Company Reports

Nationale Nederlanden Group is the largest insurance firm in Holland with over one-third market share. While its roots lie in a spinout from ING, the business has built a strong offering. Its development hasn’t been without hurdles as it has had ongoing issues with a unit-linked lawsuit. With over 2 million policies sold previously and no way of ascertaining how many of those policyholders would make claims and be successful, this created a lot of uncertainty. However, the settlement with its main competitor ASR and the agreement over claims with ConsumentenClaim, Vereninging Woekerpolis.nl, Stichting Woekerpolisproces, Wakkerpolis, and Consumentenbond has left NN in a much more certain position.

NN Group reported another solid set of results, with operating capital generation of EUR 1.9 billion in 2023 versus EUR 1.711 billion in the prior year. As result, the group raised its 2025 target to EUR 1.9 billion. The amount of capital available for the business to invest and distribute to shareholders rose to EUR 1.4 billion in 2023 from EUR 1.3 billion. Commensurately, NN raised its 2025 free cash flow target to EUR 1.6 billion from EUR 1.5 billion and increased its full-year dividend to EUR 3.20 per share, above the EUR 3.05 consensus forecast as per LSEG. We had estimated EUR 2.69 per share. The final dividend of EUR 2.08 per share will be paid in cash or stock on June 20; on May 28, the shares will trade excluding this dividend. This means NN shares offer an 8.4% dividend yield, bolstered by an annual share buyback that has been raised to EUR 300 million from EUR 250 million. Our forecast for earnings per share was off, with NN delivering EUR 4.04 in 2023 versus our EUR 4.90 prediction.

Nationale Nederlanden Group is the largest insurance firm in Holland with over one-third market share. While its roots lie in a spinout from ING, the business has built a strong offering. Its development hasn’t been without hurdles as it has had ongoing issues with a unit-linked lawsuit. With over 2 million policies sold previously and no way of ascertaining how many of those policyholders would make claims and be successful, this created a lot of uncertainty. However, the settlement with its main competitor ASR and the agreement over claims with ConsumentenClaim, Vereninging Woekerpolis.nl, Stichting Woekerpolisproces, Wakkerpolis, and Consumentenbond and other interest groups has left NN in a much more certain position.

NN Group has announced the settlement of its unit-linked file and this removes some uncertainty around the name. The settlement NN Group has agreed with the claims foundations is EUR 300 million and the business has provisioned an additional EUR 60 million for claims arising from customers unaffiliated with these claims foundation claims. The total settlement of EUR 300 million covers all three NN Group entities of Nationale Nederlanden Levensverzekering, Delta Lloyd, and ABN Amro Levensverzekering as well. When we estimated the cost of the potential settlement for NN after ASR announced a similar settlement in November last year, we estimated that the cost would be around EUR 255 million, give or take around EUR 100 million. We accounted for this amount within our estimates at that time. We maintain our EUR 55 per share fair value and maintain our no-moat rating.

With the news Nov. 30 that ASR has reached a settlement to close its unit-linked file, we reduce our Uncertainty Rating for NN Group from High to Medium and we maintain our EUR 55 per share fair value estimate. The settlement of EUR 250 million relates to around 140,000 policies represented by the claims foundations. While ASR has set aside a further EUR 50 million as a buffer for claims not included in this settlement, and that is on top of an existing EUR 40 million provision, the total set aside of around EUR 340 million represents a substantially lower amount than the guestimate that has previously been circulated, around EUR 2,430 per policy versus prior working numbers of around EUR 15,000.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. This deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. This deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

With regard to the unit-linked insurance products sold by Nationale Nederlanden, The Court of Appeal in The Hague has concluded that there was no contractual basis for the amount of costs to be deducted from the returns delivered to these policyholders and that NN should have provided more information about returns and deductions to policyholders.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. This deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. This deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

Nationale Nederlanden 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.

When looking at the exposure of insurers to the unfolding banking crisis, we believe this is limited. The main impact of the crisis currently seems to be contagion, so investors are selling shares cheaply. However, exposure to United States bonds is either in government bond securities, or exposure to Credit Suisse, Silicon Valley Bank, and other U.S. regional banks is immaterial, which is 50 basis points or less of their investment portfolio. Some do hold larger bank debt holdings of up to 5.5% of shareholder investments, but nearly all that debt ranks as senior. AT1 debt tends to be very minimal or there is no exposure as a policy with board-level approval. The vast majority of corporate debt held is investment-grade. We maintain our fair value estimates and moat ratings across our European insurance coverage. Allianz remains our Best Idea. Admiral is one of our top picks.

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

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. This deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

Nationale Nederlanden has announced the completion of the legal merger of the businesses it acquired in Greece and Poland. This excludes the pension business in Poland that in September 2022 Nationale Nederlanden announced it was divesting to Generali. This divested Polish pension business is largely the result of local assets under management pension cap regulations. The remaining parts of the acquired and merged Polish business are life insurance.

Nationale Nederlanden has announced that it will sell its former MetLife pension business in Poland to Generali. This is a sharp change in direction, considering the business only announced it had bought MetLife's businesses in Poland and Greece in April. The Polish business that is being sold has EUR 2.4 billion in assets under management. That is small compared with the EUR 24.6 billion in the housing division of Insurance Europe at Nationale Nederlanden. We believe Nationale Nederlanden shares are undervalued, but also think the business does, and will not, generate economic returns. We retain our no moat rating.

Nationale Nederlanden has reported slightly disappointing results for the first half of 2022, delivering an operating profit of EUR 983 million. This puts the business below our forecasts. The lower operating result of today's numbers has primarily come from the nonlife division. While earned premiums have remained broadly steady, claims have risen. This seems to be largely a result of the February storms and takes the firm’s nonlife numbers back to pre-COVID-19 levels. The operating result of the local life business is largely in line, but the bottom line has been hit by market revaluations. Netherlands life investment margin has improved as the business is benefiting from higher returns on invested assets. Fee income has also risen and according to Nationale Nederlanden this is because the business has benefited from higher average defined contribution values. From what we can tell, this is a margin not an asset story. Expense control has not been enough to offset lower gains on publicly traded bonds and equities. Higher interest rates resulted in a substantial loss on derivatives used for hedging, negative EUR 586 million.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of the conditions for receiving government aid. Originally, the spinoff of these assets was mandated to occur before end-2013. However, this deadline was extended to end-2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group has subsequently sold the rest of its stake in Nationale Nederlanden.

On April 11 NN Group announced the completion of its sale of NN Investment Partners to Goldman Sachs. The sale has generated cash proceeds of EUR 1.7 billion for NN, of which NN is distributing EUR 1.0 billion to shareholders by a buyback with the program ending by the end of first-quarter 2023. The completion of the sale cements the 10-year partnership with GSAM, announced in August 2021. We maintain our fair value estimate and our no-moat rating.

Nationale Nederlanden is the former Europe and Japan insurance business of International Netherlands Group and includes the divested asset management division. When the global financial crisis hit, International Netherlands Group was forced to divest its insurance assets as part of receiving state aid conditions. Originally, the spinoff of these assets was mandated to occur before year-end 2013. However, this deadline was extended to year-end 2014 and National Nederlanden was subsequently listed on the Amsterdam Stock Exchange. The larger banking group subsequently completed the sale of the rest of its stake in Nationale Nederlanden in 2016.