NN Clears Capital Expectations and Makes Investors Think Twice

Nationale Nederlanden continues to impress with its focus on capital that it can utilise for reinvestment and distributions.

Following on from typically strong capital generation when NN reported its first-half results, it again reports strong generation in the second half, making investors think twice. In its first half the business impressed with its Netherlands Life operating result. Here, EUR 502 million of investment margin, or 113.4 basis points of its provisions for its own account life insurance and investments policyholders, was good. The most recent results confirm the strength of this investment margin at EUR 478 million, or 112.3 basis points, for the second half. This is clearly well ahead of the long-term 95 basis points that we forecast when we published a special report on the company in December 2018, after the drop to 85 basis points with the acquisition of Delta Lloyd. At that time, we also forecast an operating profit before tax of around EUR 2.8 billion in full-year 2021. NN obliterated that and hit our forecast two years ahead.

We maintain our EUR 55 fair value estimate and no-moat rating.