to
policyholders 1,861 1,861 1,861
Share of other comprehensive income of
associates and joint ventures -2 -2 -2
Exchange rate differences -66 -66 -66
Remeasurement of the net defined
benefit asset/liability 19 19 19
Total amount recognised directly in
equity (Other comprehensive income)
- - -5,901 -202 -6,103 - -6,103
Net result for the period 3,278 3,278 3,278
Total comprehensive income - - -5,901 3,076 -2,825 - -2,825
Changes in share capital -1 1 - -
Transfers to/from associates 699 -699 - -
Dividend -412 -412 -412
Purchase/sale of treasury shares -545 -545 -545
Employee stock option and share plans -2 -2 -2
Coupon on undated subordinated notes -59 -59 -59
Balance at 31 December 2021 38 12,575 16,651 3,624 32,888 1,764 34,652
1 Other reserves include Retained earnings and Unappropriated result.
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2021 Annual Report
Parent company statement of changes in equity (2020)
Share
capital
Share
premium
Share of
associates
reserve
Other
reserves1
Shareholders’
equity
Undated
subordinated
notes
Total
equity
Balance at 1 January 2020 41 12,572 16,597 1,558 30,768 1,764 32,532
Unrealised revaluations available-for-sale
investments and other 3,119 -10 3,109 3,109
Realised gains/losses transferred to the
profit and loss account -574 -574 -574
Changes in cash flow hedge reserve 3,422 3,422 3,422
Deferred interest credited to policyholders -750 -750 -750
Share of other comprehensive income of
associates and joint ventures 5 5 5
Exchange rate differences -110 -110 -110
Remeasurement of the net defined benefit
asset/liability 6 6 6
Unrealised revaluations property in own use -3 -3 -3
Total amount recognised directly in equity
(Other comprehensive income)
- - 5,115 -10 5,105 - 5,105
Net result for the period 1,904 1,904 1,904
Total comprehensive income - - 5,115 1,894 7,0 09 - 7,0 0 9
Changes in share capital -2 2 - -
Transfers to/from associates 141 -141 - -
Dividend -394 -394 -394
Purchase/sale of treasury shares -622 -622 -622
Employee stock option and share plans 1 1 1
Coupon on undated subordinated notes -59 -59 -59
Changes in the composition of the group
and other changes 28 28 28
Balance at 31 December 2020 39 12,574 21,853 2,265 36,731 1,764 38,495
1 Other reserves include Retained earnings and Unappropriated result.
Parent company statement of changes in equity continued
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NN Group N.V.
2021 Annual Report
1 Accounting policies for the Parent company annual accounts
The parent company annual accounts of NN Group N.V. are prepared in accordance with the financial reporting requirements included in
Part 9 of Book 2 of the Dutch Civil Code. The accounting policies applicable to presentation and disclosures are in accordance with the
financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code. The principles of valuation and determination of results
stated in connection with the Consolidated balance sheet and profit and loss account are also applicable to the parent company balance
sheet and profit and loss account with the exception of investments in group companies and Associates and joint ventures which are
recognised at net asset value with goodwill, if any, recorded under intangible assets.
A list containing the information referred to in Article 379 (1), Book 2 of the Dutch Civil Code has been filed with the Commercial Register of
the Chamber of Commerce in Amsterdam in accordance with Article 379 (5), Book 2 of the Dutch Civil Code.
Changes in balance sheet values due to changes in the revaluation reserves of associates are reflected in the ‘Share of associates
reserve’, which forms part of shareholders’ equity. Changes in balance sheet values due to the results of these associates, accounted for
in accordance with NN Group accounting policies, are included in the profit and loss account. Other changes in the balance sheet value of
these associates, other than those due to changes in share capital, are included in the ‘Share of associates reserve’.
A legal reserve is carried at an amount equal to the share in the results of associates since their first inclusion at net asset value less the
amount of profit distributions to which rights have accrued in the interim. Profit distributions which can be repatriated to the Netherlands
without restriction are likewise deducted from the ‘Share of associates reserve’.
2 Investments in group companies
Investments in group companies
Interest held
Balance
sheet value Interest held
Balance
sheet value
Name Statutory seat 2021 2021 2020 2020
NN Insurance Eurasia N.V. Amsterdam, the Netherlands 100% 33,387 100% 37,332
Delta Lloyd Houdstermaatschappij
Verzekeringen N.V. Amsterdam, the Netherlands 100% 1 100% 1
Nationale-Nederlanden Bank N.V. The Hague, the Netherlands 100% 847 100% 910
Nationale-Nederlanden ABN AMRO
Verzekeringen Holding B.V. Zwolle, the Netherlands 51% 255 51% 270
NN Insurance International B.V. The Hague, the Netherlands 100% 17 100% 22
Investments in group companies 34,507 38,535
Changes in Investments in group companies
2021 2020
Investments in group companies – opening balance 38,535 32,234
Revaluations -6,100 5,136
Result of group companies 3,494 2,022
Capital contributions 338 422
Dividend and repayments -1,760 -1,265
Changes in the composition of the group and other changes -14
Investments in group companies – closing balance 34,507 38,535
3 Debt securities Available-for-sale
Changes in Debt securities Available-for-sale
2021 2020
Debt securities Available-for-sale – opening balance 4,509 6,238
Additions 14,301 10,942
Disposals and redemptions -14,892 -12,671
Debt securities Available-for-sale – closing balance 3,918 4,509
Notes to the Parent company annual accounts
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
293
NN Group N.V.
2021 Annual Report
4 Intangible assets
Intangible assets
2021 2020
Goodwill 148 294
Other intangible assets 116 161
Intangible assets 264 455
For the decrease of Goodwill and the accompanying change in the line ‘Amortisation of intangible assets and other impairments’ in the
Parent company profit and loss account, reference is made to Note 10 ‘Intangible assets’ of the Consolidated annual accounts.
5 Other assets
Other assets
2021 2020
Receivables from group companies 2,450 2,838
Cash 2,640 2,302
Other receivables 562 896
Assets held for sale 170
Other assets 5,822 6,036
As at 31 December 2021, an amount of EUR1,394 million (2020: EUR1,462 million) is expected to be settled after more than one year from the
balance sheet date.
6 Equity
Total equity
2021 2020
Share capital 38 39
Share premium 12,575 12,574
Share of associates reserve 16,651 21,853
Retained earnings and unappropriated result 3,624 2,265
Shareholders’ equity 32,888 36,731
Undated subordinated notes 1,764 1,764
Total equity 34,652 38,495
As at 31 December 2021, share premium includes an amount of EUR6,390 million (2020: EUR6,390 million) exempt from Dutch
withholding tax.
Share capital
Ordinary shares
(in number)
Ordinary shares
(amounts in millions of euros)
2021 2020 2021 2020
Authorised share capital 700,000,000 700,000,000 84 84
Unissued share capital 382,121,790 369,721,790 46 45
Issued share capital 317,878,210 330,278,210 38 39
For details on share capital and share premium, reference is made to Note 14 ‘Equity’ in the Consolidated annual accounts.
Notes to the Parent company annual accounts continued
Our operating
environment
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performance
Corporate
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294
NN Group N.V.
2021 Annual Report
6 Equity continued
Changes in Retained earnings and unappropriated result (2021)
2021
Retained
earnings
Unappropriated
result Total
Retained earnings and unappropriated result – opening balance 361 1,904 2,265
Net result for the period 3,278 3,278
Unrealised revaluations -202 -202
Transfer to/from share of associates reserve -699 -699
Transfer to/from retained earnings 1,904 -1,904 -
Dividend -412 -412
Purchase/sale of treasury shares -545 -545
Employee stock option and share plans -2 -2
Coupon on undated subordinated notes -59 -59
Retained earnings and unappropriated result – closing balance 346 3,278 3,624
Changes in Retained earnings and unappropriated result (2020)
2020
Retained
earnings
Unappropriated
result Total
Retained earnings and unappropriated result – opening balance -404 1,962 1,558
Net result for the period 1,904 1,904
Unrealised revaluations -10 -10
Transfer to/from share of associates reserve -141 -141
Transfer to/from retained earnings 1,962 -1,962 -
Dividend -394 -394
Purchase/sale of treasury shares -622 -622
Employee stock option and share plans 1 1
Coupon on undated subordinated notes -59 -59
Changes in the composition of the group and other changes 28 28
Retained earnings and unappropriated result – closing balance 361 1,904 2,265
The total amount of Equity in the Parent company annual accounts equals Shareholders’ equity (parent) in the Consolidated annual
accounts. Certain components within equity are different, as a result of the following presentation differences between the Parent company
accounts and Consolidated accounts:
• Unrealised revaluations within consolidated group companies, presented in the ‘Revaluation reserve’ in the Consolidated annual accounts,
are presented in the ‘Share of associates reserve’ in the Parent company annual accounts
• Foreign currency translation on consolidated group companies, presented in the ‘Currency translation reserve’ in the Consolidated annual
accounts, is presented in the ‘Share of associates reserve’ in the Parent company annual accounts
• Remeasurement of the net defined benefit asset/liability within consolidated group companies presented in the ‘Net defined benefit asset/
liability remeasurement reserve’ in the Consolidated annual accounts, are presented in the ‘Share of associates reserve’ in the Parent
company annual accounts
• Non-distributable retained earnings of associates presented in ‘Other reserves’ in the Consolidated annual accounts, are presented in the
‘Share of associates reserve’ in the Parent company annual accounts
• Revaluations on real estate investments, capitalised software and certain participations recognised in income and consequently presented
in ‘Retained earnings’ in the Consolidated annual accounts, are presented in the ‘Share of associates reserve’ in the Parent company
annual accounts
Notes to the Parent company annual accounts continued
Our operating
environment
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performance
Corporate
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NN
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295
NN Group N.V.
2021 Annual Report
6 Equity continued
Share of associates reserve
2021 2020
Unrealised revaluations within consolidated group companies 14,422 20,468
Currency translation reserve -181 -97
Net defined benefit asset/liability remeasurement reserve -119 -138
Reserve for non-distributable retained earnings of associates 2,111 1,412
Revaluations on investment property and certain participations recognised in income 418 208
Share of associates reserve 16,651 21,853
Positive components of the Share of associate reserve of EUR16,951 million (2020: EUR22,088 million) cannot be freely distributed.
The reserve for cash flow hedges is included in the Share of associates reserve on a net basis. Retained earnings can be freely distributed,
except for an amount equal to the negative balance in each of the components in the Share of associates reserve.
Distributable reserves
NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains
the restriction that dividends can only be paid up to an amount equal to total shareholders’ equity less the issued and outstanding capital and
less the reserves required by law. In case of negative balances for individual reserves legally to be retained, no distributions can be made out
of retained earnings to the level of these negative amounts.
In addition, NN Group’s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures.
NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject
to dividend payment restrictions. Such restrictions may, among others, be of a similar nature as the restrictions which apply to NN Group.
Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch
Civil Code, from NN Group’s subsidiaries, associates and joint ventures are as follows:
Distributable reserves based on the Dutch Civil Code
2021 2021 2020 2020
Total shareholders’ equity 32,888 36,731
Share capital 38 39
Positive components of Share of associates reserve 16,951 22,088
Total non-distributable part of shareholders’ equity: 16,989 22,127
Distributable reserves based on the Dutch Civil Code 15,899 14,604
The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a
second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on
the basis of solvency requirements and freely distributable capital on the basis of capital protection.
Freely distributable reserves
2021 2021 2020 2020
Solvency requirement under the Financial Supervision Act 9,840 9,534
Reserves available for financial supervision purposes 20,927 20,028
Total freely distributable reserves on the basis of solvency requirements 11,087 10,494
Total freely distributable reserves on the basis of the Dutch Civil Code 15,899 14,604
Total freely distributable reserves (lower of the values above) 11,087 10,494
Reference is made to Note 53 ‘Capital and liquidity management’ for more information on solvency requirements.
Notes to the Parent company annual accounts continued
Our operating
environment
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performance
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296
NN Group N.V.
2021 Annual Report
6 Equity continued
Other restrictions
There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of
minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is
made to Note 53 ‘Capital and liquidity management’ in the Consolidated annual accounts for the minimum capital requirements.
In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group
there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the
Group’s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and
regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations.
Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most
junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist.
Furthermore, NN Group is subject to legal restrictions with respect to repayment of capital to holders of ordinary shares. Capital may be
repaid to the holders of ordinary shares pursuant to an amendment of NN Group’s Articles of Association whereby the ordinary shares are
written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group’s creditors opposes such a repayment within
two months following the announcement of a resolution to that effect.
Undated subordinated notes
In July 2014, NN Group N.V. issued fixed to floating rate undated subordinated notes with a par value of EUR1,000 million. The notes are
undated, but are callable after 11.5 years and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.50% per
annum for the first 11.5 years and will be floating thereafter. As these notes are undated and include optional deferral of interest at the
discretion of NN Group, these are classified under IFRS-EU as equity. Coupon payments are deducted from equity if and when paid or
contractually due. The discount to the par value and certain issue costs were deducted from equity at issue, resulting in a balance sheet
value equal to the net proceeds of EUR986 million.
In June 2014, fixed to floating rate undated subordinated notes with a par value of EUR750 million were originally issued by Delta Lloyd which
are classified as equity under IFRS. The notes are undated, but are callable as from 13 June 2024 and every quarter thereafter (subject to
regulatory approval). The coupon is fixed at 4.375% per annum until 13 June 2024 and will be floating thereafter. Coupon payments are
distributed out of equity if and when paid or contractually due. These notes were recognised upon acquisition of Delta Lloyd for an amount of
EUR778 million.
7 Subordinated debt
Subordinated debt
Interest rate Year of issue Due date First call date Notional amount Balance Sheet Value
2021 2020 2021 2020
4.625% 2014 8 April 2044 8 April 2024 1,000 1,000 995 994
4.625% 2017 13 January 2048 13 January 2028 850 850 841 840
Subordinated debt 1,836 1,834
The above subordinated debt instruments have been issued to raise hybrid capital. Under IFRS-EU these debt instruments are classified as
liabilities and are considered capital for regulatory purposes. All subordinated debt is euro denominated.
8 Other liabilities
Other liabilities
2021 2020
Debt securities issued 2,293 1,694
Amounts owed to group companies 5,575 7, 29 0
Other amounts owed and accrued liabilities 155 222
Other liabilities 8,023 9,206
Amounts owed to group companies by remaining term
2021 2020
Within 1 year 5,575 7,29 0
Amounts owed to group companies 5,575 7, 2 9 0
Notes to the Parent company annual accounts continued
Our operating
environment
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performance
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governance
Safeguarding
value creation
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Facts and
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NN
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297
NN Group N.V.
2021 Annual Report
9 Other
NN Group N.V. has issued statements of liability in connection with Article 403, Book 2 of the Dutch Civil Code and other guarantees (mainly
funding and redemption guarantees) for group companies.
Reference is made to the Consolidated annual accounts for the number of employees, audit fees and remuneration of the Executive Board,
the Management Board and the Supervisory Board.
Notes to the Parent company annual accounts continued
Our operating
environment
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298
NN Group N.V.
2021 Annual Report
The Parent company annual accounts of NN Group N.V. for the year ended 31 December 2021 were authorised for issue in accordance with a
resolution of the Executive Board on 9 March 2022. The Executive Board may decide to amend the Parent company annual accounts as long
as these are not adopted by the General Meeting.
The General Meeting may decide not to adopt the Parent company annual accounts, but may not amend these during the meeting.
The General Meeting can decide not to adopt the Parent company annual accounts, propose amendments and then adopt the Parent
company annual accounts after a normal due process.
The Hague, 9March 2022
The Supervisory Board
D.A. (David) Cole, chair
H.M. (Hélène) Vletter-van Dort, vice-chair
I.K. (Inga) Beale
H.J.G. (Heijo) Hauser
R.W. (Robert) Jenkins
R.J.W. (Rob) Lelieveld
C. (Cecilia) Reyes
J.W. (Hans) Schoen
C.C.F.T. (Clara) Streit
The Executive Board
D.E. (David) Knibbe, CEO, chair
D. (Delfin) Rueda, CFO, vice-chair
Authorisation of the Parent company annual accounts
Our operating
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performance
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299
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report
KPMG Accountants N.V., a Dutch limited liability company registered with the trade register in the Netherlands under number 33263683, is a member firm of the global
organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee.
Independent auditor's report
To: The General Meeting of Shareholders and the Supervisory Board of NN Group N.V.
Report on the audit of the annual accounts 2021 included in the annual report
Our opinion
In our opinion:
— the accompanying consolidated annual accounts give a true and fair view of the financial
position of NN Group N.V. (‘the Group’) as at 31 December 2021 and of its result and its cash
flows for the year then ended, in accordance with International Financial Reporting Standards
as adopted by the European Union (EU-IFRS) and in accordance with Part 9 of Book 2 of the
Dutch Civil Code; and
— the accompanying parent company annual accounts give a true and fair view of the financial
position of NN Group N.V. as at 31 December 2021 and of its results for the year then ended
in accordance with Part 9 of Book 2 of the Dutch Civil Code.
What we have audited
We have audited the 2021 annual accounts of NN Group N.V. based in Amsterdam and
headquartered in The Hague, as set out on pages 142 to 298 of the annual report. The annual
accounts include the consolidated annual accounts and the parent company annual accounts.
The consolidated annual accounts comprise:
1 the consolidated balance sheet as at 31 December 2021;
2 the following consolidated statements for 2021: the profit and loss account, the statements of
comprehensive income, cash flows and changes in equity; and
3 the notes comprising a summary of the significant accounting policies and other explanatory
information.
The parent company accounts comprise:
1 the parent company balance sheet as at 31 December 2021;
2 the parent company profit and loss account for 2021; and
3 the notes comprising a summary of the accounting policies and other explanatory
information.
3
Climate-related risks
— The Group’s strategy related to climate risk has been disclosed in the annual report
— We have considered the impact of climate-related risks on our identification and
assessment of risks of material misstatement in the annual accounts
Key audit matters
— Valuation and reserve adequacy of insurance liabilities
— Valuation of illiquid investments
— Unit-linked exposure
— Solvency II disclosure
— Reliability of IT general controls and cybersecurity controls
Opinion
Unqualified
Materiality
Based on our professional judgement we determined the materiality for the annual accounts as a
whole at EUR 140 million (2020: EUR 140 million). The materiality is determined with reference
to core equity (shareholders’ equity minus revaluation reserves) and amounts to 1% (2020: 1%).
We continue to consider core equity as the most appropriate benchmark based on our
assessment of the general information needs of the users of the annual accounts of the financial
institutions predominantly active in the life insurance business. We believe that core equity is a
relevant metric for assessment of the financial performance of the Group.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the annual accounts for qualitative reasons.
We agreed with the Audit Committee of the Supervisory Board that misstatements identified
during our audit in excess of EUR 7 million (2020: EUR 7 million) would be reported to them, as
well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
NN Group N.V. is at the head of a group of components. The financial information of this group is
included in the consolidated annual accounts of the Group. The Group is structured along seven
segments: Netherlands Life, Netherlands Non-life, Insurance Europe, Japan Life, Asset
Management, Banking and Other, each comprising of multiple legal entities and/or covering
different countries. Following the announced sale of NN Investment Partners, Asset
Management activities are presented separately from the results of the remaining segments.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
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NN
Annual
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300
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
2
Basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on
Auditing. Our responsibilities under those standards are further described in the ‘Our
responsibilities for the audit of the annual accounts’ section of our report.
We are independent of NN Group N.V. in accordance with the ‘Verordening inzake de
onafhankelijkheid van accountants bij assurance-opdrachten’ (ViO, Code of Ethics for
Professional Accountants, a regulation with respect to independence) and other relevant
independence regulations in the Netherlands. Furthermore, we have complied with the
‘Verordening gedrags- en beroepsregels accountants’ (VGBA, Dutch Code of Ethics).
Our audit procedures were determined in the context of our audit of the annual accounts as a
whole. Our observations in respect of going concern, fraud and non-compliance with laws and
regulations, climate and the key audit matters should be viewed in that context and not as
separate opinions or conclusions.
We believe the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
Audit approach
Summary
Materiality
— Materiality of EUR 140 million, this is in line with 2020
— Based on core equity; shareholders‘ equity minus revaluation reserves (1%)
Group audit
— 89% of core equity
— 97% of total assets
— 92% of profit before tax
Going concern
— Going concern: no significant going concern risks identified
Fraud/Noclar
— Fraud & non-compliance with laws and regulations (Noclar): we identified management
override of controls as presumed fraud risk
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
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301
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
3
Climate-related risks
— The Group’s strategy related to climate risk has been disclosed in the annual report
— We have considered the impact of climate-related risks on our identification and
assessment of risks of material misstatement in the annual accounts
Key audit matters
— Valuation and reserve adequacy of insurance liabilities
— Valuation of illiquid investments
— Unit-linked exposure
— Solvency II disclosure
— Reliability of IT general controls and cybersecurity controls
Opinion
Unqualified
Materiality
Based on our professional judgement we determined the materiality for the annual accounts as a
whole at EUR 140 million (2020: EUR 140 million). The materiality is determined with reference
to core equity (shareholders’ equity minus revaluation reserves) and amounts to 1% (2020: 1%).
We continue to consider core equity as the most appropriate benchmark based on our
assessment of the general information needs of the users of the annual accounts of the financial
institutions predominantly active in the life insurance business. We believe that core equity is a
relevant metric for assessment of the financial performance of the Group.
We have also taken into account misstatements and/or possible misstatements that in our
opinion are material for the users of the annual accounts for qualitative reasons.
We agreed with the Audit Committee of the Supervisory Board that misstatements identified
during our audit in excess of EUR 7 million (2020: EUR 7 million) would be reported to them, as
well as smaller misstatements that in our view must be reported on qualitative grounds.
Scope of the group audit
NN Group N.V. is at the head of a group of components. The financial information of this group is
included in the consolidated annual accounts of the Group. The Group is structured along seven
segments: Netherlands Life, Netherlands Non-life, Insurance Europe, Japan Life, Asset
Management, Banking and Other, each comprising of multiple legal entities and/or covering
different countries. Following the announced sale of NN Investment Partners, Asset
Management activities are presented separately from the results of the remaining segments.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
302
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
4
Because we are ultimately responsible for the audit opinion, we are responsible for directing,
supervising and performing the group audit. In this respect, we have determined the nature and
extent of the audit procedures to be carried out for group entities.
In our risk assessment and related scoping, we took into account potential effects of COVID-19
and re-evaluated these during the process.
Our group audit mainly focused on significant components. These significant components are
either individually financially significant due to their relative size within the Group or because we
assigned a significant risk of material misstatement to one or more account balances of the
component. In addition, we included certain components in the scope of our group audit in order
to arrive at a sufficient coverage for all relevant significant account balances.
This resulted in a full or specific scope audit for 27 (2020: 25) components, in total covering ten
countries, and in a coverage of 89% of core equity, 97% of total assets and 92% of profit before
tax. For the remaining 11% of core equity, 3% of total assets and 8% of profit before tax,
procedures were performed at the group level including analytical procedures in order to
corroborate that our scoping remained appropriate throughout the audit. This coverage is in line
with our 2020 audit.
We sent audit instructions to all component auditors, covering significant areas including the
relevant risks of material misstatement and set out the information required to be reported to the
group audit team. All components in scope for group reporting purposes are audited by KPMG
member firms.
A specific point of attention as a result of COVID-19 was the virtual way of working, and in
particular the impact thereof on the audit procedures and the reliability of the audit evidence
obtained. For the largest part of 2021, the Group’s employees were working from home. We
performed the audit of the Group also largely working from home.
In view of the COVID-19 related restrictions on the movement of people across borders, we
considered changes to the planned audit approach to evaluate the component auditors’
communications and the adequacy of their work. According to our original audit plan, we
intended to visit the components in Japan, Greece, Poland, Spain and Romania. Due to the
aforementioned restrictions this was not possible. As a result, we held those visits remotely. For
all components in the scope of the group audit we held video and conference calls. During these
calls, the planning, risk assessment, procedures performed, findings and observations reported
to the group auditor were discussed in more detail and any additional work deemed necessary
by the group audit team was then performed. In addition, we requested component auditors
selected for file review to provide us with remote access to their audit workpapers and
subsequently performed the file reviews.
The group audit team has set component materiality levels, which ranged from EUR 7 million to
EUR 100 million, based on the mix of size and risk profile of the components within the Group.
Our operating
environment
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governance
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303
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
5
The consolidation of the Group, the disclosures in the annual accounts and certain accounting
topics are audited by the group audit team. The accounting matters on which audit procedures
are performed by the group audit team include, but are not limited to, assessment of the use of
the going concern assumption, companies and businesses acquired and divested, intangible
assets including goodwill, equity, staff expenses in the Netherlands, other operating expenses in
the Netherlands, certain elements of the risk and capital management disclosures, corporate
income tax for the Dutch fiscal unity and legal proceedings.
By performing the procedures mentioned above at group components, together with additional
procedures at group level, we have been able to obtain sufficient and appropriate audit evidence
about the Group’s financial information to provide an opinion about the annual accounts.
Our procedures as described above, including our audit coverage can be summarised as
follows:
Core equity
76%
13%
11%
Audit of the complete
reporting package
Audit of specific
items
Covered by additional procedures
performed at group level
Total assets
91%
6%
3%
Audit of the complete
reporting package
Audit of specific
items
Covered by additional procedures
performed at group level
Profit before tax
70%
22%
8%
Audit of the complete
reporting package
Audit of specific
items
Covered by additional procedures
performed at group level
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
304
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
6
Audit response to going concern – no significant going concern risks identified
The Executive Board has performed its going concern assessment and has not identified any
significant going concern risks. Our main procedures to assess the Executive Board’s
assessment were:
— we considered whether the Executive Board’s assessment of the going concern risks
included all relevant information of which we are aware as a result of our audit;
— we assessed whether the scenarios included in the Own Risk Solvency Assessment (ORSA)
and Preparatory Crisis Plan that were submitted to De Nederlandsche Bank N.V. (the Dutch
Central Bank, DNB) and other regulatory correspondence indicate a significant going concern
risk; and
— we considered whether the outcome of our audit procedures on the Solvency II capital
position and disclosures (see: Key Audit Matters) indicate a significant going concern risk.
The outcome of our risk assessment procedures, including our consideration of findings from our
audit procedures on other areas, did not give reason to perform additional audit procedures.
Audit response to the risk of fraud and non-compliance with laws and regulations
In note 52 chapter VIII of the annual report, the Executive Board describes its response and
procedures in respect of the risk of fraud and non-compliance with laws and regulations, as does
the Supervisory Board in the paragraph ‘Risk Control Framework’.
As part of our audit, we have gained insights into the Group and its business environment, and
assessed the design and implementation and, where considered appropriate, tested the
operating effectiveness of the Group’s risk management in relation to fraud and non-compliance.
Our procedures included, among other things, assessing the Group’s code of conduct,
whistleblowing procedures, incidents register and its procedures to investigate indications of
possible fraud and non-compliance. Furthermore, we performed relevant inquiries with
management, Supervisory Board and other relevant functions, such as Internal Audit, Legal
Counsel, Compliance and the Actuarial Function Holder. As part of our audit procedures, we:
— assessed the fraud risk assessments performed by operational risk management in the
business units and coordinated by Group Operational Risk Management. We shared these
fraud risk assessments with all component auditors and evaluated their local follow up;
— assessed other positions held by the Management Board members and paid special attention
to procedures and governance and compliance in view of possible conflicts of interest;
— evaluated internal compliance reports on indications of possible fraud and non-compliance;
— inspected correspondence with De Nederlandsche Bank (DNB), Autoriteit Financiële Markten
(AFM) and other regulators and supervisory authorities; and
— evaluated legal confirmation letters.
In addition, we performed procedures to obtain an understanding of the legal and regulatory
frameworks that are applicable to the Group.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
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Facts and
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About
NN
Annual
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305
NN Group N.V.
2021 Annual Report
Other - Independent Auditors Report continued
7
The Group is subject to many other laws and regulations where the consequences of non-
compliance could have an indirect material effect on amounts recognised or disclosures in the
annual accounts, or both, for instance through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an indirect effect:
— Wet op het financieel toezicht (Wft) (including the European Solvency II directives);
— Financial and economic crime (FEC) related regulation; and
— data privacy regulation (GDPR).
We evaluated with support of our forensics specialists, the fraud and non-compliance risk factors
to consider whether those factors indicate a risk of material misstatement in the annual accounts.
Based on the above and on the auditing standards, we identified the following fraud risk that is
relevant to our audit, including the relevant presumed risks laid down in the auditing standards,
and responded as follows:
— Management override of controls (a presumed risk)
Risk:
— Management is in a unique position to manipulate accounting records and prepare fraudulent
annual accounts by overriding controls that otherwise appear to be operating effectively such
as: estimates related to valuation and reserve adequacy of insurance liabilities and Solvency
II disclosures.
Responses:
— We evaluated the design and the implementation of internal controls that mitigate fraud and
non-compliance risks, such as processes related to journal entries and estimates.
— We performed data analysis of high-risk journal entries and evaluated key estimates and
judgements for bias by the Group, including retrospective reviews of prior year's estimates.
— Where we identified instances of unexpected journal entries or other risks through our data
analytics, we performed additional audit procedures to address each identified risk. These
procedures also included testing of transactions back to source information.
— We incorporated elements of unpredictability in our audit, e.g. in the scoping of components
and data-analysis on outgoing payments and performed risk-based specific item testing.
— We performed detailed testing on other emoluments in relation to the Management Board
remuneration.
— Considered the outcome of our other audit procedures and evaluated whether any findings or
misstatements were indicative of fraud or non-compliance. If so, we re-evaluated our
assessment of relevant risks and its resulting impact on our audit procedures.
We refer to the key audit matters 1, 2 and 4 that provide information of our approach related to
areas of higher risk due to accounting estimates where management makes significant
judgements.
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We assessed the presumed fraud risk on revenue recognition as irrelevant, as we consider the
likelihood remote that a material error results from fraud other than originating from management
override of controls, which is covered by the risk described above.
We communicated our risk assessment, audit responses and results to the Executive Board and
the Audit Committee of the Supervisory Board. Our audit procedures did not reveal indications
and/or reasonable suspicion of fraud and non-compliance that are considered material for our
audit.
Audit response to climate-related risks
The Executive Board is responsible for preparing the annual accounts in accordance with the
applicable financial reporting framework, including considering whether the implications from
climate-related risks and commitments have been appropriately accounted for and disclosed.
The Executive Board has performed an analysis of the impact of climate-related risks on the
Group’s business and operations going forward and on its accounting in the 2021 annual
accounts. We refer to the Group’s response in relation to climate change as disclosed in the
annual report and note 52 of the annual accounts.
The evaluation of the effectiveness of management’s strategy against internal or external goals
set is not in scope of our audit of the annual accounts. As part of our audit we consider the
potential effects of climate-related risks on the accounts and disclosures, including significant
judgements and estimates in the current year’s annual accounts to determine whether the
annual accounts are free from material misstatements. This includes discussion of the Group’s
strategy in relation to climate change with the Executive Board and the Supervisory Board and
inspecting minutes and external communications for significant climate related commitments,
strategies and plans made by management.
Our key audit matters
Key audit matters are those matters that, in our professional judgement, were of most
significance in our audit of the annual accounts. We have communicated the key audit matters to
the Executive Board and the Audit Committee of the Supervisory Board. The key audit matters
are not a comprehensive reflection of all matters discussed.
These matters were addressed in the context of our audit of the annual accounts as a whole and
in forming our opinion thereon, and we do not provide a separate opinion on these matters.
The COVID-19 pandemic has had both operational and financial impact on the Group. We refer
to note 2 of the annual accounts. As described under scoping of the group audit it also impacted
our way of working with the component auditors. COVID-19 is also reflected in our key audit
matters. For the valuation of non-listed investments, the reserve adequacy of insurance liabilities
and Solvency II we assessed the impact of COVID-19 on management’s accounting estimates.
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1. Valuation and reserve adequacy of insurance liabilities
Description
Insurance and investment contract liabilities (in short; insurance liabilities) amount to
EUR 169 billion as at 31 December 2021, or 78% of total liabilities. The valuation of insurance
liabilities involves management judgement, especially for determining the ultimate settlement
value of long-term liabilities. In addition NN performs the so-called Reserve Adequacy Test
(RAT) to assess the adequacy of the insurance liabilities, before reinsurance and net of
deferred acquisition cost, based on current best estimate actuarial assumptions.
The RAT for NN Life is most significant to the group given its relative size and complexity and
requires significant management judgement in setting the assumptions related to longevity,
expenses and future reinvestment rates.
Given the financial significance and the level of judgement required we considered the
valuation and reserve adequacy of insurance contract liabilities a key audit matter.
Our response
Our audit approach is a mixture of controls testing and substantive audit procedures.
Our procedures over internal controls focused on testing of controls around the adequacy of
policyholder data, assumption setting and internal review procedures performed on the RAT by
the Group Chief Actuary. We also assessed the process for the internal validation and
implementation of the models used for the valuation of the insurance liabilities and the RAT.
With the assistance of our own actuarial specialists we performed the following substantive
audit procedures:
— we assessed the appropriateness of assumptions used in the valuation of the insurance
liabilities for significant business units (including NN Life) by reference to company and
industry data and expectations of future investment returns, future longevity, also in relation
to the mortality tables published by The Royal Dutch Actuarial Association on
9 September 2020, and expense developments;
— we tested of the appropriateness of the data used and assumptions and methodologies
applied in the RAT, taking into account COVID-19 related uncertainties.
— we performed substantive analysis of developments in actuarial results and movements in
reserve adequacy during the year for each of the business units in scope and made
corroborative inquiries with management and the Group Chief Actuary; and
— we assessed the robustness of management’s substantiation that the insurance contract
liabilities are adequate as at 31 December 2021.
Our observation
The valuation and reserve adequacy test shows a positive margin and we consider the
valuation of the insurance contract liabilities to be appropriate. We refer to notes 11 and 18 of
the annual accounts.
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We note that the unrealised revaluations on available for sale investments backing the
insurance contract liabilities are recorded in shareholders’ equity and represent a significant
part of the revaluation reserve. As and when these available for sale investments are sold, the
excess in reserve adequacy would decrease accordingly and the realised capital gains would
only be partly available to shareholders, since a significant portion of the gains would be
required to strengthen the insurance contract liabilities in order to remain adequate. We refer
to note 1 of the annual accounts.
2. Valuation of illiquid investments
Description
For non-listed investments quoted prices are not available and fair values are based on
valuation techniques which often involve the exercise of judgement by management and
the use of assumptions, estimates and valuation models. Where significant pricing inputs
are unobservable, management has no reliable, relevant market data available in
determining the fair value. For these illiquid investments estimation uncertainty can be high,
especially since the outbreak of COVID-19 with increased market volatilities. This is mainly
applicable to:
— mortgages;
— real estate investments; and
— private equity and private debt investments.
Given the financial significance and estimation uncertainties we considered the valuation of
non-listed investments a key audit matter.
Our response
We assessed management’s approach to the valuation for non-listed investments and
performed the following procedures:
— we evaluated the Group’s processes and controls governing the valuation of non-listed
investments;
— we inspected the supporting valuation documents prepared by management’s internal
and external valuation experts;
— KPMG valuation specialists assisted us in challenging the appropriateness of the
models and methodologies used by management in calculating fair values of
mortgages. We tested the source data used and assessed the appropriateness of
critical valuation parameters. Our valuation specialists independently calculated
whether the fair value for the mortgage portfolio as a whole as determined by
management is within the acceptable fair value range;
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— we involved our real estate valuation specialists in the substantive audit procedures of
selected high-risk real estate investments. We evaluated the objectivity, independence
and professional competence of external valuators engaged by management. We
inspected the valuation reports obtained, tested the source data used and the
calculations made and challenged significant assumptions such as the gross initial
yield/discount rate and estimated rental values. We assessed the assumptions used
against available market data and object specific underlying characteristics such as
occupancy rates and contract renewals;
— we tested and challenged management’s valuation of private equity and private debt
investments by critically reviewing the minutes of the meetings of management with the
external fund managers, we tested the timeliness of such meetings and performed back
testing procedures to determine the reliability of the fair value estimates provided by the
external fund managers. We compared the movements in the valuations for the period
with available external market data and performed back testing on the prior year
estimates, e.g. by reconciliation of valuations to annual accounts of investments or
comparison to sales results; and
—
we assessed the disclosures in the annual accounts.
Our observation
The results of our testing were satisfactory and we considered the fair value of illiquid
investments to be appropriate. We observed that in the course of 2021 valuation
uncertainties in real estate decreased for all sectors excluding retail, where, although
valuations stabilised, a limited number of transactions took place to support the estimated
yield levels. As at year-end the valuation reports of external valuators do not contain
material valuation uncertainty clauses anymore. We also refer to note 2 and 37 of the
annual accounts in which the real estate valuation uncertainties that exist at
31 December 2021 are disclosed.
3. Unit-linked exposure
Description
Holders of unit-linked products sold in the Netherlands, or consumer protection organisations
on their behalf, have filed claims or initiated legal proceedings against the Group and may
continue to do so. A negative outcome of such claims and proceedings, settlements or any
other actions to the benefit of the customers by other insurers or sector-wide measures, may
affect the (legal) position of the Group and could result in substantial financial losses for the
Group as and when compensation would be required. The Executive Board assessed the
financial consequences of these legal proceedings under both the EU-IFRS and the Solvency
II reporting framework and concluded that these cannot be reliably measured, estimated
and/or quantified at this point.
Due to the potential significance and judgement that is required to assess the developments
relevant to these claims and proceedings we considered this a key audit matter.
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Our response
— We assessed the group’s processes and controls with respect to the unit-linked exposures
within the relevant business units in the Netherlands and especially NN Life.
— We inspected and assessed supporting legal documentation and discussed on a quarterly
basis the evolving legal risks and proceedings with the legal counsel and its internal legal
advisors. Our assessment took into account NN specific developments such as the
Supreme Court’s answers relating to collective proceedings initiated by the Vereniging
Woekerpolis.nl against Nationale-Nederlanden as well as broader market developments,
including the impact, if any, of verdicts issued up to the date of this audit opinion.
— We obtained lawyers letters of the external lawyers engaged by the group in relation to the
collective cases Woekerpolis.nl, Consumentenbond and Wakkerpolis to support our
assessment of management judgment on the accounting treatment and disclosures for
related risks exposures. We assessed the professional competency and capability of these
external lawyers.
— We assessed the unit-linked disclosure on contingent liabilities in note 45 Legal
proceedings of the annual accounts.
Our observation
We concur with the Executive Board’s conclusion that the financial consequences of the unit-
linked exposure cannot be reliably measured and that no provision can be recognised as at
31 December 2021. We consider the disclosure in note 45 to be appropriate.
4. Solvency II disclosure
Description
Solvency II information as included in note 52 and 53 of the annual accounts is an important
disclosure about the regulatory capital position of the Group. The calculation of the Solvency II
ratio is complex and requires significant management judgement. The Group applies the
Partial Internal Model (PIM) as approved by DNB to calculate the Solvency Capital
Requirement (SCR).
Given the importance of the Solvency II capital position, the reporting complexities, the
significance of management judgements and assumptions on the outcome of the ratio, the
significant measurement uncertainties and related sensitivities we identified the adequacy of
the Solvency II disclosure as a key audit matter.
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Our response
We obtained an understanding of the Group’s application and implementation of the
Solvency II directive. In designing our audit approach, we have set a separate materiality for
the audit of the Solvency II capital position. The materiality level applied is EUR 180 million
(2020: EUR 180 million). With the assistance of our own actuarial specialists, we performed
the following audit procedures:
— we assessed the effectiveness of internal controls over the SCR calculations and Group’s
modelling and assumption (change) approval processes;
— we assessed the follow up to the terms and conditions set by DNB in relation to the
approval of the PIM-Major Model Changes;
— we tested controls over the calculations of the market value balance sheet, Own Funds and
SCR for them to be prepared in accordance with the Solvency II directive and in
accordance with the PIM as approved by DNB;
— we assessed and challenged the rationale, implementation and impact of material changes
to models and assumptions used to determine the value of best estimate insurance
liabilities and SCR;
— we assessed the impact of the 2021 Q&A published by DNB on contract boundaries for
individual disability contracts and the related disclosure in the annual accounts under
note 52 chapter VII;
— we assessed the appropriateness of economic and non-economic assumptions used for
the calculations of the market value balance sheet, Own Funds and SCR, based on market
observable data, company and industry data, comparison of management judgements
made to current and emerging market practices;
— we assessed the adequacy of the quantitative and qualitative disclosures of the Solvency II
Capital Requirements including disclosures about the interpretation of legislation and
related uncertainties. In this context we also assessed internal controls over the
preparation of the Solvency II sensitivity disclosures;
— we assessed the quality of the risk management function and actuarial function for their
involvement with the Solvency II reporting. We made inquiries with the Group Chief Actuary
on the Group Actuarial Function Holder report 2021, which sets out conclusions on the
reliability and adequacy of the technical provisions as at 31 December 2021 under
Solvency II;
— we verified the accuracy of the calculations of the market value balance sheet used to
determine Own Funds for selected balance sheet items, using our own actuarial specialists
and alternative actuarial methods, if applicable;
— we assessed the supporting evidence for critical judgements applied in assumption setting
by the Group for both the best estimate liability and the SCR. This included the
substantiation by management of the loss absorbing capacity of deferred taxes in
accordance with the applicable legislation and regulations;
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— we verified the correctness of the consolidation of the Solvency II reporting by the Group’s
components, taking into account the Solvency II requirements for consolidation that deviate
from EU-IFRS;
— we assessed and challenged the internally prepared analysis of the movements in the
Solvency II capital position during the year and sensitivities reported as at 31 December
2021 and discussed the outcome with the Group’s actuaries and Group Chief Actuary; and
— we tested the accuracy of the sensitivity disclosures.
Our observation
We considered the Solvency II disclosure in note 52 to be adequate.
5. Reliability of IT general controls and cybersecurity controls
Description
The Group is highly dependent on its IT systems for the continuity of its operations. To meet
evolving client needs and business requirements the Group is continuously improving the
efficiency and effectiveness of its IT systems and infrastructure. IT general controls and
cybersecurity controls are fundamental to the group’s internal control framework to ensure the
continuity and reliability of IT.
Taking into account group’s dependency on the reliability and continuity of IT and the
increasing frequency and severity of cyber incidents in the environment where the group
operates, we considered the reliability of IT general controls and cybersecurity controls a key
audit matter.
Our response
With the support of our specialised IT auditors, we tested IT general controls related to logical
access, change management and computer operations and key application controls
embedded in the IT systems that are relevant to the Group’s financial reporting. As part of our
risk assessment and design of our IT audit approach, we have taken into account regulatory
correspondence related to IT security risk management. We performed test procedures to
respond to specific risks such as data migrations (in particular at NN Life, NN Non-life and
Group), the implications of the decommissioning of systems following the conversion to new
environments and vendor management related to outsourced IT processes.
We evaluated cybersecurity risks as part of our audit of the annual accounts. We updated our
understanding and assessed the design and effectiveness of preventive and detective
cybersecurity controls and responses, cybersecurity self-assessments performed by the
business units and we performed procedures to test the resilience of the cybersecurity controls
in place. We held corroborative inquiries with the personnel at the Security Operations Center
and with the Group’s Chief Information Security Officer (CISO). This work was performed
together with our IT auditors that are specialised in cyber risk management
.
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Our observation
Based on our testing of IT general controls we obtained sufficient comfort to support our IT
driven audit approach.
The results of the procedures performed regarding cybersecurity controls were satisfactory in
relation to our audit. We shared our observations with the Executive Board and the Audit
Committee of the Supervisory Board.
We refer to the disclosure on Risk Management in note 52.
Report on the other information included in the annual report
In addition to the annual accounts and our auditor’s report thereon, the annual report contains
other information. Additionally, other information includes the annual review.
Based on the following procedures performed, we conclude that the other information:
— is consistent with the annual accounts and does not contain material misstatements; and
— contains the information as required by Part 9 of Book 2 of the Dutch Civil Code report and
other information.
We have read the other information. Based on our knowledge and understanding obtained
through our audit of the annual accounts or otherwise, we have considered whether the other
information contains material misstatements.
By performing these procedures, we comply with the requirements of Part 9 of Book 2 of the
Dutch Civil Code and the Dutch Standard 720. The scope of the procedures performed is less
than the scope of those performed in our audit of the annual accounts.
The Executive Board is responsible for the preparation of the other information, including the
information as required by Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements and ESEF
Engagement
We were engaged by the General Meeting of Shareholders as auditor of NN Group N.V. on
28 May 2015, as of the audit for the year 2016 and have operated as statutory auditor ever since
that financial year. We were reappointed by the General Meeting of Shareholders on
29 May 2019 to continue to serve the Group as its external auditor for the financial years 2020–
2022.
No prohibited non-audit services
We have not provided prohibited non-audit services as referred to in Article 5(1) of the
EU Regulation on specific requirements regarding statutory audits of public-interest entities.
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European Single Electronic Format (ESEF)
The Group has prepared its annual report in ESEF. The requirements for this format are set out
in the Commission Delegated Regulation (EU) 2019/815 with regard to regulatory technical
standards on the specification of a single electronic reporting format (these requirements are
hereinafter referred to as: the RTS on ESEF).
In our opinion, the annual report prepared in the XHTML format, including the partially tagged
consolidated annual accounts of the Group has been prepared in all material respects in
accordance with the RTS on ESEF.
The Executive Board is responsible for preparing the annual report including the annual
accounts, in accordance with the RTS on ESEF, whereby management combines the various
components into a single reporting package. Our responsibility is to obtain reasonable assurance
for our opinion whether the annual report is in accordance with the RTS on ESEF.
Our procedures taking into consideration Alert 43 of NBA (the Netherlands Institute of Chartered
Accountants), included amongst others:
— obtaining an understanding of the entity's financial reporting process, including the
preparation of the reporting package;
— obtaining the reporting package and performing validations to determine whether the
reporting package containing the Inline XBRL instance document and the XBRL extension
taxonomy files have been prepared in accordance with the technical specifications as
included in the RTS on ESEF; and
— examining the information related to the consolidated annual accounts in the reporting
package to determine whether all required taggings have been applied and whether these
are in accordance with the RTS on ESEF.
Description of responsibilities regarding the annual accounts
Responsibilities of the Executive Board and the Supervisory Board for the annual
accounts
The Executive Board is responsible for the preparation and fair presentation of the annual
accounts in accordance with Part 9 of Book 2 of the Dutch Civil Code. Furthermore, the
Executive Board is responsible for such internal control as management determines is necessary
to enable the preparation of the annual accounts that are free from material misstatement,
whether due to fraud or error. In that respect the Executive Board under supervision of the
Supervisory Board is responsible for the prevention and detection of fraud and non-compliance
with laws and regulations, including determining measures to resolve the consequences of it and
to prevent recurrence.
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As part of the preparation of the annual accounts, the Executive Board is responsible for
assessing the Group’s ability to continue as a going concern. Based on the financial reporting
frameworks mentioned, the Executive Board should prepare the annual accounts using the going
concern basis of accounting unless the Executive Board either intends to liquidate
NN Group N.V. or to cease operations, or has no realistic alternative but to do so. The Executive
Board should disclose events and circumstances that may cast significant doubt on the Group’s
ability to continue as a going concern in the annual accounts.
The Supervisory Board is responsible for overseeing the Group’s financial reporting process.
Our responsibilities for the audit of the annual accounts
Our objective is to plan and perform the audit engagement in a manner that allows us to obtain
sufficient and appropriate audit evidence for our opinion.
Our audit has been performed with a high, but not absolute, level of assurance, which means we
may not detect all material errors and fraud during our audit.
Misstatements can arise from fraud or error and are considered material if, individually or in the
aggregate, they could reasonably be expected to influence the economic decisions of users
taken based on these annual accounts. The materiality affects the nature, timing and extent of
our audit procedures and the evaluation of the effect of identified misstatements on our opinion.
A further description of our responsibilities for the audit of the annual accounts is located at the
website of de ‘Koninklijke Nederlandse Beroepsorganisatie van Accountants’ (NBA, Royal
Netherlands Institute of Chartered Accountants) at http://www.nba.nl/ENG_oob_01. This
description forms part of our auditor’s report.
Amstelveen, 9 March 2022
KPMG Accountants N.V.
D. Korf RA
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NN Group N.V.
2021 Annual Report
Appropriation of result
The result is appropriated pursuant to Article 34 of the Articles of Association of NN Group N.V., the relevant stipulations of which state that
the appropriation of result shall be determined by the General Meeting, having heard the advice of the Executive Board. Reference is made to
Note 14 ‘Equity’ for the proposed appropriation of result.
Other - Appropriation of result
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NN Group N.V.
2021 Annual Report
Structure
In the Annual Report, we aim to provide a
concise, accurate and balanced account
of NN Group’s financial and non-financial
performance over the past year. It is
structured around the sections About NN,
Our operating environment, Our strategy
and performance, Creating value for
our stakeholders, Safeguarding value
creation, Corporate governance, Facts
and figures, followed by the consolidated
Annual Accounts.
It is prepared in accordance with applicable
Dutch law and the International Financial
Reporting Standards (IFRS), endorsed by the
European Union. It furthermore adheres to
relevant non-financial disclosure regulations,
such as the EU Non-Financial Reporting
Directive (NFRD). Moreover, we are
disclosing according to the EU Taxonomy
regulation for the first time in 2021.
NN Group also publishes a Solvency and
Financial Condition Report and a Total
Tax Contribution Report. NN Investment
Partners publishes a Responsible Investing
Report. These reports provide additional
information on specific topics and are
published on the same date on NN
Group’s website in the Investors/Financial
reports section.
We believe that this reporting strategy
enables us to tailor our reporting for different
stakeholders, who require different levels
of detail. The online version of the Annual
Report contain a number of links, including
links to sources on the NN Group website.
Reporting profile
This is NN Group’s eight Annual Report
since our separation from ING Group and
becoming a publicly-listed company on
2 July 2014. It is published on 10 March 2022.
We report annually, on a calendar year basis
(1 January – 31 December).
Scope of the data in the
Annual Report
The scope of the reported data is the
range of entities over which NN Group has
management control. This applies to all
material items as depicted in the materiality
matrix, unless otherwise stated.
The scope for community investment and
environmental data is all businesses with
more than 100 FTE (representing 99% of
our total organisation).
Performance data
For non-financial information and data
on customer engagement we use NPS
reporting and the Global Brand Health
Monitor (GBHM). The Human Resources (HR)
data is directly sourced from our HR data
analytics department. Data on responsible
investment come from Aladdin and our
proprietary system for logging engagements
with issuers. For data related to community
investment, we follow the B4SI (industry)
standard for categorising the data. For our
direct environmental footprint, NN Group
uses an online system, Credit360. Our internal
validation process, including the application
of Credit360’s validation rules ensures we
limit any inaccuracies in the reported data.
Review and approval
Information in the Annual Report is based
on extensive reporting from our businesses
and functions in the countries where we
are active. All information is reviewed by
NN Group’s Disclosure Committee and has
been approved by our Executive Board and
Supervisory Board before publication.
Relevant topics
Relevant topics were selected for
the 2021 Annual Report through a
materiality assessment using internal and
external research, and other sources.
This assessment included interviews and
an online session with internal and external
stakeholders, see page 59.
Reporting guidelines
We aim to strengthen our integrated way
of reporting every year. For this reason, we
have integrated what was previously the
Annual Review and Financial Report into
one Annual Report. The Annual Report
contains various elements from the Value
Reporting Foundation framework, such as
our value creation model and a materiality
matrix. This report strives to present relevant
information about our strategy, governance
and performance in ways that are relevant
to the economic, environmental and social
contexts in which we operate.
The non-financial information and data
in the Annual Report is prepared in
accordance with the Standards (Core)
from the Global Reporting Initiative (GRI).
The GRI Index table shows against which
indicators NN Group reports, and where to
find the respective information in this Annual
Report and/or the NN Group website.
For the second time, the 207 Tax Standard is
included. The index table is published on
NN Group’s corporate website in the
Investors/Financial Report section, where
you can also find the Progress reports for
the UN Principles for Sustainable Insurance
and the UN Global Compact.
External assurance
The annual accounts of NN Group N.V.,
including the consolidated annual accounts
and the parent company annual accounts,
are audited by KPMG. For more information,
refer to the Independent auditor’s report on
page 299.
Furthermore, KPMG provided limited
assurance on the non-financial information
in the Annual Report. The scope of KPMG’s
assurance engagement is described in its
assurance report. We provided evidence
to our external auditor in support of the
statements we make in this report. For more
information, refer to the Assurance report of
the independent auditor on page 138.
NN Group’s Total Tax Contribution Report
was provided limited assurance by KPMG.
For more information, refer to the Assurance
report of the independent auditor on pages
29-31 of the Total Tax Contribution Report.
Going forward
We will continue to tailor our reporting to
serve different stakeholder groups. We will
aim for further integration of financial
and non-financial information to provide
stakeholders with a complete picture of how
we create long-term value
for our company and our stakeholders.
Our approach to reporting
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
319
NN Group N.V.
2021 Annual Report
Material topic
(in alphabetical order) Strategic commitment
Involved
stakeholders
Read more
on chapter
Segment
Customer
and
distribution
Products
and
services
People
and
organisation
Financial
strength Society
Business ethics and transparency
Having a strong corporate governance
structure in place (board diversity, elaborate
codes of conduct, ESG in remuneration, etc.)
and ensuring compliance with all relevant
regulations, ethical behavior and transparency
in all aspects such as artificial intelligence,
human rights, sustainable finance and taxes.
X X X X X
Customers
Investors
Employees
Safeguarding
value creation
Corporate
governance
chapter
Climate change
Having a strong climate strategy to mitigate and
adapt for the consequences of climate change.
This includes preparing for the climate-related
risks and opportunities in investments and
insurance underwriting, having a commitment
to net zero, and being resource efficient in own
operations.
X X
Society
Customers
Investors
Operating
environment,
Create a positive
impact on society,
managing our
risks, TCFD, Facts
and figures
Community investment
Putting our resources, expertise, and networks
to maximise positive change in our communities,
specifically around financial well-being, self-care
and carefree retirement, and sustainable planet.
X X
Society
Employees
Create a positive
impact on society
Customer experience
Understanding customer needs and
expectations, delivering quality products and
services, and fostering customer engagement.
This includes providing transparent information
as well as fair and suitable advice to empower
our customers (and end-consumers) to make
sound financial decisions.
X X
Customers Adding value for
customers
Data privacy and cybersecurity
Safeguarding customer privacy, securing
personal data, and actively protecting the
security of our information systems against
cybersecurity failure.
X X X X
Customers
Employees
Safeguarding
value creation,
Managing our
risks
Digitalisation
Investing in technology, platforms and
ecosystems to advance digital systems and
capabilities and continually deliver seamless
customer experience.
X X X X X
Customers
Employees
Adding value
for customers,
Safeguarding
value creation
Diversity and inclusion
Being a purpose-led and values-driven
organisation which fosters diversity and
inclusion, equal opportunities and pay, and
hybrid Way of Working.
X
Customers
Employees
Society
Empowering our
people to be their
best, Corporate
governance
chapter
People management
Having a strong employer branding to foster
talent attraction and retention, investing in
skills and capabilities to develop talent and
leadership, protecting the health and well-being
of our people (especially in the context of the
Covid-19 pandemic) and sustaining employee
engagement.
X
Employees Empowering our
people to be their
bestEmpowering
our people to be
their best
Material topics index
We closely monitor those material topics that potentially have the most impact on our business and stakeholders, and where we could create
the most long-term value. This table links our material topics to our strategic commitments and the stakeholders that are most impacted.
It also shows where in this Annual Report you can read more about this topic.
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
320
NN Group N.V.
2021 Annual Report
Material topic
(in alphabetical order) Strategic commitment
Involved
stakeholders
Read more
on chapter
Segment
Customer
and
distribution
Products
and
services
People
and
organisation
Financial
strength Society
Products with societal added value
Developing insurance and banking products
that address societal challenges and/or
promote environmentally-responsible behaviour.
This includes ensuring our products and
services promote financial inclusion.
X X X
Customers
Society
Add value for
customers,
Creating a
postive impact on
society
Responsible investing
Integrating environmental, social and
governance factors in our investment processes.
This includes undertaking sustainable and
impact investments, and practising engagement
and voting, and exclusion. Related to this
topic, we pay a special attention to corporate
governance, climate change and natural
resources, and human rights/decent work.
X X X X
Customers
Investors
Employees
Society
Creating a
positive impact
on society, TCFD,
Carbon footprint
analysis
Robust financial framework
Being a financially reliable and stable institution,
able to meet its financial objectives and fulfil
its short- and long-term commitments to all
its stakeholders. This includes ensuring a
strong balance sheet, solid financial returns for
shareholders, disciplined capital allocation and
systemic risk management.
X
Customers
Investors
Employees
Society
Our performance,
Creating value for
investors
Material topics index continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
321
NN Group N.V.
2021 Annual Report
Assets under Management
(AuM) in sustainable and
impact strategies
Assets managed with a specific focus on sustainability, for example, strategies that focus on today’s and tomorrow’s
sustainability leaders and companies that make a clear positive contribution to the UN SDGs.
Carbon Disclosure Project
(CDP)
A global disclosure system for companies, cities, states and regions to manage their environmental impacts, and for
investors and purchasers to access environmental information for use in financial decisions.
COLI Corporate-owned life insurance.
EIOPA European Insurance and Occupational Pensions Authority. EIOPA focuses on providing a sound regulatory
framework for and consistent supervision of insurance and occupational pensions sectors in Europe, and is
an independent advisory body to the European Commission, the European Parliament and the Council of the
European Union.
Engagement survey A questionnaire measuring how a company’s brand and values are experienced by its employees, how its
leaders live up to the standards the company sets, and how the company fulfils its employee value proposition
asan organisation.
Environmental, social and
governance (ESG) factors
A subset of non-financial performance indicators concerning sustainable, ethical and corporate governance issues,
such as managing the company’s carbon footprint and having systems in place to ensure accountability.
Financial economic crime
(FEC)
Involvement in money laundering, the funding of terrorism or other criminal activities that could harm stakeholder
confidence in a financial services provider such as NN.
Financial sector oath
or promise
An ethical statement introduced in early 2013 for employees in the Dutch financial sector, along with the introduction
of a social charter and update of the Banking Code. It applies to employees of banks and other financial enterprises,
including insurance companies, investment firms and financial service providers. By taking the oath, employees
declare that they are bound by a code of conduct to the ethical and careful practice of their profession.
General Data Protection
Regulation (GDPR)
Regulation by which the European Parliament, Council of the European Union and European Commission aim to unify
data protection for all individuals within the European Union. The GDPR came into effect on 25 May 2018.
Global Real Estate
Sustainability Benchmark
(GRESB)
GRESB is a mission-driven and industry-led organization that provides actionable and transparent environmental,
social and governance (ESG) data to financial markets. GRESB collects, validates, scores and benchmarks ESG data
to provide business intelligence, engagement tools and regulatory reporting solutions for investors, asset managers
and the wider industry.
Global Reporting Initiative
(GRI)
An international independent standards organisation that helps businesses, governments and other organisations
understand and communicate their impact on issues such as climate change, human rights and corruption.
Materiality matrix Presents the trends and topics that are considered to have a potential impact on a company, and/or on its
stakeholders. Likelihood, location and a specific timeframe are taken into account.
Net Promoter Score (NPS) A management tool to gauge the loyalty of a firm’s customer relationships. It serves as an alternative to traditional
customer satisfaction research.
Net zero Net zero means that emissions in the real economy are reduced as close to zero as possible and remaining emissions
are balanced using carbon removal technologies. The ambition is based on the Paris Climate Agreement to limit
temperature rise to 1.5°C.
NN Future Matters The global community investment programme for NN Group. It aims to empower people in the markets where we
operate to improve their financial well-being, and support them in growing their economic opportunities.
NN Group Compliance
Function Charter
A policy set in place by NN Group to help businesses manage their compliance risks effectively and to set out the
responsibilities on compliance risk management for the business and the compliance function.
Non-governmental
organisation (NGO)
An organisation that is neither part of a government nor a conventional for-profit business. Usually set up by citizens,
NGOs may be funded by governments, foundations, businesses or private individuals.
OECD The Organisation for Economic Co-operation and Development, an international organisation, established after
World War II, with the aim to shape policies that foster prosperity, equality, opportunity and well-being for all.
Glossary
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
322
NN Group N.V.
2021 Annual Report
Operating capital generation
(OCG)
The movement in the solvency surplus (Own Funds before eligibility over SCR at 100%) in the period due to operating
items, including the impact of new business, expected investment returns in excess of the unwind of liabilities, release
of the risk margin, operating variances, Non-life underwriting result, contribution of non-Solvency II entities and
holding expenses and debt costs and the change in the SCR. It excludes economic variances, economic assumption
changes and non-operating expenses.
Product approval and review
process (PARP)
The assessment of a product in relation to its customer suitability, financial and non-financial risks, and profitability.
NN Group conducts a PARP when it introduces a new product, changes the characteristics of an existing product or
reviews a product. This is to ensure the product is acceptable to our company, our customers and society in general.
Report of the management
board
The NN Group N.V. 2021 Report of the management board (Bestuursverslag), as referred to in section 2:391 of
the Dutch Civil Code. It includes the Annual Review and the following chapters in the Financial Report: Financial
Developments, the Report of the Supervisory Board, Corporate Governance, the Remuneration Report, and the
Dutch Financial Supervision Act and Dutch Corporate Governance Code statements.
Responsible Investment (RI)
Framework policy
Sets out a company’s vision, approach and key principles on responsible investment. NN Group defines RI as the
systematic integration of relevant ESG factors into investment decision-making and active ownership practices.
SME Small- and medium-sized enterprise.
Sustainable Development
Goals (SDGs)
Also known as the Global Goals, these are 17 global goals set in 2015 by the UN General Assembly to be achieved by
2030. They form a universal call-to-action to end poverty, protect the planet, and ensure all people can enjoy peace
and prosperity.
Task Force on Climate-
related Financial Disclosures
(TCFD)
An industry-led initiative of the Financial Stability Board to develop recommendations on climate-related financial
disclosures. The Task Force published its final recommendations in June 2017.
UN Global Compact A UN initiative to encourage businesses worldwide to adopt sustainable and socially responsible policies, and report
on their implementation. It is a principle-based framework for business containing ten principles in the areas of
human rights, labour, environment and anti-corruption.
Glossary continued
Our operating
environment
Our strategy and
performance
Corporate
governance
Safeguarding
value creation
Creating value for
our stakeholders
Facts and
figures
About
NN
Annual
accounts
Other
information
Disclaimer
The 2021 Annual Report provides an integrated review of the
performance of NN Group. More information – for example
the Solvency and Financial Condition Report (SFCR), Total Tax
Contribution Report and the GRI Index Table – is available on the
corporate website in the Investors/ financial reports section.
Small differences are possible in the tables due to rounding.
Certain of the statements in this 2021 Annual Report are not
historical facts, including, without limitation, certain statements
made of future expectations and other forward-looking statements
that are based on management’s current views and assumptions
and involve known and unknown risks and uncertainties that could
cause actual results, performance or events to differ materially
from those expressed or implied in such statements. Actual results,
performance or events may differ materially from those in such
statements due to, without limitation: (1) changes in general
economic conditions, in particular economic conditions in NN
Group’s core markets, (2) the effects of the Covid-19 pandemic
and related response measures, including lockdowns and travel
restrictions, on economic conditions in countries in which NN
Group operates, on NN Group’s business and operations and on
NN Group’s employees, customers and counterparties, (3) changes
in performance of financial markets, including developing markets,
(4) consequences of a potential (partial) break-up of the euro or
European Union countries leaving the European Union, (5) changes
in the availability of, and costs associated with, sources of liquidity as
well as conditions in the credit markets generally, (6) the frequency
and severity of insured loss events, (7) changes affecting mortality
and morbidity levels and trends, (8) changes affecting persistency
levels, (9) changes affecting interest rate levels, (10) changes
affecting currency exchange rates, (11) changes in investor, customer
and policyholder behaviour, (12) changes in general competitive
factors, (13) changes in laws and regulations and the interpretation
and application thereof, (14) changes in the policies and actions of
governments and/or regulatory authorities, (15) conclusions with
regard to accounting assumptions and methodologies, (16) changes
in ownership that could affect the future availability to NN Group of
net operating loss, net capital and built-in loss carry forwards, (17)
changes in credit and financial strength ratings, (18) NN Group’s
ability to achieve projected operational synergies, (19) catastrophes
and terrorist-related events, (20) adverse developments in legal and
other proceedings and (21) the other risks and uncertainties detailed
in the Risk management section and/or contained in recent public
disclosures made by NN Group and/or related to NN Group.
Any forward-looking statements made by or on behalf of NN Group
in this Annual Report speak only as of the date they are made, and
NN Group assumes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information
or for any other reason.
This document does not constitute an offer to sell, or a solicitation of
an offer to buy, any securities.
© 2022 NN Group N.V.
Prepared by
NN Group Corporate Relations
Design
Radley Yeldar | ry.com
Contact us
NN Group N.V.
Schenkkade 65
2595 AS The Hague
The Netherlands
P.O. Box 90504, 2509 LM The Hague
The Netherlands
www.nn-group.com
Commercial register no. 52387534
For further information on NN Group, please visit our corporate
website or contact us via external.communications@nn-group.com
For further information on NN Group’s sustainability strategy, policies
and performance, please visit www.nn-group.com/in-society.htm
or contact us via sustainability@nn-group.com
Contact and legal information
NN Group N.V.
www.nn-group.com