Nn Group N.v. · EURONEXT:NN
Nn — H2 2023 Earnings Presentation
47 slides from Nn's earnings presentation, Feb 29, 2024
Slide 1: NN Group 2H23 results
NN Group 2H23 results Enhancing our investor proposition 29 February 2024
Slide 2: Enhancing our investor proposition
Enhancing our investor proposition David Knibbe, CEO
Slide 3: Today’s key takeaways
Today’s key takeaways Strong performance of our business leading to improved 2025 OCG target of EUR 1.9bn versus EUR 1.8bn before Robust capital position: solvency ratio at 197%, upper-end of 150-200% comfort range and high quality Explicit FCF target of EUR 1.6bn in 2025 versus guidance of approxim
Slide 4: Returned EUR 10bn to shareholders over the past decade
Returned EUR 10bn to shareholders over the past decade Accumulated payout to shareholders1,2 (EURbn) 3.20 2.79 2.33 2.49 2.16 1.90 10.0 1.51 1.55 1.66 3.5 0.57 6.6 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024E 2025E Total 2015-2024 Share buyback -- 500 417 -- -- 500 250 250 1,0003 250 300
Slide 5: Final settlement for the unit-linked issue achieved
Final settlement for the unit-linked issue achieved Residual risk significantly Deal terms Financial ingredients mitigated • NN reached a settlement with all interest • Settlement involves EUR ~300m • No new proceedings can be initiated by groups involved in legal proceedings against • A EUR ~360m p
Slide 6: On track to achieve strategic targets
On track to achieve strategic targets Above market average Net Promoter Employee engagement2 of ≥ 8.0 by 2025 Diversity: Women in senior management Score (NPS-r) of Netherlands and positions3 of ≥ 40% by 2025 International1 by 2025 7.7 7.9 7.8 40% 40% 34% Netherlands: on par International: above 202
Slide 7: Stable cash flows from Dutch life with upside from pension reform
Stable cash flows from Dutch life with upside from pension reform Market leader in Dutch pensions Pension reform provides DC target of EUR 32bn AuM in 2025 • Sustainable release of capital from in-force opportunities for buyouts and achieved, upside from pension business secures long-term stable exp
Slide 8: Continued strong growth in Insurance Europe
Continued strong growth in Insurance Europe Strong positions in underpenetrated Moderate sales growth and shift to …translating into OCG growth over CEE markets and Greece1 protection products with attractive time (OCG, EURm) margins... (APE, EURm) Greece #1 Life 29% 772 421 388 644 5% #1 Life 27% 3
Slide 9: Improved cash conversion from leading position in Dutch Non-life
Improved cash conversion from leading position in Dutch Non-life Leading position in consolidated Continued strong business Future remittances expected more Dutch Non-life market performance in 2023 in line with OCG (EURm) (Market shares Dutch Non-life1) ≥ 80% • Excellent results underpinned by soli
Slide 10: Supporting increase of our 2025 OCG target to EUR 1.9bn
Supporting increase of our 2025 OCG target to EUR 1.9bn OCG1 upside for NL Non-life and banking versus target... ... support increase of 2025 NN Group target (in EURbn) (in EURm) 2023 2025 Outlook realised target 1.9 1.8 Netherlands Life 1,025 1,150 On track Netherlands Non-life 416 325 Insurance Eu
Slide 11: Resulting in an enhanced investor proposition
Resulting in an enhanced investor proposition Strong business Resilient balance sheet Step-up in capital return performance Group SII ratio Financial targets 2025 Dividend per share 197% (31 Dec 2023) Upgraded EUR 3.20 (+15% vs 2022) • Continues to be progressive Higher capital quality OCG1 target:
Slide 12: 2H23 results
2H23 results Annemiek van Melick, CFO
Slide 13: Net cash and capital build secure solid financial foundation
Net cash and capital build secure solid financial foundation Unit-linked settlement Longevity transactions Decisive management actions have lowered tail risks… EUR ~360m +~8%-points provision recognised in 4Q23 on NN Group’s solvency ratio at 3Q23 Solvency ratio Operating capital generation …further
Slide 14: Decisive management actions strengthen capital position
Decisive management actions strengthen capital position Other management Unit-linked settlement Longevity deals NN Life actions • Settlement relating to unit-linked • EUR ~13bn of pension liabilities • Reduced sensitivity to steepening of products1 with all interest groups reinsured the interest rat
Slide 15: Robust capital, despite elevated mortgage margins
Robust capital, despite elevated mortgage margins 21% 2% • FY23 operating capital generation up 13% to Solvency ratio 197% 209% 197% EUR 1.9bn, adding 21%-points to the solvency ratio -12% -12% • Market impact mainly reflects negative real estate revaluations 1.9 18.8 17.8 17.7 • Mortgage margins we
Slide 16: Strong acceleration of OCG with favourable mix changes
Strong acceleration of OCG with favourable mix changes OCG1 by segment (EURm) FY23 FY22 Delta FY23 OCG up 13% to EUR 1.9bn Netherlands Life 1,025 1,142 -10% • Continued strong business performance Netherlands Non-life, reflecting favourable pricing and benign weather in P&C as well as favourable Net
Slide 17: Operating result reflects momentum
Operating result reflects momentum Operating result (EURm) FY23 FY22 Higher operating result mainly driven by Banking, Insurance Netherlands Life 1,390 1,429 Europe and Other, partly offset by NL Life and Non-life • Netherlands Life: lower risk adjustment release Netherlands Non-life 364 400 • Nethe
Slide 18: Capital visibility improving, despite continued uncertainty
Capital visibility improving, despite continued uncertainty OCG net of capital flows adds ~7-9%-points per annum • In the past, the solvency ratio was impacted by regulatory supports sustainable solvency build-up (EURbn) items such as UFR step-downs, market impacts including real estate revaluations
Slide 19: Explicit FCF target of EUR 1.6bn in 2025 introduced
Explicit FCF target of EUR 1.6bn in 2025 introduced FCF target of EUR 1.6bn in 20251 (EURbn) • Upgrading FCF target to EUR 1.6bn, from implicit EUR 1.5bn in 2025 based on mid single-digit growth versus 2021 level +7% CAGR • The increase is primarily supported by more confidence for 1.6 increased rem
Slide 20: Cash build-up remains strong, even with higher capital returns
Cash build-up remains strong, even with higher capital returns New FCF Retained cash comfortably growing (EURbn) target 1.6 Retained cash Capital flows to shareholders 1.4 1.3 1.2 1.1 1.02 0.9 1.0 0.5 0.4 0.2 0.3 0.2 Free cash flow1 Retained cash Free cash flow2 Retained cash Free cash flow3 Retaine
Slide 21: Resulting in an enhanced investor proposition
Resulting in an enhanced investor proposition Strong business Resilient balance sheet Step-up in capital return performance Group SII ratio Financial targets 2025 Dividend per share 197% (31 Dec 2023) Upgraded EUR 3.20 (+15% vs 2022) • Continues to be progressive Higher capital quality OCG1 target:
Slide 22: Wrap up
Wrap up
Slide 23: Today’s key takeaways
Today’s key takeaways Strong performance of our business leading to improved 2025 OCG target of EUR 1.9bn versus EUR 1.8bn before Robust capital position: solvency ratio at 197%, upper-end of 150-200% comfort range and high quality Explicit FCF target of EUR 1.6bn in 2025 versus guidance of approxim
Slide 24: Q&A
Q&A David Knibbe, Annemiek van Melick, Bernhard Kaufmann
Slide 25: Appendices
Appendices @»s
Slide 26: Solvency ratio at 197% despite elevated mortgage margins
Solvency ratio at 197% despite elevated mortgage margins 5% 5% • Solid solvency ratio at 197% Solvency ratio 205% 203% 197% • 4Q23 Operating capital generation added ~5%-points -12% -6% to the solvency ratio • Market impact was negative, mainly reflecting higher 18.2 0.4 18.3 17.7 mortgage spreads a
Slide 27: Solvency sensitivities
Solvency sensitivities Solvency ratio sensitivities to market shocks at 31 Dec 20231,2 Δ EOF Δ SCR Δ SII ratio (EURbn) (EURbn) (%-points) Interest rate: Parallel shock +50bps -0.3 -0.2 +1% Interest rate: Parallel shock -50bps +0.4 +0.3 -1% Interest rate: 10bps steepening between 20y–30y -0.2 +0.0 -2
Slide 28: Solid OCG delivery with favourable business mix effects
Solid OCG delivery with favourable business mix effects OCG1 by segment (EURm) 2H23 2H22 FY23 FY22 Developments 2H23 versus 2H22 Netherlands Life 502 561 1,025 1,142 Lower investment return and SCR release, partly offset by the higher net positive impact of the UFR drag and risk margin release as a
Slide 29: Operating capital generation by source
Operating capital generation by source OCG1 by source (EURm) 2H23 2H22 FY23 FY22 OCG sensitivities4 (31 Dec 2023, EURm) Δ OCG Investment return 605 677 1,226 1,379 Interest rates: Parallel shock +50bps +5 Life – UFR drag -58 -132 -163 -450 Interest rates: Parallel shock -50bps -20 Life – Risk margin
Slide 30: Remittances from subsidiaries
Remittances from subsidiaries Remittances from subsidiaries (EURm) 2H23 1H23 FY23 FY22 FY213 Netherlands Life1 530 529 1,059 1,171 1,048 Netherlands Non-life1 229 106 335 176 123 Insurance Europe1,2 52 319 370 172 192 Japan Life - 68 68 75 146 Banking1 21 1 21 113 138 Reinsurance business - - - 45 6
Slide 31: Operating result also shows strong momentum
Operating result also shows strong momentum Operating result (EURm) 2H23 2H22 FY23 FY22 Developments 2H23 versus 2H22 Netherlands Life 581 738 1,390 1,429 Lower investment, technical and other result partly offset by a higher profit margin and service expense result Netherlands Non-life 137 210 364
Slide 32: Holdco cash capital of EUR 1.0bn
Holdco cash capital of EUR 1.0bn Movement in holding company cash capital (EURm) Adjusted FCF: EUR 1,410m1 • FY23 adjusted free cash flow of EUR 1,410m 1,855 FCF: EUR 470m driven by remittances from subsidiaries • Change in debt and loans reflects the 2,081 -1,117 repayment of EUR 500m senior notes
Slide 33: Strong balance sheet and financial flexibility
Strong balance sheet and financial flexibility Eligible Own Funds and SII headroom (31 December 2023, EURbn) Headroom RT1/T2 Credit ratings RT1 headroom T2 headroom 17.7 Financial 31 Dec 31 Dec 2.1 EUR 1.2bn EUR 0.1bn 1.1 Strength Rating 2023 2022 2.6 10.4 1.4 A+ A Standard & Poor's Stable Positive
Slide 34: High-quality investment portfolio
High-quality investment portfolio Investment portfolio (NN Group excluding banking)1 • High-quality and conservative investment portfolio (31 December 2023) • Diversified real estate exposure across segments and regions 6% Fixed income • Core profile and strong occupancy rate ~95% 3% 3% Real estate
Slide 35: Investment portfolio
Investment portfolio Investment portfolio (NN 31 Dec 31 Dec % of Total investment exposure decreased mainly due to a Change Group excl banking)1 (EURbn) 2023 2022 total decrease in the fixed income portfolio Fixed income (excl. mortgages2) 73.8 76.7 -2.9 52% • Decrease in fixed income portfolio was
Slide 36: Details of fixed income portfolio
Details of fixed income portfolio 31 Dec 31 Dec % of • Core of fixed income portfolio consists of AAA-A rated Fixed income1 (EURm) 2023 2022 Change total government bonds Government2 39.8 42.0 -2.2 28% • A decrease in the value of the fixed income portfolio was Corporates2 23.3 23.1 0.2 16% mainly d
Slide 37: Well-diversified and high-quality real estate portfolio
Well-diversified and high-quality real estate portfolio Real estate exposure by segment1 Occupancy rate by segment • Actively managed portfolio; well-diversified (8% of investment portfolio, 31 December 2023) (31 December 2023 upper line versus 31 Dec 2022) across segments, geographies and 96% inves
Slide 38: Well-collateralised Dutch mortgage portfolio
Well-collateralised Dutch mortgage portfolio Mortgages1 31 Dec 31 Dec Change % of • ~25% guaranteed, mainly by the Dutch state (NHG2) (EURbn) 2023 2022 total • Very comfortable average loan to value of 55%, with the vast NHG and other guaranteed2 9.6 10.1 -0.5 25% majority reflecting LTV <80% LTV ≤
Slide 39: Actual losses in our Dutch mortgage portfolio very limited
Actual losses in our Dutch mortgage portfolio very limited Low historical losses in NN Group mortgage portfolio1 • NN Group mortgage portfolio experienced very limited losses (in bps) <10bps during and after financial crisis in line with market 50 • Mortgage losses in Dutch market are low NN losses
Slide 40: Details of corporate bond and equity portfolio
Details of corporate bond and equity portfolio Corporate bonds and loans by rating Equity exposure including mutual funds (16% of investment portfolio, at 31 December 2023) (4% of investment portfolio, at 31 December 2023) 4% AAA Public equity 14% 6% AA 31% Private equity EUR EUR A Equity in mutual
Slide 41: IFRS 9/17 - NN continues to steer the business on OCG
IFRS 9/17 - NN continues to steer the business on OCG IFRS 17 has no impact on strategy or targets OCG targets in 2025 • For NN Group, OCG is a better proxy for cash conversion than NN Group1 IFRS 9/17 profits • Focus on Solvency II and Operating Capital Generation (OCG) EUR 1.9bn remains unchanged
Slide 42: IFRS 9/17 - We have chosen for earnings stability
IFRS 9/17 - We have chosen for earnings stability Use of OCI in IFRS 9 and 17 3 accounting models in IFRS 17 • IFRS 9 and 17 allow changes in financial assumptions (mainly changes in • NN Group applies each of the three accounting models in IFRS 17 market interest rates and spreads) to be reflected
Slide 43: IFRS 9/17 - Operating result and CSM
IFRS 9/17 - Operating result and CSM Operating result CSM • Operating results were higher than the operating result on the basis of • CSM represents unamortised unearned profit IAS39/IFRS 4 in 2022: • CSM at transition is highly dependent on Fair Value transition • Mainly due to higher result in NN
Slide 44: IFRS 9/17 - Sustainable CSM growth expected
IFRS 9/17 - Sustainable CSM growth expected Netherlands Netherlands Insurance Contractual Service Margin (EURm) NN Group Life Non-life Europe Japan Life Other Opening CSM, net (31 Dec 2022) 6,467 3,227 356 1,698 1,178 7 New business added 695 101 147 317 128 2 Underlying return on in-force 124 -30 6
Slide 45: Pillar 2 pension reform in the Netherlands provides opportunities
Pillar 2 pension reform in the Netherlands provides opportunities for buyouts and coming service New pension law effective Potential doubling of market for Reduction in number of corporate • All pension plans become DC schemes with future defined contribution accruals pension funds expected1 life cy
Slide 46: Important legal information
Important legal information 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 of the Dutch Civil Code. In preparing the financial information in this document, the
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