Nn Group N.v. · EURONEXT:NN
Nn — Investor Day (June 2020)
148 slides from Nn's investor day presentation, Jun 24, 2020
Slide 1: Committed to sustainable value creation
Committed to sustainable value creation NN Group Capital Markets Day 24 June 2020
Slide 2: NN Group strategy
NN Group strategy David Knibbe CEO NN Group Capital Markets Day
Slide 3: Today’s key messages
Today’s key messages • Proven capabilities to enhance efficiency, improve performance and Delivered on Group targets generate free cash flow • Robust capital position and conservative investment portfolio provide Resilient balance sheet stability, also in times of stress Limited impact from COVID-19
Slide 4: Solid performance so far but more work to do
Solid performance so far but more work to do Cost reduction Annual earnings growth Free cash Delivering on EUR ~400m compared with 5-7% average, medium-term In a range around net Group medium- FY16 expense base by 20201 target2 operating result, over time3 term financial Net operating result EUR 3.7
Slide 5: Business mix provides protection, limited business impact of COVID-19 so far
Business mix provides protection, limited business impact of COVID-19 so far Limited business impact expected Mitigating actions taken to offset Base recovery scenario used for • No or limited exposure to business earnings pressure Group and segment targets, interruption, travel and health • Seizing
Slide 6: Experienced and diverse Management Board to lead NN
Experienced and diverse Management Board to lead NN • Strong Management Board with the David Knibbe (NL) Dailah Nihot (NL) Chief Executive Officer1 Chief Organisation & required skills and experience in the current Corporate Relations fast-paced and dynamic environment • Average experience in the fi
Slide 7: Creating value for our stakeholders
Creating value for our stakeholders A.6
Slide 8: Becoming a customer-centric, data-driven company
Becoming a customer-centric, data-driven company Evolving current skills while developing new capabilities and an entrepreneurial mindset to meet changing customer demands and to stay competitive and relevant in the future End of value chain manufacturing Front of value chain (customer engagement, d
Slide 9: Our broader responsibility to stakeholders
Our broader responsibility to stakeholders Excellent customer Customer engagement Brand consideration2 experience All insurance business units 28% by 2023 scoring above market average NPS1 by 2023 Engaged employees Employee engagement Women in senior management positions ≥ 7.8 by 2023 40% by 2023 Po
Slide 10: Our proposition to investors
Our proposition to investors Resilient balance sheet Strong cash flow in the Profitable growth in Netherlands attractive markets • Priority is a strong capital position • Accelerating management actions • Leading market positions in Japan and balance sheet • Shift to higher-yielding assets COLI1 and
Slide 11: Our resilient balance sheet is well positioned to navigate market volatility
Our resilient balance sheet is well positioned to navigate market volatility Solvency II ratio at year-end 20191,5 Low sensitivity to interest rates2 (EURbn) 224% 214% 18.2 • Well capitalised; Solvency II ratio 199% 197% 1.8 1.1 Largely after of ~227% at end of May 2020 year 30; limited NPV • Low ec
Slide 12: Leading positions in the Netherlands
Leading positions in the Netherlands Netherlands Life Netherlands Non-life Banking Asset Management • Market leader in pensions • Strong positions in D&A • Fifth bank in the • Total AuM EUR 276bn5 (40% market share1,2) and (#1, 32% market share4) Netherlands • Responsible Investing at individual lif
Slide 13: Accelerating management actions to increase cash flow generation
Accelerating management actions to increase cash flow generation Actively manage in-force portfolio in the Netherlands Netherlands Life • Increase allocations to mortgages, loans and real estate, while reducing exposure to government bonds OCG of EUR 0.9bn in • Manage longevity risk, while consideri
Slide 14: Continued focus on improving efficiency
Continued focus on improving efficiency Administrative expenses1 (EURm) Scope to achieve further efficiencies • Track record of reducing expenses – total cost savings of EUR 618m achieved since 2013 • Expense metrics in line with peers -18% • Continued focus on efficiency: 1,970 • On track to delive
Slide 15: Profitable growth in Europe and Japan
Profitable growth in Europe and Japan Insurance Europe Japan Life • High market share in protection markets (>20% in Romania, • Market leader in COLI, with ~12% market share2, offering VNB Hungary and Belgium) growth and diversification of cash flows and risk • NN protection growth1 (9%) faster than
Slide 16: Driving profitable growth in attractive markets
Driving profitable growth in attractive markets Offer excellent products in Europe and Japan • Leverage on leading market positions Insurance Europe • Focus on protection products in Europe for higher customer relevancy and better margins OCG of EUR 325m in • Reactivate sales of COLI products in Jap
Slide 17: International footprint provides diversification
International footprint provides diversification Diversified sources of cash, income and growth 2% 27% Cash vs Sources of 45% 47% VNB growth income 52% 55% by segment3 51% by segment1 by segment2 21% • 18 million customers • Diversified portfolio, including Netherlands Life cash generation Predomina
Slide 18: Thorough assessment of individual businesses
Thorough assessment of individual businesses • Regular and thorough assessment of individual businesses at both the business unit and market level, including strategic coherence and right-owner concept • Return on Own Funds International business units Return on Own Business unit • New business prof
Slide 19: We actively manage the portfolio
We actively manage the portfolio • We commit to optimising all of our Operate to maximise value creation business units to achieve attractive NL Life, NL Non-life, Asset Management and Banking returns • Business units with a strong capital generation to Own Funds and/or stable • If the local cost of
Slide 20: Strategy will lead to growing long-term capital generation and cash flows
Strategy will lead to growing long-term capital generation and cash flows Illustrative development of Operating Capital Generation1 Mid-single digit annual growth of OCG over time • Run-off Dutch Life in-force book offset by Operating capital generation UFR unwind • Growth driven by new business at
Slide 21: We have a disciplined approach to capital deployment
We have a disciplined approach to capital deployment Capital deployed first for Options for deployment of excess capital Investments Dividends Management Inorganic Additional in organic and share of financial growth return to growth buybacks leverage opportunities shareholders • Hurdle rates and • P
Slide 22: Group and segment targets focusing on value creation
Group and segment targets focusing on value creation Group Operating capital generation Free cash flow Dividend policy medium-term Progressive DPS financial (2019: EUR 2.161) targets and EUR 1.5bn in 2023 In a range around OCG Annual share buyback of at dividend policy over time least EUR 250m Nethe
Slide 23: Key takeaways
Key takeaways NN Group has consistently delivered on its Group financial commitments Our balance sheet is strong and resilient Business impact from COVID-19 is limited We are becoming a customer-centric, data-driven company Strategic priorities will result in resilient and growing long-term capital
Slide 24: Financial performance and capital return
Financial performance and capital return Delfin Rueda CFO NN Group Capital Markets Day
Slide 25: Financial performance and new targets
1 2 3 Financial Capital generation Capital management performance and and Free Cash Flow and dividend policy new targets B.2
Slide 26: EUR 6.6bn of shareholder value created in 6 years
EUR 6.6bn of shareholder value created in 6 years Total shareholder value created since IPO (July 2014) (EURbn) 2.4 6.6 13% annualised total shareholder return3 4.2 Cash returned Market Total shareholder to shareholders1 capitalisation value created increase2 1. Cash returned to shareholders of EUR
Slide 27: Strong OCG and Solvency II ratio
Strong OCG and Solvency II ratio +33% +2% • Since the introduction of Solvency II -0% • EUR 5bn of OCG, +52% +0% 239% -22% -1% • EUR 3bn cash returned to 224% shareholders, SII ratio -22% 196% • EOF increased EUR 5bn -56% 4Q15 OCG1 Market Other2 Capital Acq DL 2Q17 OCG1 Market Other2 Capital 4Q193 •
Slide 28: NN Group delivered on its Group targets
NN Group delivered on its Group targets Delivering on Cost reduction Annual earnings growth Free Cash Flow Group medium- EUR ~400m compared with 5-7% average, medium-term In a range around net FY16 expense base by 20201 target2 operating result, over time3 term financial targets Net operating result
Slide 29: New Group targets focus on capital generation and shareholder return
New Group targets focus on capital generation and shareholder return 1 Group Operating capital generation Free Cash Flow medium-term X financial EUR 1.5bn … translating In a Cash in Free range around OCG targets in 2023 Flow growth … over time Resulting in sustainable capital returns.. • Progressive
Slide 30: Underpinned by clear segment targets
Underpinned by clear segment targets Netherlands Life Netherlands Non-life Insurance Europe OCG of EUR 0.9bn COR 94-96% OCG of EUR 325m Segment in 2023 in 2023 medium-term financial Japan Life Asset Management Banking targets VNB of at least EUR 150m OCG of EUR 125m Net operating RoE ≥ 12% in 2023 i
Slide 31: Financial performance and new targets
1 2 3 Financial Capital generation Capital management performance and and Free Cash Flow and dividend policy new targets B.8
Slide 32: Operating capital generation from a variety of sources
Operating capital generation from a variety of sources Breakdown OCG by source (FY19, in EURm) • Operating capital generation reflects the change in Own Funds Investment return 1,089 in excess of SCR (at 100%), adjusted for market variance and Life - UFR drag -626 other one-off elements Life - Risk
Slide 33: OCG well diversified over segments
OCG well diversified over segments OCG FY19: EUR 1.3bn Key drivers Netherlands Life • Shift to higher yielding assets and capital release from in-force book 770 Netherlands Non-life • Underwriting improvements and expense reductions • Value new business growth Insurance Europe • In-force actions imp
Slide 34: We expect OCG to grow mid-single digit over time
We expect OCG to grow mid-single digit over time Illustrative development of Operating Capital Generation1 Mid-single digit annual growth of OCG over time • Run-off Dutch Life in-force book offset by UFR unwind • Growth driven by new business at Dutch and Operating capital generation International u
Slide 35: Target to grow OCG to EUR 1.5bn in 2023
Target to grow OCG to EUR 1.5bn in 2023 Illustrative development of Operating Capital Generation (EURbn) • OCG 2020 adversely impacted by market movements, COVID-19 and future negative impact of the longevity transaction executed in May 2020 1.5 • OCG to grow to EUR 1.5bn in 2023 through management
Slide 36: Investment return to grow through shift to higher-yielding assets
Investment return to grow through shift to higher-yielding assets Low risk investment portfolio compared with peers (FY19) • Defensive asset mix, liabilities backed by fixed income securities and mortgages NN Group1 • Mortgages, real estate and loans attractive from risk Peers2 return perspective •
Slide 37: 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 movements Scenario 1 EOF1 up • Limited impact on cash flows due to close matching Interest rates
Slide 38: FCF to grow over time in a range around OCG
FCF to grow over time in a range around OCG Historical Free Cash Flow (EURbn) Target Free Cash Flow: in a range • FCF will be lower in 2020 mainly NN Group has generated stable free cash around OCG over time reflecting dividend restrictions for flows in the past, in a range around OCG Supported by I
Slide 39: Financial performance and new targets
1 2 3 Financial Capital generation Capital management performance and Free Cash Flow and dividend policy and new targets B.16
Slide 40: High quality of Solvency II capital
High quality of Solvency II capital Eligible Own Funds excluding UFR, VOLA, CRA and RM Tiering Solvency II Eligible Own Funds close to reported Eligible Own Funds (NN Group, FY19, in EURbn) (NN Group, FY19, in EURbn) 18.2 18.2 Tier 1 Unrestricted 1.3 17.5 Tier 1 Restricted 2.5 0.7 1.9 Tier 2 Tier 3
Slide 41: Prudent leverage position
Prudent leverage position Financial leverage / Fixed Cost Coverage Ratio (FCCR) • Strong interest cover at >10x 30.8% • Leverage ratio brought down from 30.8% 27.9% 27.9% 25.9% 24.7% 22.8% 21.4% after Delta Lloyd acquisition to 24.7% at Financial 20.8% leverage end of June 20202 13.5x 13.8x 12.0x 9.
Slide 42: Strong solvency and capital generation supports sustainable and attractive cash return to shareholders
Strong solvency and capital generation supports sustainable and attractive cash return to shareholders Attractive dividends and share buybacks (EURm) Dividend policy Dividends Share buybacks Temporarily suspended Progressive dividend per share 4,761 • Growing dividend per share 1,198 515 997 929 • I
Slide 43: Ample financial flexibility within an unchanged capital framework
Ample financial flexibility within an unchanged capital framework Capitalisation Cash capital at holding Financial leverage • Manage operating units to commercial • To cover stress events and to fund • Maintain financial leverage and fixed-cost capital levels holding costs cover ratio (FCCR) consist
Slide 44: Key takeaways
Key takeaways Consistent delivery on Group targets since IPO New Group financial targets centred around capital generation (grow OCG to EUR 1.5bn in 2023) Focus on delivering long term value to all stakeholders, supported by a strong balance sheet and low risk profile Committed to a progressive divi
Slide 45: APPENDICES
APPENDICES
Slide 46: Breakdown OCG per source
Breakdown OCG per source Breakdown OCG, by source FY19 FY181 • Operating capital generation reflects the change in Own (in EURm) Funds in excess of SCR (at 100%), adjusted for market Investment return 1,089 956 variance and other one-off elements Life – UFR drag -626 -421 Life – Risk margin release
Slide 47: Breakdown OCG per segment
Breakdown OCG per segment Breakdown OCG, by segment FY19 FY181 Key drivers (in EURm) Netherlands Life 770 913 • Shift to higher yielding assets and capital release from in-force book Netherlands Non-life 132 41 • Underwriting improvements and expense reductions Insurance Europe 251 252 • Value new b
Slide 48: Own Funds sensitivities
Own Funds sensitivities Δ EOF Δ OF generation Stock and flow Sensitivities to market shocks at 1Q20 (‘stock’) (‘flow’) (in EURbn) (in EURm) interaction Interest rate: Parallel shock +50bps -1.2 +240 Stock and flow, Interest rate: Parallel shock -50bps +1.6 -315 except for partial open position after
Slide 49: Prioritising capital generation over IFRS results, moderate operating result growth expected
Prioritising capital generation over IFRS results, moderate operating result growth expected Operating result1 (EURm) 2019 2018 2017 Expected developments over time Netherlands Life 922 972 896 • Operating result expected to remain broadly stable; excluding the costs related to the back-book longevi
Slide 50: Prioritising capital generation over IFRS results, moderate operating result growth expected
Prioritising capital generation over IFRS results, moderate operating result growth expected Operating result1 (EURm) 2019 2018 2017 Expected developments over time Asset Management 161 155 161 • Operating result in the short term volatile as a result of market movements because of COVID-19 insecuri
Slide 51: Managing risk and return
Managing risk and return Bernhard Kaufmann CRO NN Group Capital Markets Day
Slide 52: We manage risk and return within our risk appetite
We manage risk and return within our risk appetite Strong balance sheet Avoid having to raise equity capital after a 1-in-20 year event or to be a forced seller of assets in Strategic challenges distressed markets Manage our businesses on a risk-return basis to meet our strategic objectives whilst R
Slide 53: Balance sheet resilience Risk-return
1 2 3 4 Balance sheet Risk-return COVID-19 risk Regulatory resilience optimisation assessment development C.3
Slide 54: Our solvency position is very strong
Our solvency position is very strong NN Group insurance (EURbn) FY19 NN Bank (EURm) FY19 • NN Group’s Solvency II ratio holds Market risk 4.6 Core Tier 1 capital 930 up well and continues to be very Insurance and business risk 6.7 Risk Weighted Assets 5,867 strong: ~227% at end of May6 Counterparty
Slide 55: Insurance and business risks reflect focus on life & pensions
Insurance and business risks reflect focus on life & pensions SCR by insurance and business risk type Insurance risk categories dominated by longevity risk (undiversified, FY19) • Longevity risk is the largest risk driven by the long duration life Longevity1 5% 5% & pensions books in the Netherlands
Slide 56: Balanced market risk profile in the light of long term nature of liabilities
Balanced market risk profile in the light of long term nature of liabilities SCR by market risk type Market risk is well diversified and actively managed (undiversified, FY19) • We hedge the liability cash flows stemming from our long Interest rate risk 3% duration life & pensions books Credit sprea
Slide 57: To manage our interest rate risk we focus on cash flow matching
To manage our interest rate risk we focus on cash flow matching NN Life asset and liability cash flows1 (FY19) • NN Life liability cash flows are predictable and stable; very Assets limited exposure to policyholder behavior and profit sharing Liabilities mechanisms and therefore to changes in capita
Slide 58: Remaining interest rate position is controlled and supporting stable remittance capacity
Remaining interest rate position is controlled and supporting stable remittance capacity Remittance capacity in first 30 years broadly immune • Close cash flow match in first 30 years and duration based from interest rate changes partial hedging of cash flow buckets beyond 30 years lead to Δ OF very
Slide 59: Our defensive asset mix allows for a shift to higher yielding assets
Our defensive asset mix allows for a shift to higher yielding assets Investment portfolio (NN Group excl. banking)1 Fixed income portfolio (FY19) (84% of investment portfolio, FY19) Fixed income 6% Government3 3% 7% Real estate 5% 3% Mortgages 1% 2% Equity Corporates3 17% Other EUR 171bn Financials3
Slide 60: The exposure to equity and real estate risks is low
The exposure to equity and real estate risks is low Equity exposure Real estate exposure (3% of investment portfolio, FY19) (5% of investment portfolio, FY19) Public equity Retail 3% 17% Private equity Office 29% Industrial 36% EUR 5.4bn Residential EUR 9.3bn Other 12% 83% 21% • Equity exposure well
Slide 61: Solvency II ratio sensitivities are well within tolerance levels
Solvency II ratio sensitivities are well within tolerance levels Sensitivities to market shocks at FY19 Δ SII ratio Tolerance Interest rate: Parallel shock +50bps +6% Interest rate: Parallel shock -50bps -6% Up to 10% Interest rate: 10bps steepening between 20y–30y -8% Credit spread: Parallel shock
Slide 62: Balance sheet resilience Risk-return
1 2 3 4 Balance sheet Risk-return COVID-19 risk Regulatory resilience optimisation assessment development C.12
Slide 63: Longevity transaction NN Life executed to optimise capital position
Longevity transaction NN Life executed to optimise capital position • Reduction of longevity risk, the largest insurance risk of NN Group, resulting in a SCR Longevity Risk (NN Group; undiversified, FY19, in EURbn) EUR ~500m decrease of NN Group SCR1 5.4 • Current in-benefit Dutch pension liabilitie
Slide 64: We started to shift to assets with a more attractive risk-return profile
We started to shift to assets with a more attractive risk- return profile Expected Return on SCR for selected asset classes1 Preferred asset classes • NN Group is shifting from assets with a low return on SCR 4Q19 towards assets with a high return on SCR 1Q20 • Intention to gradually increase alloca
Slide 65: Well-collateralised Dutch mortgage portfolio with attractive risk-return characteristics
Well-collateralised Dutch mortgage portfolio with attractive risk-return characteristics Attractive return Low risk profile and sound risk Strong sourcing capabilities • Attractive spreads compared to other management • Mortgage exposure of EUR 28bn in the asset classes with similar risk profile • D
Slide 66: Dutch mortgages have proven to be a very stable asset class
Dutch mortgages have proven to be a very stable asset class Actual losses1 – NN Group mortgage portfolio (bps) Strong institutional framework in the Netherlands • Mortgage losses in Dutch market relatively low 50 • Affordability is high, also based on the tax incentives NN losses • Banks have recour
Slide 67: Balance sheet resilience Risk-return
1 2 3 4 Balance sheet Risk-return COVID-19 risk Regulatory resilience optimisation assessment development C.17
Slide 68: NN Group has limited exposure to COVID-19 pandemic
NN Group has limited exposure to COVID-19 pandemic Non-life Market & Credit • Low exposure to most impacted lines of business • Low sensitivity to market movements on our Solvency II • Event insurance largely reinsured ratio • Business interruption as single risk is not covered, only after • Risk of
Slide 69: Our portfolio consists of high quality fixed income assets
Our portfolio consists of high quality fixed income assets Rating breakdown Sector breakdown • To limit risk due to downgrades and (Fixed income assets1; 65% of investment portfolio, FY19, (Corporates for selected sectors and financials; 20% of in %) investment portfolio, FY19, EURbn) defaults NN is
Slide 70: In a severe recession there is limited risk to credit rating migration and defaults
In a severe recession there is limited risk to credit rating migration and defaults in our corporate bond portfolio Stress scenarios Solvency II impact Key remarks 1 Credit risk migration 1 Credit risk migration • 20% one full letter downgrade of corporate One big letter downgrade for 20% of corpora
Slide 71: Balance sheet resilience Risk-return
1 2 3 4 Balance sheet Risk-return COVID-19 risk Regulatory resilience optimisation assessment development C.21
Slide 72: 2020 Solvency II review aims at a balanced approach
2020 Solvency II review aims at a balanced approach Process of Solvency II review started Regulators favor a balanced approach • Implementation not expected before 20231 • EIOPA is committed to a neutral impact: • EIOPA to submit advice to the European Commission (EC) • ‘overall the framework is wor
Slide 73: Impact Solvency II review assessed to be manageable
Impact Solvency II review assessed to be manageable Item Expected outcome Expected impact Mitigants NN Group SII ratio Risk-free curve Changes which decrease the Negative • Actual impact in 2023 reduced due to run- extrapolation mismatch between the risk-free Stock and flow impact off curve and the
Slide 74: Key takeaways
Key takeaways Balance sheet is resilient supported by active interest rate risk management and defensive investment portfolio We exploit optimisation levers to improve our risk-return profile and create shareholder value Impact Solvency II review manageable C.24
Slide 75: APPENDIX
APPENDIX
Slide 76: NN Life sustainable release of capital from in-force business
NN Life sustainable release of capital from in-force business NN Life SCR run-off (excluding renewals and new Releasing capital from in-force business business)1 (EURbn) • NN Life has significant individual life closed book (EUR 34bn) 5.0 and group pension back book (EUR 68bn) liabilities2 4.0 • Dur
Slide 77: Transforming the business
Transforming the business Tjeerd Bosklopper CEO Netherlands Non-life, Banking & Technology Capital Markets Day
Slide 78: Leading position in the Dutch market
1 2 3 Leading position in Transforming the NN Bank originates the Dutch market Non-life business high-quality mortgages and drives customer interaction D.2
Slide 79: Strong delivery on all medium-term targets
Strong delivery on all medium-term targets Netherlands Life Netherlands Non-life Banking Operating result broadly Combined ratio ≤ 97%2 Net operating RoE ≥ 10%2 Profitability stable1 CAGR ~1% 95.4% 15.0% Cost reduction Netherlands Life Netherlands Non-life Banking compared with Operating expenses -2
Slide 80: Clear industry leader in the Dutch market
Clear industry leader in the Dutch market Overall market leading position High brand consideration in NL5 33 31 Pensions #1 40% market share1,2 28 25 26 29 23 20 Individual Life #1 23% market share1 18 17 Non-life D&A #1 32% market share3 P&C #2 26% market share3 Pensions Non-life NN Bank #5 Balance
Slide 81: Highly recognised brands and powerful partnerships
Highly recognised brands and powerful partnerships Omnichannel insurance Specialised labels Broad product suite All distribution channels Retail and Commercial Exclusive bancassurance partnerships Servicing 6.7 million1 Talented people Life and P&C retail and SME customers Large employer with Retail
Slide 82: Benefiting from leading position in the Netherlands
Benefiting from leading position in the Netherlands Dividing the responsibilities for the Dutch businesses helps to create focus Actively manage in-force portfolio in the Netherlands Transforming the Non-life business • Increase allocations to mortgages, real • Further improve data and digital estat
Slide 83: Impact of COVID-19 on Netherlands Non-life and Banking
Impact of COVID-19 on Netherlands Non-life and Banking Limited impact on 2020 operating result expected Assisting our partners • Netherlands Non-life: modestly improving claims experience • Digital tools for brokers to continue serving customers remotely within P&C, offset by higher claims in D&A •
Slide 84: Leading position in the Dutch market
1 2 3 Leading position in Transforming the NN Bank originates the Dutch market Non-life business high-quality mortgages and drives customer interaction D.8
Slide 85: Resilient improvement of Non-life’s profitability
Resilient improvement of Non-life’s profitability Non-life combined ratio improvement Leveraging on scale in D&A1 (combined ratio) Improvement of P&C ongoing1 through lower expenses and better (combined ratio) underwriting1 108.0% 102.0%2 104.6%2 99.6% 99.4%3 97.2% 102.3%3 94.0% 92.3%4 95.4%4 89.8%
Slide 86: NL Non-life well positioned to benefit from increased scale
NL Non-life well positioned to benefit from increased scale #1 position in Dutch Non-life market after Vivat acquisition Diversified product mix and strong multi-channel • High satisfaction scores from customers (NPS +211) and distribution brokers (7.0 out of 101,2) • Partnerships with four of the t
Slide 87: Profitability driven by underwriting improvement and expense reduction
Profitability driven by underwriting improvement and expense reduction From integrate to upgrade Illustration of value drivers towards 2023 • Further expense reduction to come from Vivat Non-life Impact on Combined OCG integration and digitalisation ratio (EURm) • Reduction of administrative expense
Slide 88: Proven integration track record gives confidence in successful Vivat Non-life integration
Proven integration track record gives confidence in successful Vivat Non-life integration Sound strategic rationale and attractive benefits Milestones Vivat Non-life integration • Low execution risk given in-market transaction characteristics as well as experience from Delta Lloyd integration: 2019
Slide 89: Benefiting from largest non-life data pool in Dutch market
Benefiting from largest non-life1 data pool in Dutch market Pricing and underwriting most important drivers for Automated premium and claims data used to profit and growth Premium and monitor portfolios and to adjust tariff more claims data • Claims paid in 2019 amount to EUR 2.5bn2 (67% of flexibly
Slide 90: Expense reductions to contribute to further profitability improvement
Expense reductions to contribute to further profitability improvement Further expense reductions to bring administrative • Continued efficiencies, final savings from Delta Lloyd expense ratio below 10% in 2023 integration and EUR 40m expense synergies from Vivat acquisition1 13.2% • Efficiency incre
Slide 91: Engagement platforms: building the business of tomorrow
Engagement platforms: building the business of tomorrow • Customers live within need spaces containing all customer needs with the same origin or ultimate goal ... Manage your home Protect your belongings ... • In the past, customers navigated need spaces by themselves. Today, driven by digital inte
Slide 92: Leading position in the Dutch market
1 2 3 Leading position in Transforming the NN Bank originates the Dutch market Non-life business high-quality mortgages and drives customer interaction D.16
Slide 93: Strong and profitable banking franchise
Strong and profitable banking franchise #5 retail bank in the Netherlands Key figures (EURm) FY19 FY18 FY171 • Serving 1 million retail customers with mortgages and savings Operating result 1523 130 124 products • Distribution through intermediaries and direct channel Net operating RoE 15.0%3 12.9%
Slide 94: Efficient originator of high-quality residential mortgages
Efficient originator of high-quality residential mortgages Strong growth in mortgage origination (EURbn) High quality mortgage portfolio 7.9 5.7 6.1 2.5 4.9 1.2 3.9 1.0 8% NHG 1.8 1.9 4.7 4.9 5.5 12% Interest only 34% 2.0 3.1 Annuity and linear FY15 FY16 FY17 FY18 FY19 21% Savings and Bank savings R
Slide 95: Leverage on large customer base and enhanced customer engagement
Leverage on large customer base and enhanced customer engagement Large customer base with high customer and broker Increase relevance further through data-driven products satisfaction and services • Solid and reliable distribution; serving 1 million retail • Expansion of NN bancassurance franchise w
Slide 96: Strong operating results and attractive RoE
Strong operating results and attractive RoE Strong operating results (EURm) • Cost/income ratio below 55% in 2023 62% 56% 57% • Temporary increase of cost/income ratio in 2021 and 53% 2022 due to strategic investments partly compensated 130 152 by ongoing cost reductions in existing business 124 Ope
Slide 97: Key takeaways
Key takeaways Leading position in the Netherlands with solid track record in delivery Further benefit from scale in efficiency, data and customer engagement Delivering on Non-life combined ratio target of 94-96% Targeting net operating RoE of 12% or higher for Banking D.21
Slide 98: Optimise the core
Optimise the core Leon van Riet CEO Netherlands Life & Pensions Capital Markets Day
Slide 99: Market leader in Dutch Life
Market leader in Dutch Life Key highlights Key figures (EURm) FY19 FY18 FY171 • Market leader in Dutch life and pensions GWP 4,373 3,602 3,072 • 40% market share in Group Life Administrative expenses 462 494 513 • Largest in-force customer base and broad distribution Operating result 922 972 896 cap
Slide 100: Strong position to unlock further value
Strong position to unlock further value Significant remittances… (EURm) …whilst maintaining a strong balance Management actions contributing to sheet value generation 255% 1,035 • ~22% expense reduction since FY16 837 814 217% 213% ~221% 642 300 203% • Capital synergies from Delta Lloyd integration4
Slide 101: Operating capital generation to grow to EUR 0.9bn in 2023
Operating capital generation to grow to EUR 0.9bn in 2023 Increased focus on operating capital generation Targeted OCG development Netherlands Life1 (EURbn) • Actively manage longevity risk while considering cost 0.9 versus return • Optimise risk return asset portfolio to increase operating capital
Slide 102: Targeted investment portfolio aimed at further improving operating capital generation
Targeted investment portfolio aimed at further improving operating capital generation NN Life asset mix general account1 Optimise risk return asset portfolio to increase OCG • Since IPO, NN Life invested EUR 11.5bn5 in mortgages and loans 6% 5% 5% 6% and EUR 2.4bn5 in real estate, funded by transfer
Slide 103: Next step in increasing efficiency
Next step in increasing efficiency Significant cost reductions driven by efficiency increases and • Insurance expenses to develop in line with the portfolio removal of overlap from the Delta Lloyd integration (EURm) • Insurance expenses to reduce by EUR 50m by 2023 -22% • Future expense reductions t
Slide 104: Win in DC
Win in DC 2,3 2/3 of Dutch working population (excluding industry and NN well positioned in Group pensions market (EURbn) corporate pension funds) accumulates in a DC pension scheme1 5.0 5.0 5.1 5.3 1.3m participants 1.0m participants 1.0m participants 36% 37% 38% 40% 66% 36% 52% 2009 2014 2019 2012
Slide 105: Growing scale to drive future DC profitability
Growing scale to drive future DC profitability Scale drives future profitability Revenue model • Scale contributes to cost efficiency in a highly price-sensitive • Capital-light accumulation is mainly fee based, providing more market diversified earnings and capital generation • Fee income increases
Slide 106: Potential to leverage scale via pension buy-outs
Potential to leverage scale via pension buy-outs While liabilities of Dutch corporate pension funds • Pension funds under regulatory pressure to find increased, the number of DB pension funds decreased1 sustainable solutions for governance, oversight and (EURbn) cost efficiencies +76% • NN has stron
Slide 107: Key takeaways
Key takeaways Operating capital generation to increase to EUR 0.9bn in 2023, reflecting shift to higher yielding assets Strong and consistent cash generator in the past; step up in dividends expected Continue to reduce costs; expenses in-force book to be reduced in line with the run-off whilst impro
Slide 108: Driving growth in Insurance International
Driving growth in Insurance International Fabian Rupprecht CEO Insurance International Capital Markets Day
Slide 109: Insurance International at a glance
Insurance International at a glance Serving 12 million customers in 11 countries Growth opportunity for NN outside of the Netherlands • Access to a population of 250m in Europe and 2.7m SMEs in Japan • Protection and retirement gap in most markets offers opportunity for growth • High margins in the
Slide 110: Impact of COVID-19 on Insurance International
Impact of COVID-19 on Insurance International Impact on our 2020 results Helping our customers – examples of initiatives Impact on 2020 operating result expected to be limited in • Uninterrupted and digitally enabled claims process Japan and Europe • Extension of cover for COVID-19 patients • In Eur
Slide 111: Driving profitable growth in Europe / Increasing VNB in Japan Life
1 2 3 Driving profitable Increasing VNB in Key takeaways growth in Europe Japan Life F.4
Slide 112: Robust results despite regulatory headwinds
Robust results despite regulatory headwinds Operating result1 (EURm, CAGR in %) Key trends +10.0% • Growth of operating result despite regulatory headwinds +4.3% 283 • Protection portfolio growth 260 270 176 197 198 • Optimising in-force book through management actions • Regulatory changes in pensio
Slide 113: Europe to drive profitable growth
Europe to drive profitable growth Resilient balance sheet Strong cash flow in the Profitable growth in Netherlands attractive markets Focus areas 1 2 3 4 Protection focus Leverage on strong tied Drive bancassurance Enhance in-force book • For higher customer agent and broker network • Through close
Slide 114: VNB largest driver of OCG growth
VNB largest driver of OCG growth OCG development Key takeaways (EURm, CAGR in %) • Continue shift to protection products 325 +7% with attractive margins (IRR of ~13% and a payback period of ~6 years) • Improving tied agent efficiency through acceleration of digital 251 transformation and lead genera
Slide 115: We are a leading protection player
1 We are a leading protection player NN well positioned in the Protection VNB at attractive margins Next steps (FY19, %) protection market • Early mover in the attractive 11.8% • Focus on building easy processes with a Risk Protection segment with high GWP protection customer-oriented approach Pensi
Slide 116: Leveraging on large customer base and strong TA network
2 Leveraging on large customer base and strong TA network TA - APE TA - VNB TA sales force Strategic focus (EURm, CAGR in %) (EURm, CAGR in %) (#, 2019) • Create more value from our customer relationships • Leverage on and transform strong TA1 network Spain ~2,100 +0.7% • NPS-T Purchase score in 201
Slide 117: Experiences in sales force digital transformation journey are encouraging
2 Experiences in sales force digital transformation journey are encouraging Poland Hungary Spain Action: supporting TA network with leads and Action: starting with digital lead generation and Action: Third party product offering to our analytics management and sales process automation customers via
Slide 118: Driving bancassurance through close partnerships
3 Driving bancassurance through close partnerships BA - APE BA - VNB Strategic focus (EURm, CAGR in %) (EURm, CAGR in %) • Deep understanding of customers and products and strong relationships with bancassurance partners to drive mutual growth (e.g. ING, Piraeus Bank, Moneta Bank) • Fully integrated
Slide 119: Focus on in-force management to improve margins and increase capital efficiency
Focus on in-force management to improve margins and increase capital efficiency Focus on in-force management starting to bear fruit And further focus to improve OCG 2018 and earlier Large and profitable in-force portfolio1 build up over the years Main focus on new business growth 2019 Quick wi
Slide 120: NN Belgium - reshaping through in-force management
NN Belgium - reshaping through in-force management Actions taken Focus of reshape Target • Business and first IT integration (Delta In-force programme launched: • Improve Return on Own Funds from Lloyd) completed • Capital optimisation 7% in 2019 to double digit in 2023 • Leading to expense savings
Slide 121: Driving profitable growth in Europe / Increasing VNB in Japan Life
1 2 3 Driving profitable Increasing VNB in Key takeaways growth in Europe Japan Life F.14
Slide 122: Strong and unique capabilities in Japan
Strong and unique capabilities in Japan We are market leader in Focused on B2B NN culture Strong distribution a large market franchise • COLI accounting for 30% • Important segment in NN • Japanese and European • Large distribution access: of Japanese Life sales1 Group Strategy ways of working – 5,0
Slide 123: Strong growth at high returns
Strong growth at high returns Operating result Key takeaways (EURm, CAGR in %) • Continuous delivery of operating results with a 9% annual growth since IPO +9.3% +4.4% • Strong VNB growth per annum of ~10% at attractive margins 200 218 with an IRR of ~14% 140 160 154 167 • Cumulative VNB of EUR 900m
Slide 124: Free cash partially re-invested in profitable sales
Free cash partially re-invested in profitable sales Significant part of in-force profits reinvested in profitable growth Key takeaways (JGAAP for the period fiscal year 20181, in EURm) • Profitable new sales lead to in-force profits 216 -120 over time • In JGAAP, sales create high new business strai
Slide 125: Strong new sales are the basis for OCG growth over time
Strong new sales are the basis for OCG growth over time OCG profile new sales Key takeaways FY19 VNB of EUR 146m • Operating Capital Generation from NN Japan Life reflects JGAAP earnings • New sales result in a high new business strain on JGAAP basis • Therefore, contrary to Solvency II units, highe
Slide 126: Japan provides clear diversification benefits to the Group
Japan provides clear diversification benefits to the Group Japan provides attractive VNB and diversification of earnings Key takeaways to NN Group • Japan is an attractive growth business for NN Group, deploying capital at strong VNB Japan 16% margins and IRR • Provides diversification in terms of:
Slide 127: VNB contributing to OCG in the longer term
VNB contributing to OCG in the longer term Resilient balance sheet Strong cash flow in the Profitable growth in Netherlands attractive markets Focus areas NN Life Japan capabilities Reactivation of sales Protection focus • Unique capabilities support • Reactivate sales following • Offer excellent CO
Slide 128: Two COLI business lines: Financial Solutions and Protection
Two COLI business lines: Financial Solutions and Protection Value creation Value proposition COLI product offering (VNB per calendar year, in EURm) 214 Customers Main benefit Tax benefit 194 54 45 146 Protection: All SMEs Solutions around Fully 121 ownership deductible, 100 67 succession no change 3
Slide 129: Rapidly growing in COLI Protection market which is unaffected by the tax rule change
Rapidly growing in COLI Protection market which is unaffected by the tax rule change Risk protection - Sales Risk protection - VNB Strategic focus (APE in EURm, CAGR in %) (EURm, CAGR in %) • Since 2014, NN’s COLI Protection sales to SMEs show significant growth +33.0% +36.1% • Thanks to a unique di
Slide 130: In COLI Financial Solutions tax incentives remain
In COLI Financial Solutions tax incentives remain Fragmented Financial Solutions market after the tax Focus after Covid-19: re-activating agencies revision while Protection market is unchanged • New rules are more complex – requiring more expertise Before tax rule change After from agents, which led
Slide 131: Positive trend after tax rule change (before COVID-19)
Positive trend after tax rule change (before COVID-19) Sales development Key takeaways (APE, in EURm) • 3Q19: after tax rule change: reduced demand for hybrid COLI products 73 COVID-19 15 impact • 4Q19: modest recovery (over and above average expected to seasonality patterns) materialise 40 35 • 1Q2
Slide 132: Driving profitable growth in Europe / Increasing VNB in Japan Life
1 2 3 Driving profitable Increasing VNB in Key takeaways growth in Europe Japan Life F.25
Slide 133: Key takeaways
Key takeaways International businesses have delivered strong and profitable growth since IPO Disciplined performance management of International footprint, actions taken to improve results where necessary Target to grow OCG in Europe to EUR 325m in 2023 through leveraging on leading position in prot
Slide 134: NN Investment Partners
NN Investment Partners Satish Bapat CEO NN IP Capital Markets Day
Slide 135: NN Investment Partners - solid contributor to the Group
NN Investment Partners - solid contributor to the Group • Assets under Management (AuM) of EUR 276bn Key figures FY19 FY18 FY171,2 FY161 • Responsible investing is core to who we are AuM (EURbn) 276 246 246 195 • Managing EUR 165bn of NN’s general accounts ESG-integrated AuM 68% • Over 60% of income
Slide 136: Progress since 2016
Progress since 2016 Guidance given at CMD 2017 Administrative expenses1 (EURm) Operating result2 (EURm) -13.5% • DLAM integration 327 161 161 155 completed by mid-2018 44 133 283 • Expected cost synergies to 129 145 reduce 2016 cost base by ~5-10% realised by 2020 2016 Savings 2019 2016 2017 2018 20
Slide 137: Navigating through a dynamic market environment
Navigating through a dynamic market environment Our focus areas Accelerating in light of COVID-19 • Macroeconomic volatility Leader in • Reinforce responsible investing responsible investing conviction • Environmental and demographical change Consistent • Continue strengthening our % investment perf
Slide 138: Asset manager with responsible investing at its core
Asset manager with responsible investing at its core Resilient balance sheet Strong cash flow in the Profitable growth in Netherlands attractive markets Focus areas Leader in responsible % Consistent investment Digital, personal client Efficiency investing performance experience • ESG factors integr
Slide 139: Responsible investing is core to who we are
Responsible investing is core to who we are Systematic ESG integration Sustainable and Impact strategies • ESG-integrated strategies • EUR 22.7bn (2017: EUR 10.9bn) EUR 168bn (68% of total AuM)1 • Green bonds • Ambition for 2023 Largest manager worldwide2 80% of total AuM • Across all sustainable st
Slide 140: Investment capabilities delivering consistent performance
% Investment capabilities delivering consistent performance Investment capabilities Consistent performance in line with client mandates Outperforming benchmarks AuM (EURbn) EUR 117bn in fixed EUR 48bn private debt EUR 111bn benchmark Benchmark aware income solutions capabilities aware capabilities c
Slide 141: Strengthening our investment capabilities
% Strengthening our investment capabilities Investments organisation • Investments organisation simplified • Enhanced sustainable VIVAT Non-life assets onboarded equity range launched • MoU with • Majority stake to • ESG China equity fund launched • US Equities sub advisor expand mortgage • DL and N
Slide 142: Serving a broad range of clients
Serving a broad range of clients AuM Operating income1 Our clients Digital and personal client experience (EURbn) (EURm) • Manager of NN’s insurance general • Digital: omni-channel approach, 276 444 accounts and serving third party facilitating remote delivery during 13 43 institutional clients, wit
Slide 143: Through local presence and partnerships
Through local presence and partnerships Presence on the ground in 15 locations Deepening existing partnerships Building partnerships Distributor in Europe Distributor mostly in Europe Distributor in Japan Distributor in Ireland 2013 2014 2017 2018 2019 Distributor in Taiwan Dutch pension provider, p
Slide 144: Simplifying and focusing on the core
Simplifying and focusing on the core Operating expenses (bps of AuM)1 Operating model 28 • DLAM integration • Streamlining Dutch fiduciary proposition, completed closing Altis Zug office 18 14 • Transfer of insurance accounting 10 • Automating private debt to NN Group capabilities • Simplified commi
Slide 145: 2023 targets
2023 targets Targeting OCG of EUR 125m in 2023 (EURm) 80% ESG-integrated AuM in 2023 122 125 68% 2019 80% 2019 Market Data, Fee pressure Run-off Net inflows/ Efficiencies Target 2023 impact technology, affiliated Product mix Target 2023 and staff cost business G.12
Slide 146: Key takeaways
Key takeaways Migrating to 80% ESG-integrated AuM, a key driver of mid- to long-term returns for clients Leveraging our insurance heritage to grow private debt and multi-asset solutions Digitalising our research platform to enable consistent investment performance Stepping up digital and personal cl
Slide 147: 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
Slide 148: Slide 148