NN Group reports 4Q18 and 2018 results Solvency II

Solvency II ratio 230%, final dividend and share buyback announced

• 4Q18 operating result of the ongoing business of EUR 343 million, broadly stable versus 4Q17 reflecting improved results at Netherlands Life, Netherlands Non-life, Insurance Europe and Japan Life, offset by lower results at the segment Other and Asset Management
• Full-year 2018 operating result of the ongoing business of EUR 1,626 million, up 3% from 2017
• Net result EUR -533 million in 4Q18 versus EUR 700 million in 4Q17, reflecting the goodwill impairment resulting from the progress of the integration of NN Life and Delta Lloyd Life (as announced on 13 December 2018) and lower non-operating items
• Full-year 2018 net result of EUR 1,117 million versus EUR 2,110 million in 2017
• Further cost savings of EUR 20 million in 4Q18, bringing total cost reductions to EUR 289 million versus the full-year 2016 administrative expense base
• APE at the insurance businesses up 8.1% at constant currencies compared with 4Q17. Full-year 2018 value of new business (VNB) of EUR 391 million, up 13.4% from 2017
• 2018 final dividend proposal of EUR 1.24 per ordinary share, bringing the full-year 2018 dividend to EUR 1.90 per ordinary share, or approximately EUR 637 million in total, up 14.5% compared with 2017
• Solvency II ratio of 230% reflects changes in the corporate tax rate in the Netherlands, the impact of the final dividend and the termination of the warrant agreement as well as negative equity revaluations, partly offset by the expansion of the Partial Internal Model and operating capital generation
• Holding company cash capital increased to EUR 2,005 million, reflecting net dividends from subsidiaries partly offset by shares repurchased in the fourth quarter of 2018 and the termination of the warrant agreement with ING Groep
• Share buyback programme up to EUR 500 million over 12 months, anticipated to commence on 1 March 2019 

Statement of Lard Friese, CEO

'2018 was a successful year for our company. We further strengthened our market position and reached a number of important milestones in the integration process of Delta Lloyd's asset management, banking and the Dutch and Belgium insurance businesses. We obtained approval from the Dutch Central Bank (DNB) to expand our Partial Internal Model to include the Delta Lloyd Life and Non-life entities in the Netherlands, and we merged Delta Lloyd Life and Non-life into NN Life and Non-life on 1 January 2019. In the Netherlands and Belgium, we have achieved total cost reductions to date of EUR 289 million compared with the full-year 2016 administrative expense base. We have further integrated teams, systems and processes, increased efficiency, and introduced new products and services to meet our customers' needs. The rebranding of Delta Lloyd's products and services to Nationale-Nederlanden is virtually complete.

The 2018 operating result was up 3% compared with 2017, driven by better performance at Netherlands Life, Netherlands Non-life and Insurance Europe, while at the same time Japan Life, our asset manager and the reinsurance business faced some headwinds.

Commercial momentum continued, supported by an improved product mix that drove a 19.6% increase in the value of new business in Europe and a 10.3% increase in Japan in 2018 compared with 2017. New sales in 2018 were down compared with 2017, as pension contracts in the Netherlands are not renewed each year and in 2018 we saw a lower volume of pension contracts coming up for renewal.

In line with our objective to achieve value creation and profitable growth, we completed the acquisition of Aegon's life insurance business in the Czech Republic and its life insurance and pension businesses in Slovakia in January 2019.

Our balance sheet remained strong in the fourth quarter, with a Solvency II ratio of 230% after deducting the final dividend, and a cash capital position of EUR 2,005 million. We will propose a 2018 final dividend of EUR 1.24 per ordinary share at our Annual General Meeting of Shareholders on 29 May 2019. Together with the interim dividend paid in September 2018, this brings the full-year 2018 dividend per ordinary share to EUR 1.90, up 14.5% compared with 2017 and represents a pay-out ratio of 50% of the full-year 2018 net operating result of the ongoing business. This is in line with our aim for a double-digit increase in the dividend per share in 2018.

We are today announcing a programme to buy back shares up to EUR 500 million over a period of 12 months. This underlines our disciplined capital management as well as our commitment to returning excess capital to shareholders. At the same time, we believe it is essential to maintain a robust capital position and the financial flexibility to be able to pursue opportunities to strengthen our business further and to create additional value.

We again took steps to integrate Environmental, Social and Governance (ESG) considerations into our investment processes. Furthermore, NN Group increased its score in the Sustainalytics rating and now ranks amongst the leaders in the sector. In January 2019, NN Group was included in the Bloomberg Gender Equality Index. This index highlights 230 companies that are committed to transparency in workplace gender reporting.

All these achievements would not have been possible without the dedication and efforts of our employees and business partners. We continue to focus on our key priorities to successfully integrate Delta Lloyd, further improve performance, accelerate the transformation of the business model, and to allocate capital rationally. I am confident that the company is well-positioned to deliver on our priorities going forward.'

NN Group key figures

Note: All footnotes are included on page 29

Strategy and priorities

Our businesses are built on a solid foundation of purpose, values and brand attributes, which, combined with a strong focus on our strategic priorities, enables us to create long-term value. This is how we deliver on our ambition to be a company that truly matters in the lives of our stakeholders.

Netherlands

In the Netherlands, new pension customers are selecting NN for its attractive products, the quality of service, and the financial conditions. For example, A.S. Watson transferred its pension plans to NN Life and BeFrank as of January 2019. Interfood, an international dairy company, also selected NN Life to manage its pension plan.

In November, NN Bank extended its mortgage product range by launching the 'Buy-to-Let' mortgage, specifically designed for financing residential property for private letting.

NN aims to adapt its business to changing market dynamics, and continuously looks for new ways to meet customers' needs. In January 2019, Nationale-Nederlanden, together with a number of third parties, launched Perfect Day cybersecurity. Perfect Day, an initiative from the innovation centre Sparklab, focuses exclusively on SMEs. It includes a new service that offers practical insights (for example on vulnerability of websites, protection of client information or weak passwords), provides concrete solutions, and makes cybersecurity affordable.

We continue to explore options to build partnerships, and invest in technology and analytics that will help us to improve our offering. In line with this strategy, NN Group has entered into a partnership with Crunchr, a young company that develops and offers cloud solutions for workforce analytics. Its products and services enable companies to make workforce decisions using data and analytics. It also offers tooling for employee surveys. By adding the Crunchr products to its offering, NN will strengthen its position as a business partner.

The products of ABN AMRO Verzekeringen have been recognised by various organisations for their high quality. The company also received an award for best insurer by the Dutch magazine Management Team, and was given five stars by MoneyView. Furthermore, OHRA received a bronze EFFIE, a respected communication award in the Netherlands, for its campaign 'Mobiel Verzekeren'. This year OHRA was awarded for its successful campaign 'Rob and Els', which met the set targets in terms of awareness, attitude and behaviour.

Movir, which offers individual disability insurance to self-employed workers in the Netherlands, was awarded the title of Best income insurer by the association of independent financial advisors, Adfiz. Movir also ranked first in the category 'Best Partner claims handling'.

International Insurance

NN's International Insurance businesses are expanding their portfolio of protection products and introduced several new propositions in various markets. For instance, Nationale-Nederlanden in Spain launched a new life insurance protection product, 'Contigo Familia', covering death, disability and illness, with different modular options tailored to a customer's profile and that of his or her family. Customers have 24/7 access to medical specialists through a health app called 'Meeting doctors'.

NN Life Japan continues to develop new Company-Owned Life Insurance (COLI) products, and expands and diversifies its distribution within the increasingly competitive market, with a focus on value over volume. COLI sales through Sumitomo Life accounted for 11% of NN Life Japan's total sales in 2018. Sumitomo Life agents started offering NN Life Japan's accelerated living disability benefit and increasing term products in April 2017, and its critical illness insurance as of April 2018. The new COLI product introduced in November 2018 provides coverage to business owners in the event of unforeseen accidents, the need for nursing care or disability. Sales performed well in the last two months of 2018.

NN Turkey launched a modular, flexible and innovative life protection product in November. The product supports customers throughout the different stages in life, with its benefits adapting to meet a customer's changing needs. NN Turkey also launched 'e-NN', the company's first online sales platform offering three products: life, critical illness and personal accident insurance assistance services. It aims to expand the product range in the near future.

In 2018, International Insurance set up a centre of excellence, 'NN Data Science Hub', to strengthen analytics capabilities and accelerate data-driven transformation. At NN, analytics is used to improve processes throughout the value chain: from product development to marketing and sales, from risk assessment and underwriting to claims management. For example, the Hub launched a pilot for a weather alert system for home insurance customers in Spain. When the official Spanish weather forecast website expects bad weather, an alert will be sent to customers so they can take appropriate measures to prevent any damages to their houses.

As a financial services company active in 18 countries, we operate within diverse regulatory environments. In Romania, where NN is market leader in life and pensions, the government approved significant changes to the second pension pillar in December 2018. These changes are being closely studied by NN and may impact the fundamentals of the second pension pillar system in Romania.

Asset Management

NN Investment Partners (NN IP) completed the integration of Delta Lloyd Asset Management (DLAM) in the second quarter of 2018. With the aim to better leverage on existing capabilities and accelerate decision-making, in November, NN IP announced its intention to consolidate the Luxembourg management company, NN Investment Partners Luxembourg S.A., with NN Investment Partners B.V., the Dutch licensed entity.

NN IP aims to establish and develop partnerships for distributing its products and solutions. In the fourth quarter of 2018, it reached an agreement to strengthen the long-term partnership with ING Bank Slaski in Poland. Under this agreement, ING Bank Slaski will acquire a 45% stake in NN IP in Poland, and distribute NN IP investment funds to the Polish retail market through its extensive branch network. In Japan, together with Rakuten Securities it announced the launch of a new investment service, which makes it possible to deliver a customised target-year investment solution for retail clients. The first products and solutions through NN IP's partnership with Irish Life Investment Management have been launched.

NN IP considers ESG analyses throughout the entire investment process. The NN (L) Euro Green Bond Fund has grown into one of the world's largest green bond funds, crossing an AuM of EUR 570 million. In the fourth quarter of 2018, NN IP launched the NN (L) European Sustainable Infrastructure Debt Fund, in response to growing investor demand for high quality infrastructure debt investments with robust and predictable cash flows, generated from assets that contribute to a more sustainable future.

In its latest update, Morningstar awarded Star Fund, the third pillar Belgian pension fund managed by NN IP Belgium, four Morningstar Globes. The fund also appears in the 14th percentile in terms of sustainability within the category "Allocation EUR flexible", making it the best-ranked Belgian third pillar pension fund distributed in Belgium.

Other events

In November 2018, NN Group was recognised with the overall fifth position in the 2018 Tax Transparency Benchmark. This study is commissioned by the Dutch Association of Investors for Sustainable Development (VBDO), and ranks 76 Dutch listed companies on their level of transparency regarding their tax strategy and implementation.

For the fourth consecutive year, NN Group improved its score in the Global Real Estate Sustainability Benchmark (GRESB), outperforming the majority of the 850 GRESB participants. In the 2018 assessment, NN Group investments in private real estate received an improved score of 80 (on a scale of 1 to 100) against a relevant benchmark average of 66. The portfolio maintained four stars out of five in the 2018 ranking. The GRESB is a leading global standard for assessing real estate's environmental, social and governance (ESG) performance, including performance indicators such as energy, greenhouse gas emissions, water and waste.

NN Group Profile

NN Group is an international financial services company, active in 18 countries, with a strong presence in a number of European countries and Japan. With all its employees, the Group provides retirement services, pensions, insurance, investments and banking to approximately 17 million customers. NN Group includes Nationale-Nederlanden, NN, Delta Lloyd, NN Investment Partners, ABN AMRO Insurance, Movir, AZL, BeFrank and OHRA. NN Group is listed on Euronext Amsterdam (NN).

Analyst and investor call

Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 4Q18 results at 10.30 am CET on Thursday 14 February 2019. Members of the investment community can join the conference call at +31 20 531 5865    (NL), +44 203 365 3210    (UK), +1 866 349 6093    (US) or follow the webcast on www.nn-group.com/Investors .

Press call

Lard Friese and Delfin Rueda will host a press call to discuss the 4Q18 results, which will be held at 07.45 am CET on Thursday 14 February 2019. Journalists can join the press call at +31 20 531 5863    (NL).

Financial calendar

Contact information

Additional information on www.nn-group.com

• NN Group 4Q18 Financial Supplement, NN Group 4Q18 Analyst Presentation
• Photos of NN Group executives, buildings and events are available for download at Flickr

Important legal information

Elements of this press release contain or may contain information about NN Group N.V. within the meaning of Article 7(1) to (4) of EU Regulation No 596/ 2014 (Market Abuse Regulation). 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 same accounting principles are applied as in the NN Group N.V. Condensed consolidated interim accounts for the period ended 30 September 2018. The Annual Accounts for 2018 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.

Attachment

• NN_Group_Press_Release 4Q18.pdf