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 |
- Eligible Own Funds and Solvency Capital Requirement; Available and required regulatory capital for Japan Life, Asset Management and pension funds
- Operating capital generation includes Solvency II entities, Japan Life, Asset Management and pension funds, as well as holding expenses and debt costs
- 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 |
- Eligible Own Funds and Solvency Capital Requirement; Available and required regulatory capital for Japan Life, Asset Management and pension funds
- Operating capital generation includes Solvency II entities, Japan Life, Asset Management and pension funds, as well as holding expenses and debt costs
- 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 | ||
- Includes interest on subordinated loans provided to subsidiaries by the holding company
- Refers to Insurance Europe entities' consolidated totals excluding Czech Life insurance business (branch of NN Life)
20
Important legal information
-
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.
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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