Nn Group N.v. · EURONEXT:NN
Nn — Investor Day (May 2021)
44 slides from Nn's investor day presentation, May 26, 2021
Slide 1: NN Group Investor & Analyst deep-dive webinar
NN Group Investor & Analyst deep-dive webinar 26 May 2021
Slide 2: Introducing today's presenters
Introducing today’s presenters Transforming the Non-life business Managing interest rate risk Tjeerd Bosklopper Maurice Koopman Bernhard Kaufmann CEO Netherlands Non-life, Banking & CEO NN Netherlands Non-life Chief Risk Officer and Member of the Technology and Member of the Management Board NN Grou
Slide 3: Transforming the Non-life business
Transforming the Non-life business Tjeerd Bosklopper CEO Netherlands Non-life, Banking & Technology Maurice Koopman CEO NN Netherlands Non-life Deep-dive webinar
Slide 4: Market leader in Non-life
Market leader in Non-life Mid single-digit growth… …in a consolidating market… …leads to restored profitability Total GWP Dutch market1 (EURbn) Market shares Non-life2 Combined ratio Dutch market1 17.1 17.9 CAGR 16.4 100% 110% 14.9 15.1 4.0 ~3% 80% 31% 105% 4.1 ~1% 60% 17% 100% 4.2 ~5% 40% 25% 95% 5
Slide 5: Strong performance
Strong performance Key figures Diversified product portfolio Resilient improvement of profitability Combined ratio and operating result (EURm) FY201 FY19 GWP by business line1 (FY20) development6 (EURm) GWP 3,521 3,097 102.0% 99.4% Combined ratio 95.3% 95.4% 16% D&A 95.4% 20% 95.3% Operating result
Slide 6: Unique diversified distribution platform in the Netherlands
Unique diversified distribution platform in the Netherlands Mandated brokers #1 6% Bancassurance #1 • SME as well as retail customers 9% • P&C products for SME and retail customers • Relationships with most top-100 brokers • Partnerships with 4 of the top-5 banks in NL • Mainly P&C products • Growth
Slide 7: Creating value for our stakeholders
Creating value for our stakeholders Our purpose Our strategic commitments We help people care for what matters most to them Customers and distribution We see our customers as the starting Our ambition point of everything we do. We want to be an industry leader, known for our customer engagement, tal
Slide 8: Delivering on our strategy
Delivering on our strategy Double digit OCG growth until 20231,2 (EURm, CAGR in %) • Further improve data and underwriting capabilities to improve profitability • Target: combined ratio of 94-96% in 2023 +17% 225 • Shift to higher yielding assets to optimise risk return • EUR 1.4bn invested into hig
Slide 9: Building a future-proof Non-life company
Building a future-proof Non-life company Our purpose Our strategy We help people care for what matters most to them Building a future-proof Non-life company Our ambition Our strategic commitments We want to be an industry leader, known for our customer Customers and distribution We see our customers
Slide 10: Vivat Non-life integration ahead of plan
Vivat Non-life integration ahead of plan Integration progressing well Milestones Vivat Non-life integration • Better than expected financial performance, operating result of 2019 Transaction announced EUR 45m in the period 2Q20-4Q20 Preparations for integration • Overlapping businesses allow for
Slide 11: Property & Casualty
Property & Casualty
Slide 12: Fire: healthy portfolio with strong distribution capabilities
Fire: healthy portfolio with strong distribution capabilities Market leader with 33% market share1 Brokers: retail and SME Bancassurance / Direct: retail • Strong underwriting competencies from a • Retail fire protection products are commonly 11% Regular brokers 8% 26% combination of expertise and d
Slide 13: SME fire portfolio turned to sound financial results
SME fire portfolio turned to sound financial results Actions to turn the portfolio… …followed by introduction of two new …resulted into sound financial results • Task force incl in-house technical experts with products in 2018… with potential for selective growth local knowledge started in 2017 • Lo
Slide 14: Motor: competitive market but well positioned for sustainable profitability
Motor: competitive market but well positioned for sustainable profitability Top-2 position with 21% market share1 Brokers: retail and SME Bancassurance / Direct: retail 2% • Enhancing data and AI capabilities • Highly price sensitive market 14% 20% Regular brokers Mandated brokers • Strict underwrit
Slide 15: Balancing the motor portfolio
Balancing the motor portfolio Different labels attract different On average, OHRA’s pricing appears to …but within its target group OHRA has customer profiles, despite similar risk be one of the highest in the market…1 the lowest pricing, thereby attracting the premium models preferred risks2 Averag
Slide 16: Disability & accident
Disability & accident
Slide 17: Understanding the Dutch D&A market
Understanding the Dutch D&A market Group Income Employer is required to pay 70-100%2 Employer is required to take out of employee’s salary (private or public) disability insurance • Illness and disability cover, Employer’s Sickness benefit cover Disability cover aimed at employers own risk Preventio
Slide 18: Strict measures in D&A to restore attractive historical profitability
Strict measures in D&A to restore attractive historical profitability Market leader with 32% market share1 Group Income Individual disability • Good historical performance, but higher • Trend of higher claims inflow 4% Regular brokers 13% claims in 2020 • Claims developments in society 3% Mandated b
Slide 19: Complementary offering of well-being services
Complementary offering of well-being services Well-being services complement HCS acquired in 2019 Movir offers prevention services insurance offering to self-employed professionals • Combining reintegration with • Leading and growing one-stop-shop in • Focus on me & my family, business as prevention
Slide 20: Wrap up
Wrap up
Slide 21: Key takeaways
Key takeaways Leading position in mature, consolidated Dutch non-life market Further benefit from scale in efficiency, data and customer engagement P&C results to increase further by improving underwriting supported by data analytics Strict measures in D&A to restore attractive historical profitabil
Slide 22: Appendix
Appendix
Slide 23: Combined ratios Netherlands Non-life
Combined ratios Netherlands Non-life Average combined ratio and GWP1 (EURbn) P&C D&A Non-life 1.0 0.9 0.6 2.5 0.6 0.4 1.1 3.5 100.4% 99.4% 97.1% 98.3% 100.2% 96.3% 96.7% 93.1% 20.2% 16.5% 27.8% 30.8% 20.0% 28.4% 32.6% 37.9% 78.1% 83.8% 76.3% 72.6% 68.7% 64.5% 68.3% 55.2% Fire Motor Other Sub total P
Slide 24: Managing interest rate risk
Managing interest rate risk Bernhard Kaufmann CRO NN Group Deep-dive webinar
Slide 25: Key takeaways
Key takeaways Opportunity to shift to higher-yielding assets while maintaining a conservative investment portfolio Limited economic sensitivity to interest rates as a result of close cash flow matching No impact on remittance capacity from changes in interest rates; mainly shifts between stock and f
Slide 26: Risk-return optimisation within strong balance sheet
1 2 3 Risk-return optimisation Interest rate risk Interest rate risk in a within strong balance sheet management resulting in Solvency II context low economic risk C.3
Slide 27: Strong and resilient balance sheet with low exposure to market and interest rate risk
Strong and resilient balance sheet with low exposure to market and interest rate risk Solvency II ratio at year-end 20201 SCR by risk type2 • Solvency II ratio of 210% at year-end 2020, in (undiversified, 31 December 2020) line with priority of a strong capital position Market risk • Conservative in
Slide 28: Shifting to higher-yielding assets while maintaining a conservative investment portfolio
Shifting to higher-yielding assets while Market risk excl interest rate risk maintaining a conservative investment portfolio Low risk investment portfolio compared with peers • Priority to maintain a relatively conservative investment portfolio to (% of total investment portfolio, 31 December 2020)
Slide 29: Interest rate risk management resulting in low economic risk
1 2 3 Risk-return optimisation Interest rate risk Interest rate risk in a within strong balance sheet management resulting in Solvency II context low economic risk C.6
Slide 30: To manage our interest rate risk we focus on cash flow matching
To manage our interest rate risk we focus on cash Interest flow matching rate risk NN Life asset and liability cash flows1 (31 December 2020) • Long history and focus on interest rate risk management Assets • NN Life liability cash flows are predictable and stable Liabilities • Until year 30 best es
Slide 31: Strict interest rate risk monitoring and closing the economic position when appropriate
Strict interest rate risk monitoring and closing the economic position when appropriate No forced seller or buyer in distressed times Examples of managing the limited open position after • Active monitoring of interest rate position for several maturity buckets year 30 against limit and tolerance le
Slide 32: Interest rate sensitivity is limited, supporting stable remittances
Interest rate sensitivity is limited, supporting stable remittances Low sensitivity to interest rates • Low open economic interest rate position Eligible Own Funds (EOF) impact parallel interest rates up +50bps (EURbn) • Currently ~95% of liability cash flows are interest rate hedged and a duration
Slide 33: Interest rate risk in a Solvency II context
1 2 3 Risk-return optimisation Interest rate risk Interest rate risk in a within strong balance sheet management resulting in Solvency II context low economic risk C.10
Slide 34: For the Solvency II balance sheet, Technical Provisions are valued based on the regulatory curve
For the Solvency II balance sheet, Technical Provisions are valued based on the regulatory curve Illustrative: Solvency II balance sheet • Own Funds under Solvency II is the net asset value, i.e. the difference Discounted Discounted on between the value of assets and technical provisions on market r
Slide 35: UFR benefit ('stock') results in a UFR drag over time ('flow')
UFR benefit (‘stock’) results in a UFR drag over time (‘flow’) Best estimate liability cash flows NN Life2 UFR drag methodology • Extrapolation to the UFR starts from year 20 • UFR benefit reflects the difference between liabilities and risk margin discounted on the regulatory curve (incl UFR) and s
Slide 36: Predictable run-off pattern supports OCG growth over next 10 to 15 years
Predictable run-off pattern supports OCG growth over next 10 to 15 years Run-off development ‘stock’ and ‘flow’ items NN Life1 (EURm) • OCG expected to increase by approximately EUR 40m1 per annum Risk margin release UFR drag UFR drag net of RM release until 2025 on the back of in-force run-off, ref
Slide 37: Interest rate movements impact 'stock' and 'flow', limited economic impact
Interest rate movements impact ‘stock’ and ‘flow’, limited economic impact Interest rates up +50bps impacting ‘stock’ and ‘flow’ • Investment return and UFR drag sensitive to market movements, Δ OF however mainly a stock and flow effect with limited economic impact Δ OF Δ SCR Δ Solvency generation 3
Slide 38: OCG to grow to EUR 1.5bn in 2023, supported by low risk locked-in drivers
OCG to grow to EUR 1.5bn in 2023, supported by low risk locked-in drivers and business improvement Mid term: OCG to grow to EUR 1.5bn in 2023 Locked-in drivers • In-force run-off NN Life, supporting OCG by EUR ~40m1 per annum • Full effect of the shift to higher-yielding assets of 2020 1.5 • Annual
Slide 39: Key takeaways
Key takeaways Opportunity to shift to higher-yielding assets while maintaining a conservative investment portfolio Limited economic sensitivity to interest rates as a result of close cash flow matching No impact on remittance capacity from changes in interest rates; mainly shifts between stock and f
Slide 40: Appendices
APPENDICES
Slide 41: Solvency sensitivities
Solvency sensitivities Δ Solvency Δ OF Δ SCR ratio Tolerance Sensitivities to shocks at 31 December 20201 (EURbn) (EURbn) (%-points) (%-points) Interest rate: Parallel shock +50bps -0.9 -0.6 +3% Interest rate: Parallel shock -50bps +1.2 +0.7 -3% Up to 10% Interest rate: 10bps steepening between 20y–
Slide 42: Markets impact 'stock' and 'flow', limited impact on cash flow
Markets impact ‘stock’ and ‘flow’, limited impact on cash flow Illustrative: ‘stock’ and ‘flow’ impact on Own Funds • In-force book to deliver strong and stable cash flows ‘stock’ ‘flow’ •1 Interest rate flattening after year 20 • Own Funds benefit from increased UFR benefit, offset by Scenario 1 EO
Slide 43: 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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