Fourthquarter 2019results

13 February 2020

Highlights

David Knibbe, CEO

2

Highlights 4Q19

Financial results

Operating result

Net result

Expense savings1

EUR 428m

EUR 329m

EUR 360m

(4Q18: EUR 343m)

(4Q18: EUR -533m)

(3Q19: EUR 323m)

Capital

Solvency II ratio

Full year dividend

Share buyback

218%

EUR2.16

EUR 250m

(3Q19: 217%)

(FY18: EUR 1.90)

Commercial performance

New sales (APE)

VNB2

NPS3

EUR 263m

EUR 122m

+5 points

(4Q18: EUR 407m)

(2H18: EUR 186m)

(2018: +1.5 points)

1.

Expense savings of the business units in the scope of the cost reduction target, calculated on a last 12-month basis and compared with the full-year

2016 administrative expense base of EUR 1,970m, excluding acquisitions as from 2019

2.

Value of New Business for 2H19

3

3.

Increase in NN Group Net Promoter Score (NPS-r) in 2019 compared with 2018

Focus on profitable growth

Value of new business (VNB)1(EURm)

-8%

New sales (APE)1

(EURm)

+6%

Mortgage origination NN Bank

(EURbn)

+30%

VNB and APE

VNB down 8% in 2019, due to lower sales at

Japan Life following the introduction of the

new tax rules for certain COLI products

391

9

358

1,640

1,741

7.9

VNB at Insurance Europe up 21%, driven by

more focus on risk protection sales

168

9

204

214

146

FY18

FY19

262 480

627

674

751 587

FY18 FY19

6.1

FY18 FY19

APE up 6% driven by a higher volume of

group pension contracts at Netherlands Life,

higher life and pension sales in Insurance

Europe, partly offset by lower sales in Japan

Mortgage origination

  • Total origination of EUR 7.9bn in 2019, of which ~70% transferred to NN Group companies and NN IP's Dutch Residential
    Mortgage Fund

Netherlands Life Insurance Europe Japan Life

1. VNB and APE figures based on historical currencies

4

Progress on our Group financial targets

EUR ~400m cost reduction1by 2020 compared with 2016 full-year expense base

Annual earnings growth of 5-7% on average in the medium term2

Over time, generate free cash available to shareholders in a range around the net operating result3

(EURm)

1,970

-360m

1,837

1,681 1,610

(EURm)

CAGR +6%

1,794

1,586

1,626

(EURm)

1,206 1,216

1,339

1,191

1,187

881

FY16

FY17

FY18

FY19

FY17

FY18

FY19

FY17 FY18 FY19

Net operating result

Free cash flow

1.

In total for the following units: Netherlands Life, Netherlands Non-life, Belgium, Asset Management, Banking and Corporate / Holding entities, excluding

acquisitions as from 2019. Expense base adjusted for reclassification of certain expenses, please refer to the NN Group pro forma financial supplement 2018

2.

Annual growth rate of operating result before tax on average in the medium term; based on 2017 operating result

5

3.

Net operating result, adjusted to reflect the deduction of the accrued coupon on undated subordinated notes classified in equity; assuming normal markets, no

material regulatory changes and no material special items other than restructuring charges

Updated dividend policy

CAGR +9%

0.57

1.51

1.55

1.66

1.90

2.16

1.24

1.40

0.95

1.04

1.05

0.57

0.46

0.60

0.62

0.66

0.76

2014

2015

2016

2017

2018

2019

Pay-out ratio141%

52%

45%

50%

50%

Interim dividend per share (EUR)

Total dividend per share (EUR)

Final dividend per share (EUR)

Progressive dividend per share

  • Proposed 2019 final dividend of EUR 1.40, bringing total 2019 dividend to EUR 2.16 per share
  • Total 2019 dividend per share represents 13.7% growth on 2018
  • Progressive dividend per share going forward
  • Interim dividends continue to be calculated as 40% of prior yearfull-year dividend per share

Recurring share buyback programme

  • New share buyback programme of EUR 250m to be completed within 12 months, anticipated to commence on 2 March 2020
  • Recurring annual share buyback of at least EUR 250m
  • Additional excess capital to be returned to shareholders unless it can be used forvalue-creating opportunities

1. Pay-out ratio is based on the net operating result before the deduction of the accrued coupon on undated subordinated notes classified in equity

6

4Q19 results

Delfin Rueda, CFO

7

Operating result and net result

Operating result

4Q19 operating result to net result

(EURm)

(EURm)

+10%

Operating result

428

1,794

1,626

Non-operating items1

14

Special items

-96

+25%

Acquisition intangibles

-8

and goodwill

428

343

Taxation

-5

Minority interests

-3

Net result

329

4Q18

4Q19

FY18

FY19

Net result

+76%

(EURm)

1,962

329

1,117

-533

4Q18

4Q19

FY18

FY19

1. Includes realised capital gains/losses and impairments, revaluations and market & other impacts

8

4Q19 and FY19 operating result by segment

Netherlands Life

Netherlands Non-life

Insurance Europe

Japan Life

(EURm)

972

922

192

193

(EURm)

40 63

203

94

(EURm)

271

283

72

69

(EURm)

218

167

29

50

4Q18

4Q19

2018

2019

  • 4Q19 operating result broadly stable reflecting lower expenses partly offset by lower investment margin

4Q18 4Q19 2018 2019

  • Increase in 4Q19 driven by a higher underwriting result in P&C and lower administrative expenses
  • 4Q19 combined ratio improved to 93.6%

4Q18

4Q19

2018

2019

  • 4Q19 reflects higher administrative expenses and lower pension fees, partly offset by favourable mortality and morbidity results

4Q18

4Q19

2018

2019

  • Excluding currency effects, 4Q19 reflects higher surrender and mortality results

9

4Q19 and FY19 operating result by segment

Asset Management

(EURm)

155

161

30

41

4Q18

4Q19

2018

2019

  • 4Q19 operating result reflects lower administrative expenses and higher fees
  • AuM at EUR 276bn

BankingOther

(EURm)(EURm)

130

152

28

54

-48

-44

-144

-164

4Q18

4Q19

2018

2019

4Q18

4Q19

2018

2019

4Q19 driven by higher fees

4Q19 mainly reflects an

and other income,

improved holding result

including a EUR 20m non-recurring benefit, and higher interest result

10

Cost reductions achieved to date of EUR 360m

Administrative expense base1,2

(EURm)

1,970

-133

1,837

-289

-360

~-400

1,681

1,610

~1,570

FY16

FY17

FY18

4Q19

Target FY20

Total administrative expense savings by segment1,2(EURm)

Netherlands Life

130

Netherlands Non-life

100

Belgium

20

Asset Management

44

Banking

28

Corporate/holding

38

Total

360

1. Netherlands Life, Netherlands Non-life, Belgium, Asset Management, Banking and Corporate/holding entities (including NN Re), excluding acquisitions as from 2019

2. Cost reductions calculated on a last 12-month basis

11

Free cash flow 4Q19 and FY19

Movement in holding company cash capital

(EURm)

Free cash flow EUR 233m

1,943

347

1,989

-38

-76

-186

4Q19

1,459

Free cash flow EUR 1,187m

4

-76

-200

-117

2,005

1,989

FY19

-1,085

Beginning

Remittances

Capital

Other1

Divestment

Acquisitions Capital flow

End of

of period

from

injection

proceeds

to

period

subsidiaries

shareholders

  • FY19 free cash flow of EUR 1.2bn, partly offset by capital flows to shareholders of EUR 1.1bn representing cash dividends paid and own shares repurchased
  • Expected cash outflows in 1H20 for acquisition of VivatNon-life of EUR 566m and EUR 300m maturing senior notes intended not to be refinanced

1. Other includes interest on subordinated loans and debt, holding company expenses and other cash flows

12

Solvency II movement 4Q19

SII ratio

217%

+4%

+3%

+0%

224%

-5%

218%

18.7

+0.3

18.2

17.8

-0.4

-0.4

-0.4

OF1

(in EUR bn)

8.6

8.2

0

8.2

SCR1

-0.0

-0.3

-0.2

(in EUR bn)

Solvency II ratio of 218% reflects operating capital generation and market variance, partially offset by capital flows

Capital flows reflect the proposed 2019 final dividend of EUR 448m; the impact of the EUR 250m share buyback programme will be deducted from the 1H20 ratio

Market variance mainly reflects movements in credit spreads and changes in interest rates

3Q19

Operating

Market

Other3

4Q19 before

Capital flows

4Q19

capital

variance

capital flows

generation2

  1. Eligible Own Funds and Solvency Capital Requirement; Available and required regulatory capital for Japan Life, Asset Management and pension funds
  2. Operating capital generation includes Solvency II entities, Japan Life, Asset Management and pension funds, as well as holding expenses and debt costs
  3. Includes model and assumption changes, the change ofnon-available Own Funds and non-eligible Own Funds and special items related to non-Solvency II

regulated entities and the holding company

13

Solvency II movement FY19

SII ratio

230%

+20%

233%

218%

Solvency II ratio of 218% driven by

-14%

-3%

-15%

operating capital generation, offset by

capital flows and market movements

+1.3

+1.4

19.0

17.8

Operating capital generation of

16.7

-0.5

EUR 1.3bn in 2019 (including holding

-1.2

expenses and debt costs)

OF1

Capital flows of EUR 1.2bn reflect the

(in EUR bn)

full-year 2019 dividend and the

EUR 500m share buy-back programme

7.3

+1.0

8.2

0

8.2

Market variance mainly due to

SCR1

-0.1

-0.1

movements in credit spreads and

(in EUR bn)

interest rates, partially offset by

4Q18

Operating

Market

Other3

4Q19 before

Capital flows

4Q19

positive equity and real estate

revaluations

capital

variance

capital flows

generation2

  1. Eligible Own Funds and Solvency Capital Requirement; Available and required regulatory capital for Japan Life, Asset Management and pension funds
  2. Operating capital generation includes Solvency II entities, Japan Life, Asset Management and pension funds, as well as holding expenses and debt costs
  3. Includes model and assumption changes, the change ofnon-available Own Funds and non-eligible Own Funds and special items related to non-Solvency II

regulated entities and the holding company

14

Wrap up

David Knibbe, CEO

15

Key takeaways

1

4Q19 operating result of EUR 428m; full-year operating result of EUR 1,794m

2

Solvency II ratio of 218%; holding company cash capital of EUR 2.0bn

3

Proposed 2019 final dividend per share of EUR 1.40; total 2019 dividend per share of EUR 2.16

4

New share buyback programme of EUR 250m, anticipated to commence on 2 March 2020

5

Updated dividend policy: progressive dividend per share and recurring annual share buyback

16

Q&A

David Knibbe, Delfin Rueda

17

Appendices

18

Sensitivities of the NN Group Solvency II ratio to specified shocks

Sensitivities to shocks at 4Q19

OF

SCR

Solvency II

ratio

(in EURbn)

(in EURbn)

(in %-points)

Interest rate: Parallel shock +50bps

-0.8

-0.6

+6%

Interest rate: Parallel shock -50bps

+1.1

+0.7

-6%

Interest rate:10bps steepening between 20y-30y

-0.7

-0.0

-8%

Credit spread:Parallel shock for AAA-rated government bonds +50bps

-0.8

-0.0

-9%

Credit spread:Parallel shock for AA and lower-rated government bonds +50bps

-0.8

-0.1

-7%

Credit spread:Parallel shock corporates +50bps

+0.2

-0.1

+6%

Equity:Downward shock -25%

-1.5

-0.2

-13%

Real estate:Downward shock -10%

-0.7

-0.0

-8%

UFR:Downward adjustment to 3.75%

-0.3

+0.0

-4%

19

Remittances upstreamed

Remittances upstreamed by segments/subsidiaries (EURm)

4Q19

3Q19

2Q19

1Q19

2019

2018

2017

Netherlands Life1

204

200

210

200

814

837

1,035

Netherlands Non-life1

49

1

33

1

85

108

100

Insurance Europe1,2

7

13

125

2

148

299

230

NN Japan Life

-

-

79

-

79

-

57

Asset Management

62

44

44

44

195

177

96

Banking1

5

27

56

20

107

10

2

NN Re Netherlands

-

-

10

-

10

150

200

Other

19

-

-

2

21

12

98

Total

347

285

558

269

1,459

1,593

1,818

  1. Includes interest on subordinated loans provided to subsidiaries by the holding company
  2. Refers to Insurance Europe entities' consolidated totals excluding Czech Life insurance business (branch of NN Life)

20

Important legal information

  1. 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 same accounting principles are applied as in the NN Group N.V. Condensed consolidated interim accounts for the period ended 30 September 2019. The Annual Accounts for 2019 are in progress and may be subject to adjustments from subsequent events.
    All figures in this document are unaudited. Small differences are possible in the tables due to rounding. Certain of the statements contained herein are not historical facts, including, without limitation, certain statements made of future expectations and other forward-looking statements that are based on management's current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. Actual results, performance or events may differ materially from those in such statements due to, without limitation:
    (1) changes in general economic conditions, in particular economic conditions in NN Group's core markets, (2) changes in performance of financial markets, including developing markets, (3) consequences of a potential (partial) break-up of the euro or European Union countries leaving the European Union, (4) changes in the availability of, and costs associated with, sources of liquidity as well as conditions in the credit markets generally, (5) the frequency and severity of insured loss events, (6) changes affecting mortality and morbidity levels and trends, (7) changes affecting persistency levels, (8) changes affecting interest rate levels, (9) changes affecting currency exchange rates, (10) changes in investor, customer and policyholder behaviour, (11) changes in general competitive factors, (12) changes in laws and regulations and the interpretation and application thereof, (13) changes in the policies and actions of governments and/or regulatory authorities, (14) conclusions with regard to accounting assumptions and methodologies, (15) changes in ownership that could affect the future availability to NN Group of net operating loss, net capital and built-in loss carry forwards, (16) changes in credit and financial strength ratings, (17) NN Group's ability to achieve projected operational synergies, (18) catastrophes and terrorist-related events, (19) adverse developments in legal and other proceedings and (20) the other risks and uncertainties contained in recent public disclosures made by NN Group.
    Any forward-looking statements made by or on behalf of NN Group speak only as of the date they are made, and, NN Group assumes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason.
    This document does not constitute an offer to sell, or a solicitation of an offer to buy, any securities.

21

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NN Group NV published this content on 13 February 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 13 February 2020 09:15:03 UTC