Nn Group N.v. · EURONEXT:NN
Nn — Investor Day (November 2015)
16 slides from Nn's investor day presentation, Nov 19, 2015
Slide 1: NN Group Solvency II
NN Group Solvency II Doug Caldwell, Chief Risk Officer Capital Markets Day 19 November 2015
Slide 2: Solvency II - where are we now
Solvency II - where are we now 19 November 2015 Successful NN Group S2 ratio (SF) S2 becomes estimated to be in a effective as of IPO on 2 July range around 200% 1 January 2016 2005 2014 2015 2016 2017 ING/NN adopted a Delegated acts NN Group applied Approval process First full year market value bal
Slide 3: Active Risk Management important for NN Group
Active Risk Management important for NN Group • Role of everyone to identify risk and role of management to decide how to manage Role of • Everyone in business is responsible for risks everyone to in their domain manage risk • Know which risks we choose to take and why • Have our eyes wide open to b
Slide 4: Solvency II requirements cover three pillars
Solvency II requirements cover three pillars How we measure risks and how • SII defines the amount of available capital as Own Funds… Pillar much capital we need to cope with • … where the required capital (SCR) is risk based 1 these risks How we manage risks and include SII requires: Pillar risk an
Slide 5: The Solvency II balance sheet
The Solvency II balance sheet Assets Liabilities The Solvency Capital Requirement (SCR) is the capital needed to absorb up to a 1-in-200 year Free surplus Eligible loss over one year (99.5% VaR) Own Funds SCR If Eligible Own Funds falls or may soon fall MCR below the SCR, supervisors have the right
Slide 6: NN Group has applied for a Partial Internal Model
NN Group has applied for a Partial Internal Model NN Group PIM NN Life NN Non-life NN Re Insurance Europe Japan Life PIM PIM PIM SF Equivalence • NN Group has managed with an economic capital model for more than a decade • The key strength of the Partial Internal Model (PIM) is that it reflects more
Slide 7: Previously flagged Solvency II uncertainties
Previously flagged Solvency II uncertainties Key uncertainties NN approach Status IMAP approval PIM for Dutch insurance units Pending approval Volatility Adjustment Application of the VOLA in the internal model Ongoing discussions on final interpretations (VOLA) Tax Application of tax impacts in SCR
Slide 8: Market risk largest risk for NN Group
Market risk largest risk for NN Group NN Group SCR (SF) Interest rate risk 0.4 (in EUR bln) 3Q15 Equity risk 1.1 Market risk 3.8 Credit spread risk 1.8 Real estate risk 1.1 Counterparty default risk 1.1 FX risk 0.3 Life risk 3.6 Transitionals Health risk 0.5 Non-life risk 0.5 • Solvency II ratio inc
Slide 9: Interest rate risk management focuses on closely matching liability cash flows
Interest rate risk management focuses on closely matching liability cash flows NN Life asset and liability cash flows1 Managing versus expected liability cash flows • NN Group manages interest rate risk by matching assets and best estimate liability cash flows • We do not specifically hedge the UFR
Slide 10: Volatility Adjustment dampens credit spread sensitivity
Volatility Adjustment dampens credit spread sensitivity VOLA added to risk free interest rate Impact of the Volatility Adjustment (VOLA) • NN Group cash flow matches illiquid liabilities, in principle not economically exposed to spread risk Risk-free curve including VOLA • Solvency II defines the VO
Slide 11: Understanding spread risk and the volatility adjustment, an NN Life deep-dive
Understanding spread risk and the volatility adjustment, an NN Life deep-dive NN Life credit spread/volatility adjustment Own Funds volatility from asset portfolio mismatch sensitivities1 Government/Corporate bond investments vs Reference portfolio with EIOPA reference portfolio NN Life asset portfo
Slide 12: Own Funds sensitivities for 1-in-20 year volatilities
Own Funds sensitivities for 1-in-20 year volatilities NN Group Own Funds at risk in 1-in-20 scenario Largest risks for Solvency II Own Funds 30 September 20151 • Credit spread risk is the largest risk, due to the long- Credit (spread) risk dated assets in our Dutch portfolio and mismatch with VOLA r
Slide 13: Sensitivities of the NN Group Solvency II ratio to specified shocks
Sensitivities of the NN Group Solvency II ratio to specified shocks Sensitivities to shocks1 at 3Q15 Δ OF2 Δ SCR2 (SF) Δ Solvency II ratio3 Interest rate: Parallel shock +50bps -0.1 -0.2 +7% Interest rate: 50 bps steepening between 20y-30y -0.8 0.0 -12% Credit spread: Parallel shock for all bonds +5
Slide 14: Key takeaways
Key takeaways 1 We have managed the company using an economic capital model for more than a decade 2 NN Group and its operating units are strongly capitalised under Solvency II 3 Limited exposure to interest rate risk thanks to asset liability cash flow matching Volatility of the Solvency II ratio l
Slide 15: 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 on the Dutch Civil Code. In preparing the financial information in this document, the
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