Operating result stable; strong capital position
- Operating result ongoing business of EUR 305 million, stable on 1Q15, as higher dividends at Netherlands Life and improved results at NN Bank were offset by lower results at Netherlands Non-life, Insurance Europe and Asset Management
- Net result of EUR 270 million, down from EUR 485 million in 1Q15, which included a capital gain on an equity investment while 1Q16 reflects a negative result for Japan Closed Block VA due to higher market volatility
- Cost savings in the Netherlands of EUR 11 million in 1Q16, bringing the expense base down to EUR 792 million
- Strong capital position; Solvency II ratio at 241% at 1Q16 versus 239% at 4Q15
- Holding company cash capital increased to EUR 2.1 billion reflecting dividends from subsidiaries of EUR 390 million partly offset by the EUR 250 million share buyback
- Share buyback programme up to EUR 500 million over 12 months commencing 1 June 2016
Statement of Lard Friese, CEO
‘We are pleased with our strong capital position, with a Solvency II ratio of 241% and robust free cash flow to the holding in the first quarter of 2016, especially given the volatile market conditions in the first few months of the year.
While the group operating result for the first quarter of 2016 was stable on the same quarter in 2015, the operating performance of the individual segments showed a mixed picture. Netherlands Life reported higher results supported by continued strong investment performance, and the results of NN Bank improved on the back of the continued growth of the mortgage portfolio and customer deposits. Our international businesses continued to grow their fees and premium-based revenues, which were offset by the impact of the low interest rate environment and equity market depreciation. The non-life and asset management businesses continue to have our full attention. The results of the non-life business have been quite volatile and were impacted by an unfavourable claims experience in the Individual disability portfolio in the first quarter. We continue to implement our management actions aimed at improving underwriting performance and efficiency. In response to the challenging environment, NN Investment Partners is enhancing its strategic focus as announced at the end of last year. The asset manager aims to attract third-party assets by focusing on its areas of expertise, rationalising its product range and improving the efficiency of its operations. In the first quarter of 2016, the asset manager won several Lipper Group Awards recognising the success of its Multi-Asset strategy and Emerging Markets Debt funds. Our cost reductions in the Netherlands are on track to achieve the target expense base set out for 2018, and in the first quarter we realised EUR 11 million in cost savings.
We are today announcing a programme to buy back shares up to EUR 500 million over a period of twelve months. This demonstrates our disciplined capital management as well as our commitment to returning excess capital to shareholders. At the same time, we believe it is essential to maintain a robust capital position and the financial flexibility to be able to pursue value creating corporate opportunities.
On 14 April, ING sold its remaining 14.1% stake in NN Group. This transaction marked the completion of our journey to become a stand-alone company. Going forward, it remains essential that we capture the many opportunities of changing consumer behaviour, retrenching governments and the use of new technology. We will continue to invest in innovating our businesses, focused on improving our service to customers and achieving our goals of increased efficiency and agility.’
(download the full Press Release)
Quarterly Business Update
NN Group’s strategy is to deliver an excellent customer experience based on strong products and services and long-term relationships. In executing this strategy we will focus on agility in order to navigate the ever-changing insurance and asset management landscape, as well as the challenging market dynamics.
Transparent products and services
NN Group is committed to delivering products and services that are easy to understand and meet customers’ lifetime needs. For example, Netherlands Life launched a programme called ‘Retirement in the mix’ (Pensioen in de mix) aimed at increasing pension awareness among employers and employees. Another new service is Pension Assistance (Pensioen Hulp), an online tool open to customers and non-customers alike, which provides relevant and personalised information to help people prepare for their retirement in the ten years leading up to this phase. A new product recently introduced by Nationale-Nederlanden is Active Retirement (Actief Pensioen) whereby employees can purchase a pension with immediate effect from their accrued pension capital. In the first quarter of 2016, Japan Life continued to increase its COLI protection sales, driven by products launched in 2015, including a new term product and a new income protection product for SME owners. NN Investment Partners successfully launched a Green Bond fund, underlining our commitment to responsible investing.
The fundamental need of people to protect themselves against life’s uncertainties will continue to drive growth in the insurance industry over the long term. In Europe, we continue to expand our sales of new protection products. By way of example, in Romania we have deployed an innovative product development approach with ING Bank, which has resulted in a significant increase in risk protection sales. Similarly, Turkey has introduced a new simple account protection product for bancassurance customers that provides customers a financial buffer in the case of an unexpected event. In addition, our Greek business has launched a new direct online health proposition, which is seeing early signs of success. In the Netherlands, NN Bank is one of the top 5 players in the mortgage market in terms of new mortgage production, with its mortgage portfolio growing to EUR 10.9 billion from EUR 10.5 billion at the end of 2015. Customer deposits increased to EUR 8.6 billion at the end of the first quarter. Also our asset manager continues to experience strong demand for its Dutch Residential Mortgage Fund.
NN Group strives to be available to serve our customers through multiple channels. We have a diverse mix of distribution channels comprising tied agents, bancassurance partners, brokers and direct channels, which we are looking to constantly strengthen. Within Japan Life, for example, we continue to enhance and diversify our distribution through bank networks where we have experienced sales growth of 33% in the first quarter of 2016. In Greece, new sales via our bancassurance partner, Piraeus Bank grew by 63% year on year. In Poland, we recently announced the acquisition of Notus Financial Advisors, a leading financial broker in the market. The acquisition of Notus will further strengthen and diversify the distribution network of Nationale-Nederlanden Poland with over 350 of Notus’ own agents in Poland’s largest cities as well as nationwide coverage through franchises giving access to 600 financial advisors.
Effective and efficient operations
We aim to make processes as efficient and effective as possible, in order to deliver value for money for our customers. In the Netherlands we continue to reduce expenses, for example by work towards IT-cloud solutions, offshoring and application rationalisation.
The digital transformation of our business improves customers experience as well as our efficiency. Last year, in Spain we implemented a paperless sales process for tied agents. This increased customer experience, measured by our Net Promoter Score, and reduced new business processing costs. On the back of this success in Spain, we have recently launched digital solutions in Poland and the Czech Republic and will be launching similar platforms in other European countries in the coming months.
We continue to invest in innovation and in the first quarter of the year, Netherlands Non-life introduced the SmartHome pilot in the 'Smartest House of the Netherlands' in Eindhoven. The pilot, initiated by Sparklab (NN Non-life’s innovation lab), is intended to explore the effect that home sensors have on residents’ overall feeling of safety.
(download the full Press release).
Investor conference call and webcast
Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 1Q16 results at 10.00 am CET on Thursday 26 May 2016. Members of the investment community can join the conference call at +31 20 531 5865 (NL), +44 203 365 3210 (UK), +1 866 349 6093 (US) or follow the webcast on www.nn-group.com.
Lard Friese and Delfin Rueda will host a press call to discuss the 1Q16 results, which will be held at 12.00 pm CET on Thursday 26 May 2016. Journalists can join the press call at +31 (0)20 531 5863.
Annual General Meeting: 2 June 2016
Publication 2Q16 results: 18 August 2016
Publication 3Q16 results: 17 November 2016
Publication 4Q16 results: 16 February 2017
NN Group is an international insurance and asset management company, active in more than 18 countries, with a strong presence in a number of European countries and Japan. With around 11,500 employees the group offers retirement services, insurance, investments and banking to more than 15 million customers. NN Group includes Nationale-Nederlanden, NN and NN Investment Partners. NN Group is listed on Euronext Amsterdam (NN).
NN Group’s Consolidated Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union (“IFRS-EU”) and with Part 9 of Book 2 on the Dutch Civil Code.
In preparing the financial information in this document, the same accounting principles are applied as in the 2015 NN Group Consolidated Annual Accounts.
All figures in this document are unaudited. Small differences are possible in the tables due to rounding. Certain of the statements contained herein 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) changes in performance of financial markets, including developing markets, (3) consequences of a potential (partial) break-up of the euro, (4) changes in the availability of, and costs associated with, sources of liquidity as well as conditions in the credit markets generally, (5) the frequency and severity of insured loss events, (6) changes affecting mortality and morbidity levels and trends, (7) changes affecting persistency levels, (8) changes affecting interest rate levels, (9) changes affecting currency exchange rates, (10) changes in investor, customer and policyholder behaviour, (11) changes in general competitive factors, (12) changes in laws and regulations, (13) changes in the policies of governments and/or regulatory authorities, (14) conclusions with regard to accounting assumptions and methodologies, (15) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (16) changes in credit and financial strength ratings, (17) NN Group’s ability to achieve projected operational synergies and (18) the other risks and uncertainties detailed in the Risk Factors section contained in recent public disclosures made by NN Group.
Any forward-looking statements made by or on behalf of NN Group 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.