NN Group reports strong business and financial performance and increases targets

Strong operating capital generation and business performance driving increased returns to shareholder

• Continued strong business performance with full-year operating capital generation (OCG) rising 13% (excluding the asset management business that was sold in 2022) to EUR 1.9 billion in 2023, exceeding 2025 target of EUR 1.8 billion ahead of plan
• Increased OCG target to EUR 1.9 billion and free cash flow target of EUR 1.6 billion in 2025
• NN Group Solvency II ratio remains robust at 197% from 201% at 30 June 2023; unit-linked settlement agreement and attractive longevity deals have reduced the risk profile of the balance sheet
• Consequently, 15% step-up of 2023 total dividend to EUR 3.20 per share; structural increase of annual share buyback programme to EUR 300 million
• Full-year operating result was EUR 2.5 billion; full-year net result was EUR 1.2 billion

Solid business performance across the group

• Record net inflows of EUR 2.3 billion at our defined contribution pension business in 2023
• Continued growth momentum in Europe with higher sales in Central and Eastern Europe, most notably strong value of new business in Czech Republic, Poland and Hungary, despite macroeconomic uncertainties
• Continued strong and favourable business performance in Netherlands Non-life; combined ratio of 92.6%
• Banking continued to benefit from higher interest result
• Value of new business was EUR 330 million in 2023 versus EUR 432 million in 2022, reflecting lower sales in Japan

Consistent execution of strategy; progress in customer satisfaction and responsible investment

• Customer satisfaction scores continue upward trend with International Insurance business scoring above market average NPS-r; refined strategy to accelerate our digital transformation
• Employee engagement at 7.8, showing resilience in competitive labour market 
• Continued progress in responsible investment with EUR 10.8 billion total investments in climate solutions by the end of 2023 and a 10% reduction of greenhouse gas (GHG) emissions of our corporate investment portfolio versus 2021 levels 
   

Statement of David Knibbe, CEO

‘Today we are reporting strong results for the second half and full-year of 2023, driven by a solid performance despite the volatile macroeconomic and geopolitical environment. Full-year operating capital generation (OCG) rose 13% on a like-for-like basis to EUR 1.9 billion, exceeding our 2025 target of EUR 1.8 billion ahead of plan. This reflects increased contributions from Netherlands Non-life, Banking, the segment Other and Insurance Europe. Netherlands Non-life reported a continued strong and favourable business performance, while Insurance Europe and Banking benefitted from higher rates. This helped to offset a lower contribution from Netherlands Life which was mainly driven by the financial markets. While business growth is expected to return to normalised levels, we continue to expect underlying growth in the coming years. We have therefore increased our OCG target for 2025 to EUR 1.9 billion.

The strong results reflect the consistent execution of our strategy that focuses on our customers, employees and role in society. Customer satisfaction scores improved, driven by our customer engagement and digitalisation efforts. Our International business scored an above market average relational net promoter score, with strong underlying improvements in Belgium, Czech Republic, Japan and Poland. To further increase operational efficiencies and improve the customer experience in the coming years, we recently refined our strategy with a focus on accelerating our digital transformation through the use of data and artificial intelligence (AI).

We continued to support the transition towards a low-carbon economy. On the investment side, we invested a total amount of EUR 10.8 billion in climate solutions, such as certified green buildings and renewable energy. We also reported a 10% reduction of greenhouse gas emissions in our corporate investment portfolio, moving us towards our goal of a 25% reduction by 2025 versus 2021 levels. On the insurance side, our Dutch Non-life business increasingly focuses on offering sustainable damage repair to our customers. This means we offer repair instead of complete replacement, where possible using circular materials and implementing measures such as offering customers the opportunity to upgrade their windows with insulated glass.

We took important steps to further optimise and de-risk our balance sheet, with two attractive longevity reinsurance transactions in December 2023 and a final settlement agreement on unit-linked life insurance products at the start of 2024.

Our strong business performance and balance sheet give us confidence in further growing our free cash flow (FCF), resulting in an FCF target of EUR 1.6 billion by 2025. This enables a step up of the proposed final dividend to EUR 2.08 per share, bringing the total dividend for 2023 to EUR 3.20 per share, an increase of 15% compared to 2022. We also announce a structural increase of our annual share buyback programme to an amount of EUR 300 million. From this higher base, we confirm our commitment of a progressive dividend per share, an annual share buyback of at least EUR 300 million and additional excess capital to be returned to shareholders unless used for value-creating opportunities.

Looking ahead, we are well-positioned to continue creating sustainable long-term value for our stakeholders. We would like to thank our customers and shareholders for their ongoing trust and loyalty, and our colleagues for their commitment in servicing our customers and other stakeholders.’

Delivering on our strategic commitments

At NN, we help people care for what matters most to them. Our purpose reflects the kind of company we aspire to be: one that delivers sustainable long-term value for all stakeholders. Our ambition is to be an industry leader, known for our customer engagement, talented people, and contribution to society. To realise our ambition, we identified five strategic commitments, with all parts of our business contributing.

Customers and distribution – Improving our offering through new initiatives and partnerships

NN reached a final settlement with five interest groups regarding unit-linked insurance products sold in the Netherlands by Nationale-Nederlanden, including Delta Lloyd and ABN AMRO Levensverzekering. The settlement relates to all unit-linked insurance products of customers affiliated with one of the interest groups and is subject to a 90% acceptance rate of affiliated policyholders that have received an individual proposal for compensation. As part of the settlement, all pending (collective) proceedings with respect to unit-linked products against Nationale-Nederlanden will be discontinued once the settlement is executed, which is anticipated ultimately 30 June 2025. The settlement also includes that no new legal proceedings may be initiated by the interest groups or their affiliated parties. With this settlement we provide clarity to our customers and can finally resolve this issue. To cover the settlement costs, a provision of EUR 360 million was recognised in the fourth quarter of 2023. This includes EUR 60 million for hardship cases and customers unaffiliated with one of the interest groups who have not previously received compensation.

Across NN, we are focusing on improving our customers’ experience through the use of data and artificial intelligence (AI). Our Dutch brand OHRA uses a machine-learning model that automatically drafts email responses to customer claims, enabling faster claims payments. Across our international markets, we are using an AI-driven solution to personalise our product offering to existing customers and increase the effectiveness of tied agents in acquiring new customers. The solution has been implemented in Poland, Romania, Spain, Hungary and Greece.

As we continue to focus on improving and simplifying communications and interaction with our customers, NN Belgium introduced a pension passport, a physical booklet supported by a digital version. The tool summarises the Belgian state’s pension annual statement in plain language, which increases customers’ knowledge about their personal pension situation.

Improving customer engagement continues to be top priority, and we saw a continued upward trend of our relational net promoter scores (NPS-r), especially in Europe. On an aggregated level, the NPS of our Dutch business remained stable, scoring on par with market average, while our International business scored above market average for the first time, with strong underlying improvements in Belgium, Czech Republic, Japan and Poland.

Products and services – Meeting our customers’ needs with new protection products

As we aim to support the transition to a sustainable society, our Dutch Non-life business started a series of initiatives for sustainable damage repairs. For example, following a successful pilot, we now offer retail customers the opportunity to upgrade to better insulated glass as the new standard for our home insurances, enabling them to save on energy consumption and reduce carbon emissions. In addition, OHRA announced its intention to make sustainable damage repair the norm for its customers, aiming for at least 65% sustainable recovery of claims on home insurance policies.

We continued our efforts to meet customers’ evolving needs for protection. In Romania, we launched a critical illness insurance covering treatment abroad for cancer, cardiac surgery, neurosurgery and transplants. In Greece, we launched a health product to support customers in the case of hospitalisation, providing various allowances for hospital stay, surgery and home recuperation. The product is especially valuable for people living in small cities who do not have access to hospitals or the means to cover their hospital stay.  

People and organisation – empowering our people to be their best

In our semi-annual survey carried out in the second half of 2023, employee engagement was 7.8, reflecting a slight decrease of 0.1 compared with the mid-year 2023 results. The survey results indicate our colleagues feel they have the right resources and support to successfully work in a hybrid setup, they feel their work is valued, and they feel connected with our values: care, clear, commit. Collaboration between departments and process efficiency continue to be areas of improvement and management is taking actions to look into this and correct course at a team level.

With a rapidly evolving macroeconomic and technological landscape, we must ensure our skills match our strategic needs. In light of this, we announced a programme for senior management to build the data and digital capabilities needed for the future. The programme will be further rolled out in the coming years for the wider workforce.

Financial strength – improved results and strong capital position

Full-year OCG rose 13% on a like-for-like basis to EUR 1.9 billion in 2023, exceeding our 2025 target of EUR 1.8 billion ahead of plan. We upgraded our target for OCG to EUR 1.9 billion, whilst introducing an FCF target of EUR 1.6 billion in 2025.

We announced a step up of the proposed final dividend to EUR 2.08 per share, bringing the total dividend for 2023 to EUR 3.20 per share, an increase of 15% compared to 2022. We also announced a structural increase of our annual share buyback programme to an amount of EUR 300 million.

NN Life completed two transactions to transfer the full longevity risk associated with in total approximately EUR 13 billion of pension liabilities in the Netherlands. The deals have reduced NN’s exposure to longevity risk and thereby further strengthen NN’s capital position. The unit-linked settlement has also further reduced the risk profile of the balance sheet. At the end of December 2023, NN Group decided to inject EUR 1 billion into NN Life. The capital injection will cover for the unit-linked settlement provision whilst the remainder will be deployed according to NN Life’s strategic asset allocation over time.

The NN Group Solvency II ratio at the end of 2023 was robust at 197% and the NN Life Solvency II ratio was 196%.

Society – further progress in responsible investment

We continued to make further progress in our responsible investment strategy. By the end of 2023, we recorded total investments of EUR 10.8 billion in climate solutions such as certified green buildings and renewable energy. We also reported a 10% reduction of greenhouse gas emissions of our corporate investment portfolio, moving us towards our goal of a 25% reduction by 2025 versus 2021 levels. In the coming years, we will continue to focus on our long-term decarbonisation strategy through a combination of a best-in-class approach and engagement to encourage and support decarbonisation in the companies we invest in.

In recognition of our efforts, NN Group was ranked as one of the top performing insurers in a key benchmark for responsible investment in the Netherlands. The Association of Investors for Sustainable Development (VBDO) awarded NN an absolute score of 4.1 out of 5 points, a slight improvement from the previous benchmark.

With EUR 20 million of charitable contributions, we supported more than 165 partners and met our goal of contributing 1% of our operating result before tax to our communities in 2023. Our group-wide community investment programme supported the financial, physical and/ or mental well-being of 172,000 people in 2023 (401,000 cumulative 2022-2023), putting us on track to reach our strategic target of supporting 1 million people by the end of 2025.

For the seventh consecutive year, NN Group was included in the Dow Jones Sustainability World Index (DJSI World) for 2023. According to the benchmark, NN ranks amongst the top 10% of the insurance sector globally with regard to our sustainability performance. Overall, NN scored 70 (out of 100), with the insurance sector averaging a score of 31.

Press call

David Knibbe (CEO), Annemiek van Melick (CFO) and Bernhard Kaufmann (CRO) will host a press call to discuss the 2H23 results at 07:45 CET on Thursday 29 February 2024. Journalists can join the press call by registering via this link.

Analyst and investor call

David Knibbe (CEO), Annemiek van Melick (CFO) and Bernhard Kaufmann (CRO) will host an analyst and investor conference call to discuss the 2H23 results at 10:30 CET on Thursday 29 February 2024. Members of the investment community can follow the live audio webcast on www.nn-group.com.

Analysts can participate in the Q&A by registering according to the following instructions:

• Register for the conference call online via this link
• After registration, you will receive a confirmation email containing the dial-in number and personal PIN code
• Use these details to dial in to the conference call