Nationale Nederlanden Earnings: Strong Results From Group; Maintaining Our Fair Value Estimate

Nationale Nederlanden NN has reported a good set of results for first-half 2023. Net income has fallen because of nonoperating items. In operating terms, Nationale Nederlanden’s earnings have increased by around 25% on the same period last year and the business delivered EUR 997 million in operating capital generation, an interim dividend of EUR 1.12 per share, or around EUR 325 million for the first half, and announced it has completed 80% of the EUR 250 million buyback. The level of share repurchases has been reiterated as long-term annual guidance. The operating capital-generation target represents around a 65% remittance ratio and the subsequent distribution to shareholders is based on our current forecasts. We think 70% is a more realistic and conservative level. We maintain our EUR 55 fair value and no moat rating.

The operating capital generation of almost EUR 1 billion leaves the business well placed to achieve its EUR 1.8 billion target for end-2025. Cash capital at the holding is EUR 1.9 billion and Nationale Nederlanden has a 201% solvency ratio. That is very clean in this interim, almost totally driven by operating capital generation with a minimal impact from the markets. Model and assumption reviews are yet to come in the second half, typically taking place in autumn, so these may or may not have a second-half Solvency II impact. At the moment management reiterates its preference for a more than 200% ratio as a long-term rate to maintain current remittances to shareholders.

Nationale Nederlanden places a strong emphasis on customer service by utilizing technology and we think these results show that.