Nn Group N.v. · EURONEXT:NN
Nn — Investor Day (November 2022)
117 slides from Nn's investor day presentation, Nov 17, 2022
Slide 1: Investor Update
Investor Update NN Group 17 November 2022
Slide 2: Introducing today's presenters
Introducing today’s presenters David Knibbe Annemiek van Melick Bernhard Kaufmann CEO and chair of the Executive Board CFO and vice-chair of the Executive Board Chief Risk Officer and member of the and Management Board of NN Group and Management Board of NN Group Management Board of NN Group Appoint
Slide 3: Introducing today's presenters
Introducing today’s presenters Leon van Riet Tjeerd Bosklopper Fabian Rupprecht Harm van de Meerendonk CEO Netherlands Life & Pensions CEO Netherlands Non-life, Banking CEO International Insurance and Head of NN Group Financial and member of the Management & Technology and member of the member of th
Slide 4: Continued focus on growth and value creation
Continued focus on growth and value creation David Knibbe CEO NN Group
Slide 5: Key takeaways
Key takeaways Successful implementation of 2020 strategy aimed at creating value for our stakeholders We have laid the groundwork for long-term sustainable growth through investing in the business, as well as active portfolio management Strategic targets: continued focus on customer experience, enga
Slide 6: Strategy aimed at creating value for our stakeholders
Strategy aimed at creating value for our stakeholders Our purpose We help people care for what matters most to them Our ambition Our strategic commitments We want to be an industry leader, known for our customer engagement, Customers and distribution talented people, and contribution to society We s
Slide 7: Working towards ambitious targets for Customers, Employees and Society
Working towards ambitious targets for Customers, Employees and Society Excellent customer experience Engaged employees Positive contribution to society Customer engagement: all units above Employee engagement3 of ≥ 7.8 by 2023 ESG-integrated AuM5 of 80% by 2023 market average NPS1 by 2023 (no. of un
Slide 8: Recognition for our contribution to our Customers, People and Society
Recognition for our contribution to our Customers, People and Society Customers Employees Award for Winner of the Award for best Belgian jury prize the most sustainable For the Human innovative fund offering Capital Planner sustainable and best and the NN International Included in Bloomberg mortgage
Slide 9: Groundwork laid for long-term sustainable growth
Groundwork laid for long-term sustainable growth Resilient balance sheet Strong cash flow in the Netherlands Profitable growth in International • Continue to outgrow market in high margin • Strong capital position and balance sheet with • Increased OCG by ≥ EUR 200m by ample flexibility accelerating
Slide 10: Actions taken to strengthen the portfolio
Actions taken to strengthen the portfolio … Acquisitions Rational Acquisition price Disciplined and rational approach MetLife Poland & Greece Investing for growth EUR 584m • Optimise all business units to achieve Heinenoord Strengthening customer engagement EUR 176m 1 attractive returns 2 ABN Amro L
Slide 11: Leading to robust and well-positioned set of businesses
… leading to robust and well-positioned set of businesses Diversified sources of cash, income and growth 4% 34% 34% Cash vs VNB Sources of 50% 50% growth1 by segment2 income3 66% 62% Netherlands Life cash generation Insurance Europe Spread risk Growth and long-term cash sustainability Japan Life Tec
Slide 12: Strong financial performance, ahead of plan to reach 2023 targets
Strong financial performance, ahead of plan to reach 2023 targets NN Group Operating segments Operating capital generation Netherlands Life Netherlands Non-life Insurance Europe (OCG) of EUR 1.5bn in 2023 OCG of EUR 900m in 2023 COR 94-96% OCG of EUR 325m in 2023 (EURm) (EURm) (EURm) 1,584 846 95.4%
Slide 13: Limited impact of macro volatility, while higher rates are supportive
Limited impact of macro volatility, while higher rates are supportive for business Higher interest • Higher rates support new business 20-year euro swap rate (%) rates • Allow reinvestments at higher yields 3 • Close cash flow matching of assets and liabilities 2 • Increase buyout opportunities in D
Slide 14: Strategy aligned with long-term market trends
Strategy aligned with long-term market trends Increased awareness of the need for • Broad suite of protection products to address customer needs protection • Building on early mover advantage in Europe to outperform market growth Responsibility for pensions shifting • Market leader in Dutch pension
Slide 15: Ongoing strong cash flow generation in the Netherlands
Ongoing strong cash flow generation in the Netherlands Building on solid brand … and taking management actions to support strong cash flow … and targeting and market positions … generation … in 2025 • Top market positions in group Active in-force portfolio management and growth in DC pensions, indiv
Slide 16: Driving profitable growth in Europe and Japan
Driving profitable growth in Europe and Japan Leading player with … active in attractive markets with strong growth prospects … … and targeting strength in distribution … in 2025 Offer excellent products in Europe and Japan • Leading positions in life • Serve long-term protection needs, responding t
Slide 17: Organic growth drivers and business performance support long-term OCG growth
Organic growth drivers and business performance support long-term OCG growth Illustrative development of OCG1 Long-term OCG growth drivers Netherlands • Long-term sustainable OCG from in-force capital release Life and growth in DC Operating capital generation Insurance • In Europe, higher VNB driven
Slide 18: Strong and sustainable capital returns to shareholders
Strong and sustainable capital returns to shareholders Progressive dividend per share ... ... annual share buyback of at least ... delivering attractive returns4 • Aiming at stable, predictable growth EUR 250m … • Dividend and regular share buybacks • Interim dividends calculated as 40% of • Additio
Slide 19: We remain disciplined on capital deployment
We remain disciplined on capital deployment Capital deployed first for Options for deployment of excess capital Investments in Dividends and Management of Inorganic growth Additional return organic growth share buybacks financial leverage opportunities to shareholders • Hurdle rates and • Progressiv
Slide 20: New ambitious financial targets for 2025
New ambitious financial targets for 2025 … NN Group Netherlands Life Netherlands Non-life Insurance Europe OCG1 in 2025 OCG in 2025 OCG in 2025 OCG in 2025 EUR 1.8bn EUR 1.15bn EUR 325m EUR 450m Free cash flow Expense development in Combined ratio 93-95%2 Invest for profitable growth Mid single-digi
Slide 21: Strategic targets for Customers, Employees and Society
… as well as strategic targets for Customers, Employees and Society Net Promoter Score (NPS-r) of Employee engagement2 by 2025 Diversity: Women in senior Netherlands and International1 management positions3 by 2025 by 2025 > Market average ≥ 8.0 ≥ 40% Reduction GHG4 emissions of More than double inv
Slide 22: Ambition to achieve net-zero emissions across the business
Ambition to achieve net-zero emissions across the business Interim targets2 Ambition Actions 2025 2030 Proprietary Transition proprietary • Develop and implement asset class specific Paris Alignment strategies investment investment portfolio to net- • Reduce GHG emissions of corporate investment por
Slide 23: Aiming for a net-zero carbon investment portfolio
Aiming for a net-zero carbon investment portfolio Our long-term ambition • Transitioning our proprietary investment portfolio to net-zero GHG emissions by 20501 • Playing our part in helping the real economy to decarbonise • Our approach: 1) decarbonisation of the investment portfolio, and 2) increa
Slide 24: Reconfirming our investor proposition
Reconfirming our investor proposition Resilient balance Strong cash flow Profitable growth in sheet in the Netherlands attractive markets Our commitment Long-term mid single-digit growth of OCG • Excellent customer experience • Positive contribution to society Strategic targets • Engaged employees F
Slide 25: Key takeaways
Key takeaways Successful implementation of 2020 strategy aimed at creating value for our stakeholders We have laid the groundwork for long-term sustainable growth through investing in the business, as well as active portfolio management Strategic targets: continued focus on customer experience, enga
Slide 26: Financial performance and capital return
Financial performance and capital return Annemiek van Melick CFO NN Group
Slide 27: Key takeaways
Key takeaways OCG target increased from EUR 1.5bn in 2023 to EUR 1.8bn in 20251 Reconfirmation long-term mid single-digit OCG growth from 2021 onwards Mid single-digit Free Cash Flow growth Committed to capital return policy of progressive dividend per share and annual SBB of at least EUR 250m Exces
Slide 28: Strong OCG growth and resilient Solvency enable attractive capital returns
Strong OCG growth and resilient Solvency enable attractive capital returns +55% +4% • Strong OCG generation of EUR 4.0bn (adding ~20%- -1% points solvency per year) 224% -35% • EUR 3.7bn or -42%-points of solvency from capital 205% SII flows to shareholders ratio -42% • Business strengthened and div
Slide 29: New Group and segment financial targets for 2025
New Group and segment financial targets for 2025 NN Group Netherlands Life Netherlands Non-life Insurance Europe OCG1 in 2025 OCG in 2025 OCG in 2025 OCG in 2025 EUR 1.8bn EUR 1.15bn EUR 325m EUR 450m Free cash flow guidance Expense development in Combined ratio 93-95%2 Invest for profitable growth
Slide 30: OCG brought forward ahead of 2023 target
OCG brought forward ahead of 2023 target Overdelivered on OCG target of EUR 1.5bn in 20231 • Increased OCG by ≥ EUR 200m by accelerating shift to higher- (EURbn) yielding assets Previous • Strong business performance reflecting OCG target • Non-life transformation and favourable claims development 1
Slide 31: Long-term OCG growth driven by Insurance International
Long-term OCG growth driven by Insurance International, followed by Netherlands Non-life and Banking Illustrative development of OCG1 Long-term OCG growth drivers Netherlands • Long-term sustainable OCG from in-force capital release Life and growth in DC Operating capital generation Insurance • In E
Slide 32: Target to grow OCG to EUR 1.8bn in 2025
Target to grow OCG to EUR 1.8bn in 2025 Illustrative development of OCG (EURbn) • OCG target of EUR 1.8bn in 2025 • Profitable growth in Insurance Europe • Partly offset by higher debt servicing cost 1.8 • Investment portfolio optimisation largely completed 1.6 • Non-life underwriting improvement to
Slide 33: Free Cash Flow to grow mid single-digit
Free Cash Flow to grow mid single-digit FCF growth driven by Non-life and Insurance Europe which more than offsets higher debt servicing costs FCF development (EURbn) Segment Key drivers FCF Trend Netherlands Life • Continued focus on stable remittances and solid solvency Netherlands • Remittances d
Slide 34: Strong balance sheet and financial flexibility
Strong balance sheet and financial flexibility Strong solvency levels High-quality Solvency II capital • Prioritise strong and resilient balance 224% 210% 213% 18.5 sheet in current volatile market 205% 1.8 Non-Solvency • IFRS leverage ratio of 21.7%2 1.0 regulated entities 2.3 Tier 3 • Ample financ
Slide 35: Financial leverage position and maturity profile
Financial leverage position and maturity profile Financial leverage1 Well-balanced maturity profile (EURbn) (EURbn) Senior notes Subordinated notes 5.8 1.8 29% 1.0 1.0 0.9 0.6 0.6 71% 0.5 0.5 0.8 30 June 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2022 Financial leverage ratio2: 21.7% Fix
Slide 36: Three pillar capital framework
Three pillar capital framework 1 2 Solvency Cash capital at holding • Approach, based on risk appetite; markets and macro • Cash capital held at Holding to cover at least 1-in-20 economic outlook, OCG expectations and upcoming shocks of the underlying entities and to fund Opportunity regulatory and
Slide 37: Strong and sustainable capital returns to shareholders
Strong and sustainable capital returns to shareholders Progressive dividend per share ... ... annual share buyback of at least ... delivering attractive returns4 • Aiming at stable, predictable growth EUR 250m … • Dividend and regular share buybacks • Interim dividends calculated as 40% of • Additio
Slide 38: Key takeaways
Key takeaways OCG target increased from EUR 1.5bn in 2023 to EUR 1.8bn in 20251 Reconfirmation long-term mid single-digit OCG growth from 2021 onwards Mid single-digit Free Cash Flow growth Committed to capital return policy of progressive dividend per share and annual SBB of at least EUR 250m Exces
Slide 39: Risk Management Update
Risk Management Update Bernhard Kaufmann CRO NN Group
Slide 40: Key takeaways
Key takeaways Well-diversified risk profile supports sustainable OCG Resilience to weather through the uncertain environment C.2
Slide 41: Well-diversified risk profile supports sustainable OCG
1 2 Well-diversified risk Resilience to profile supports weather through sustainable OCG uncertain environment C.3
Slide 42: Solvency position is strong and risk profile supports sustainable OCG
Solvency position is strong and our well-diversified risk profile supports sustainable OCG NN Group SCR1 30 Sept 31 Dec Basic SCR by risk type6 • Solvency II ratio of 205% at 30 September (EURbn) 2022 2019 (30 September 2022) 2022, in line with priority of a strong capital Market risk 6.7 4.6 positi
Slide 43: Solvency II sensitivities actively managed within tolerance levels
Solvency II sensitivities actively managed within tolerance levels Δ EOF Δ SCR Δ SII Stock and flow Sensitivities to market shocks at 30 September 20221 (EURbn) (EURbn) ratio Tolerance interaction Interest rate: Parallel shock +50bps -0.3 -0.2 +1% Stock and flow, Up to except for Interest rate: Para
Slide 44: Interest rate risk management with focus on hedging on an economic basis
Interest rate risk management with focus on hedging on an economic basis and managing solvency sensitivity NN Life asset and liability cash flows1 (31 December 2021) Low sensitivity to interest rates; +1%-point ratio impact2 (30 September 2022) Assets Eligible Own Funds (EOF) 18.2 Liabilities Net im
Slide 45: Mortgage spread volatility key driver for recent solvency ratio volatility
Mortgage spread volatility key driver for recent solvency ratio volatility, mitigating measures identified Mortgage spread volatility increased in 20221 Mitigating measures to reduce volatility are explored • Dutch mortgages is an asset class with proven stable risk profile • Two potential measures
Slide 46: Well-diversified risk profile supports sustainable OCG
1 2 Well-diversified risk Resilience to profile supports weather through sustainable OCG uncertain environment C.8
Slide 47: Maintaining a high-quality investment portfolio
Maintaining a high-quality investment portfolio; no material further shift to higher-yielding assets expected Investment portfolio (NN Group excl. banking)1 • Increased OCG by > EUR 200m by accelerating shift to higher- (30 September 2022) yielding assets compared to previous CMD at June 2020 Fixed
Slide 48: Well-collateralised Dutch mortgage portfolio
Well-collateralised Dutch mortgage portfolio with attractive risk-return characteristics Attractive return Low risk profile Strong sourcing capabilities • Attractive spreads compared to other • Disciplined underwriting criteria • Mortgage exposure of EUR 40bn in the asset classes with similar risk p
Slide 49: Actual losses in Dutch mortgage portfolio limited in last recession
Actual losses in our Dutch mortgage portfolio limited in last recession Low historical losses in NN Group mortgage portfolio1 • Mortgage losses in Dutch market relatively low (in bps) • Recourse to all assets and earnings of borrowers 50 • Strong social security and adequate unemployment benefits NN
Slide 50: Real estate portfolio and corporate bond portfolio
Real estate portfolio is well-diversified and high-quality corporate bond portfolio Real estate exposure Corporate bonds and loans by rating (9% of investment portfolio1, 30 September 2022) (16% of investment portfolio1, at 30 September 2022) 5% Industrial 5% AAA 13% 11% 5% Residential AA 35% Retail
Slide 51: Limited risk to credit rating migration and defaults in a severe recession
In a severe recession there is limited risk to credit rating migration and defaults in our corporate bond portfolio Credit risk migration scenario Default increase scenario • One full letter downgrade of 20% of corporate issuers results in a modest ∆ SII ∆ OF ∆ SCR ∆ SII ∆ OF ∆ SCR solvency ratio im
Slide 52: Well-positioned to weather the current economic environment
Well-positioned to weather through the current economic environment Economic impact so far manageable Resilience in adverse economic environment • Inflation risk for NN Life is limited and hedged to a large extent • Solvency even after more severe inflation shock within • Impact from expense compone
Slide 53: Changes in regulatory environment are addressed
Changes in regulatory environment are addressed Solvency II 2020 review IFRS 17 ESG • Legislative proposal published by EC on • Cash flows and economics remain • On track with implementation of 22 September 2021 unchanged various ESG-related regulations • Proposal broadly in line with the earlier •
Slide 54: Key takeaways
Key takeaways Well-diversified risk profile supports sustainable OCG Resilience to weather through the uncertain environment C.16
Slide 55: Driving growth in Insurance International
Driving growth in Insurance International Fabian Rupprecht CEO International Insurance
Slide 56: Key takeaways
Key takeaways International businesses achieved 2023 targets ahead of plan Europe: focused strategy builds on strong market positions, unique multi-distribution platform and enhanced digitalisation Europe: resilient and growing OCG; continued growth of VNB in the medium term, with short-term pressur
Slide 57: Insurance International is a major contributor to NN Group
Insurance International is a major contributor to NN Group Key figures1 Diversified footprint • Operating in 9 European countries and Japan (EURm) 1H22 FY21 • Access to a population of ~240m in Europe and ~2.5m SMEs in OCG2 272 447 Japan VNB 210 407 • International units delivering ~30% of OCG and m
Slide 58: International businesses achieved 2023 targets ahead of plan
International businesses achieved 2023 targets ahead of plan Insurance Europe Japan Life Japan Life OCG of EUR 325m in 2023 (EURm) Value of new business of EUR 150m in OCG of EUR 100m in 2023 (EURm) 2023 (EURm) 318 325 146 156 176 251 253 150 133 129 75 100 FY19 FY20 FY21 FY19 FY20 FY21 FY19 FY20 FY
Slide 59: Profitable growth in attractive European markets
1 2 Profitable growth in Ongoing shift to attractive European protection products markets in Japan D.5
Slide 60: Continuing growth in Europe; OCG target raised to EUR 450m
Continuing growth in Europe; OCG target raised to EUR 450m OCG target supported by solid drivers • OCG growth driven by new business contribution from renewal of protection products and new sales OCG development (EURm, CAGR in %) • Strong growth of investment return supported by rising interest rate
Slide 61: Growth supported by strong positions in attractive markets
Growth supported by strong positions in attractive markets Active in attractive growth markets in Europe Leading market positions • Active in markets showing strong long-term GDP growth, • 8 out of 9 business units organically built with cyclical slow down in the short term • Top 3 life player in mo
Slide 62: Leader in protection and leveraging on distribution strength
Leader in protection and leveraging on distribution strength Key drivers … … with a proven track record … … with clear actions to drive future growth 1 Protection GWP (CAGR 2019-2021)1 • Build on increased awareness and demand for protection Leading in attractive 10% • Leverage data to sustain high
Slide 63: Leveraging and growing own customer base via digitalisation
Leveraging and growing own customer base via digitalisation 3 Key drivers … … with a proven track record … … to be scaled up to drive future growth Maximise agent TA1 productivity (EURk VNB per agent) • Replicating successful digital processes and tools across the productivity by state-of- +15% mark
Slide 64: On track to meet guidance for MetLife OCG contribution
On track to meet guidance for MetLife OCG contribution Focus on swift and efficient integration Creating a strong platform for future growth MetLife Poland • Consolidating NN’s leading position in Poland (#2 in life April 2022 Closing of the transaction insurance) and creating #1 life insurer in G
Slide 65: Resilient and growing OCG in challenging environment
Resilient and growing OCG in challenging environment OCG remains resilient in current macroeconomic Mid to high single-digit OCG growth environment; short-term pressure on VNB • Near-term pressure on VNB due to discounting at higher rates and sales impacted by lower disposable income Short term VNB
Slide 66: Ongoing shift to protection products in Japan
1 2 Profitable growth in Ongoing shift to attractive European protection products markets in Japan D.12
Slide 67: Focus on further growing in protection market in Japan
Focus on further growing in protection market in Japan Summary of SME Life insurance market trends Well positioned in large and attractive market Product Market characteristics Trend NN strategy • Japan is 3rd largest life insurance market Protection Attractive margins; stable growth Driving growth
Slide 68: Unique capabilities to drive protection growth
Unique capabilities to drive protection growth Key drivers … … with a proven track record … … to be scaled up to drive future growth Customer portals users1 18k • Providing a unique offering to meet SME needs that go beyond traditional insurance and increase customer engagement Unique position as SM
Slide 69: Growth prospects reflected in higher OCG target
Growth prospects reflected in higher OCG target OCG supported by ongoing shift to protection (EURm) OCG target of EUR 125m in 2025 • Target represents mid single-digit growth versus normalised 2021 level 129 +5% 125 • Exceptionally high OCG in 2021 due to high mortality and morbidity margin and exch
Slide 70: Key takeaways
Key takeaways International businesses achieved 2023 targets ahead of plan Europe: focused strategy builds on strong market positions, unique multi-distribution platform and enhanced digitalisation Europe: resilient and growing OCG; continued growth of VNB in the medium term, with short-term pressur
Slide 71: Transforming the business
Transforming the business Tjeerd Bosklopper CEO Netherlands Non-life, Banking & Technology
Slide 72: Key takeaways
Key takeaways Leading position in the Netherlands with strong track record in delivery Further benefit from scale in efficiency, data and customer engagement Delivering on Non-life with increased OCG target of EUR 325m in 2025 Higher annual OCG target for Banking of EUR 80m in 2025 E.2
Slide 73: On track to meet 2023 targets
On track to meet 2023 targets Profitability Expense reduction Strategy Non-life combined ratio 94-96% Non-life administrative expense ratio Vivat Non-life integration < 10% 95.4% 95.3% 10.4% 93.5% 9.9% 9.9% completed FY19 FY20 FY21 FY19 FY20 FY21 ROE Banking ≥ 12% Banking cost/income ratio < 55% Dis
Slide 74: Enhancing sustainability is a strategic priority
Enhancing sustainability is a strategic priority Transition the mortgage and underwriting Netherlands Non-life Banking portfolio to net-zero greenhouse gas emissions • Gain data-driven insights in our mortgage • As part of the product approval process • Woonnu: mortgage provider and underwriting por
Slide 75: Digital transformation drives higher customer satisfaction and lower costs
Digital transformation drives higher customer satisfaction and lower costs Foundation is composed of great talent and Case: AI powered claims process Consistently strong and increasing satisfaction technology scores • Within NN, direct label OHRA has the best • Building on engineering, user experien
Slide 76: Building a future-proof non-life company
1 2 Building a future- NN Bank originates proof non-life high-quality company mortgages and drives customer interaction E.6
Slide 77: Full suite of non-life products distributed through leading platform
Full suite of non-life products distributed through leading platform Leading distribution platform in the Netherlands Attractive product mix Disability & Group income 7% Regular brokers: #1 accident 16% 16% Individual 9% Mandated brokers: #1 disability Bancassurance: #1 Accident & 40% 11% 15% GWP Di
Slide 78: Building a future-proof non-life company
Building a future-proof non-life company Key figures Strategic priorities Simplicity, Sustainability and Agility translate into: (EURm) 1H22 FY21 Digitalisation and standardisation of processes GWP 2,327 3,798 Digitalisation • Simple and inspiring organisation • High employee engagement Combined rat
Slide 79: Market leader in non-life
Market leader in non-life Market growth in line with GDP … … in a consolidating market Targeting selective growth • SMEs Total GWP Dutch market1 (EURbn) Market shares non-life3 • Leveraging on existing broker 19.3 CAGR2 17.9 18.6 network in P&C and D&A 4.3 ~2% 24% • Moderate growth in absenteeism 32
Slide 80: Delivering on our strategy with OCG of EUR 325m in 2025
Delivering on our strategy with OCG of EUR 325m in 2025 Targeting EUR 325m OCG in 2025 (EURm) • Non-recurring items in FY21 reflect a favourable claims development in P&C and D&A, including a positive impact from 325 325 Covid-19 • Further improvement of data and underwriting capabilities expected t
Slide 81: Non-life pricing expected to increase in line with inflation
Non-life pricing expected to increase in line with inflation P&C Effect of increasing inflation is limited so far • Half of the P&C portfolio has limited sensitivity to short term • Limited increase of average claims amounts observed inflation, because of the nature of claim expense drivers and • Ro
Slide 82: NN Bank originates high-quality mortgages
1 2 Building a future- NN Bank originates proof non-life high-quality company mortgages and drives customer interaction E.12
Slide 83: Efficient digital retail bank drives customer interaction
Efficient digital retail bank drives customer interaction #5 retail bank in the Netherlands with hybrid business model Key figures (EURm) 1H22 FY21 • Serving 1 million retail customers with mortgages and savings OCG 11 104 products Operating result 48 134 • Efficient originator of high-quality Dutch
Slide 84: Dutch residential mortgages remain an attractive asset class
Dutch residential mortgages remain an attractive asset class Proven through the cycle track record Dynamics for mortgage loans are shifting Diversification of income • Attractive spread with relatively low • Lower mortgage loan origination in • Lower internal and external appetite capital consumptio
Slide 85: Targeting EUR 80m OCG from Banking in 2025
Targeting EUR 80m OCG from Banking in 2025 Banking OCG1 to grow to EUR 80m in 2025 (EURm) Competitive cost/income ratio below 55% in 2025 59% 55% 104 53% 52% 80 FY21 Non-recurring Net interest Fee income FY25 Target FY19 FY20 FY21 FY25 Target items in FY212 income • OCG increase driven by higher net
Slide 86: Key takeaways
Key takeaways Leading position in the Netherlands with strong track record in delivery Further benefit from scale in efficiency, data and customer engagement Delivering on Non-life with increased OCG target of EUR 325m in 2025 Higher annual OCG target for Banking of EUR 80m in 2025 E.16
Slide 87: Winning in the changing Dutch pensions market
Winning in the changing Dutch pensions market Leon van Riet CEO Netherlands Life & Pensions
Slide 88: Key takeaways
Key takeaways Long-term sustainable OCG expected from in-force portfolio and growth in pensions; OCG target raised to EUR 1.15bn in 2025 Active balance sheet management to reduce volatility and secure solid track record of free cash flow generation Leading investor with strong focus on ESG for the p
Slide 89: Market leader in Dutch life
Market leader in Dutch life Key highlights Key figures (EURm) 1H22 FY21 • Largest in-force customer base and broad distribution GWP 1,954 3,972 • Solid ~40% market share1 in group life • Excelling in customer service Administrative expenses 215 473 • Grow scale in defined contribution pensions marke
Slide 90: Strong delivery on 2023 targets
Strong delivery on 2023 targets Profitability Expense reduction Strategy EUR 0.9bn OCG in 2023 (EURm) Insurance expenses to develop in line EUR 32bn of profitable DC business in with the portfolio (EURm) 2025 (EURbn) 770 846 386 366 3981 30 642 21 25 358 FY19 FY20 FY21 FY19 FY20 FY21 Dec 19 Dec 20 D
Slide 91: Operating capital generation to grow to EUR 1.15bn in 2025
Operating capital generation to grow to EUR 1.15bn in 2025 • Asset portfolio optimisation largely complete; focus on OCG development Netherlands Life (EURm) refinement of portfolio going forward 1,150 • Balanced risk taking through investing in private loans as well as investment grade credits • Add
Slide 92: Strong position to secure solid free cash flow generation
Strong position to secure solid free cash flow generation Significant remittances1 … (EURm) … whilst maintaining a resilient balance Active balance sheet management sheet (Solvency II ratio) 1,048 • Solvency 2 interest rate sensitivity 930 814 770 846 reduced 213% 220% 219% 642 202% 520 580 187% • R
Slide 93: Further improve cost efficiency
Further improve cost efficiency Significant cost reductions achieved Pressure on expenses increasing • 32% reduction of insurance expenses achieved since 20161 • Additional investment to achieve future cost benefits and meet • Removal of overlap from Delta Lloyd integration rising stakeholder demand
Slide 94: Current Dutch pension system explained
Current Dutch pension system explained Dutch pension system Pillar 2 employer Pillar 2 pension market consists of three different segments pension market (AuM)2 • Industry-wide pension funds have mandatory participation if employer is active in such industry (e.g., civil servants, healthcare workers
Slide 95: Pole position to capture opportunities in changing pension market
Pole position to capture opportunities in changing pension market Opportunities in changing pension landscape Increasing satisfaction scores in consolidating Further reinforce high customer engagement broker landscape by adding value-added services • Potential doubling of market for future Pension a
Slide 96: Combining products with specialised services to increase customer satisfaction
Combining products with specialised services as additional revenue source increasing customer satisfaction Nourishing the strong relationship with pension advisors Service offering to build upon NN's market Advisors • Providing new client data insights leading position • Increases the relevance of t
Slide 97: Grow scale in DC market and accelerate future profitability
Grow scale in DC market and accelerate future profitability Strong position in Dutch life market Attractive investment propositions Increasing scale drives future profitability NN’s AuM in DC (EURbn) • NN offers two DC propositions: insured • Solid investment performance 30 +1 -4 27 25 DC as well as
Slide 98: Proven integration track record for ABN Amro Life
Proven integration track record gives confidence in successful and swift integration of ABN Amro Life Sound strategic rationale Attractive benefits Swift integration expected • After closing of the transaction, NN • Adding volume, resulting in 1Q22 Transaction announced Life owns 100% of the share
Slide 99: Key takeaways
Key takeaways Long-term sustainable OCG expected from in-force portfolio and growth in pensions; OCG target raised to EUR 1.15bn in 2025 Active balance sheet management to reduce volatility and secure solid track record of free cash flow generation Leading investor with strong focus on ESG for the p
Slide 100: IFRS 9/17 update
IFRS 9/17 update Annemiek van Melick CFO NN Group Harm van de Meerendonk Head of Financial Accounting and Reporting NN Group
Slide 101: Key takeaways
Key takeaways No impact on strategy or targets Limited financial impact from IFRS 9/17 in the current market environment On track for implementation on 1 January 2023 G.2
Slide 102: Limited impact from IFRS 17
Limited impact from IFRS 17 No impact on strategy or targets Limited financial impact from IFRS 9/17 • Focus on Solvency II and Operating Capital Generation (OCG) • IFRS 9/17 equity more stable; closer to Solvency II and the remains unchanged current Adjusted Equity (excluding revaluations) • No imp
Slide 103: Accounting options reflecting underlying economics and most stable earnings
We have chosen accounting options that reflect underlying economics and provide most stable earnings Use of OCI in IFRS 9 and 17 3 accounting models in IFRS 17 • IFRS 9 and 17 allow changes in financial assumptions (mainly • NN Group will apply each of the 3 accounting models in IFRS 17 changes in m
Slide 104: IFRS 17 methodologies and assumptions close to Solvency II
We have chosen IFRS 17 methodologies and assumptions close to Solvency II, but with more economic parameters Best estimate of expected cash flows Risk adjustment CSM • The best estimate of expected cash flows • Methodology for the risk adjustment is • CSM represents unamortised unearned under IFRS 1
Slide 105: IFRS 9/17 equity more stable
IFRS 9/17 equity more stable - impact mainly driven by the introduction of the CSM and active discounting Change in equity (1 January 2022, EURbn) Equity1 (EURbn) Leverage2 (31 December 2021, %) 33 23.0% Current equity 33 20 Revaluation assets Derecognition DAC/Voba Current Current IFRS 9/17 IFRS 9/
Slide 106: Operating result and margin analysis
Operating result and margin analysis Operating result & margin analysis Margin analysis presentation IFRS 9/17 operating result Insurance result • Insurance result includes: • Operating result expected to be marginally Investment result • Profit margin, reflecting CSM release higher than the current
Slide 107: Key takeaways
Key takeaways No impact on strategy or targets Limited financial impact from IFRS 9/17 in the current market environment On track for implementation on 1 January 2023 G.8
Slide 108: Appendices
Appendices Qn
Slide 109: Operating capital generation by segment
Operating capital generation by segment OCG1 by segment (EURm) 1H22 FY21 FY20 FY19 Netherlands Life 580 846 642 770 Netherlands Non-life 144 325 76 132 Insurance Europe 198 318 253 251 Japan Life 74 129 133 173 Asset Management2 31 135 103 122 Banking 11 104 0 82 Other -140 -272 -214 -180 Operating
Slide 110: Operating capital generation by source
Operating capital generation by source OCG1 by source (EURm) 1H22 FY21 FY20 FY19 Investment return 702 1,335 1,223 1,089 Life – UFR drag -318 -825 -978 -626 Life – Risk margin release 165 400 440 436 Life – Experience variance 71 -18 -5 7 Life – New business 102 138 92 123 Non-life underwriting 95 2
Slide 111: OCG sensitivities
OCG sensitivities Δ EOF Δ OCG1 Stock and flow Sensitivities to market shocks at 30 June 2022 (‘stock’) (‘flow’) (in EURbn) (in EURm) interaction Interest rate: Parallel shock +50bps -0.2 +40 Stock and flow, Interest rate: Parallel shock -50bps +0.2 -65 except for partial open position after year 30
Slide 112: Sustainable release of capital from in-force business
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Slide 117: Slide 117