NN Group reports 2Q18 results

Solid operating performance, Solvency II ratio at 226%

• Operating result ongoing business EUR 508 million, up 25.6% from 2Q17, reflecting an improved underwriting performance at Netherlands Non-life, private equity dividends at Netherlands Life and lower expenses
• Net result EUR 463 million, up 92.7% from 2Q17, reflecting the higher operating result and higher capital gains, while 2Q17 included a provision related to ING Australia Holdings
• Further cost reductions of EUR 62 million in 2Q18, bringing total cost reductions achieved to date to EUR 236 million
• Total new sales (APE) of EUR 357 million, down 7.5% from 2Q17 at constant currencies. VNB for 6M18 up 20.2% to EUR 205 million, driven by Japan Life and Insurance Europe
• Solvency II ratio of 226% up from 213% at the end of 1Q18, reflecting operating capital generation, positive market impacts and the deduction of the 2018 interim dividend
• Holding company cash capital was EUR 1,799 million, including EUR 536 million dividends received from subsidiaries
• 2018 Interim dividend of EUR 0.66 per ordinary share or approximately EUR 222 million

Statement of Lard Friese, CEO

'Today, we are reporting a solid result for the second quarter of 2018. The operating results of most segments improved compared with the second quarter of last year, supported by an improved P&C underwriting performance at Netherlands Non-life. The cost base of the units in scope of the integration was further reduced by EUR 62 million this quarter, bringing total cost reductions to EUR 236 million compared with the 2016 full-year administrative expense base. This means we are well on our way to achieving our cost reduction target of EUR 400 million by the end of 2020.

Our profitable commercial momentum continued with the value of new business increasing at both Insurance Europe and Japan Life. The measures implemented to improve performance at Netherlands Non-life are starting to bear fruit. The combined ratio improved to 97.9% in the second quarter. While this is encouraging, work remains to be done to structurally improve the combined ratio to 97% or below.

Further steps have been taken with regard to the integration. The application for including the Delta Lloyd entities in the Partial Internal Model has been submitted, we have completed the integration of the asset management businesses as well as the head offices, and we have decommissioned several IT systems. Most Delta Lloyd products have been rebranded to NN. During the migration phase, our efforts have been focused on ensuring the least possible disruption for our customers and business partners, and we are pleased to see that customer satisfaction levels remain high.

We again took steps to further integrate Environmental, Social and Governance (ESG) considerations into our investment processes, which was also substantiated by our support for the International Corporate Social Responsibility covenant for the insurance sector. Together with our Dutch peers, several NGOs, the largest Dutch union and the government, we aim to ensure that insurance companies identify, and take into consideration, ESG issues in their investment decisions.

Our cash capital position was EUR 1,799 million at the end of the second quarter. Our Solvency II ratio was 226% after the deduction of the interim dividend of EUR 0.66 per ordinary share to be paid in September.

In addition to our second quarter results, we today disclosed that we have reached an agreement to acquire Aegon's Life Insurance business in the Czech Republic and its Life Insurance and Pension businesses in Slovakia. In line with our strategy, we consider this a good opportunity to increase our presence in two attractive markets.

Furthermore, we announced today a new composition of our Management Board. With this team, we are ready for the next phase of our company's journey, and will remain focused on our key priorities; to successfully integrate Delta Lloyd, further improve performance, accelerate the transformation of the business model, and continue to allocate capital rationally.'

NN Group key figures

Note: All footnotes are included on page 26

Strategy and priorities

Our businesses are built on a strong foundation of purpose, values and brand, 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 respected company that truly matters in the lives of our stakeholders.

Netherlands

The integration of NN and Delta Lloyd is progressing well. As of 1 July, the Nationale-Nederlanden PPI (Premie Pensioen Instelling) and online pension administrator BeFrank joined forces. The combined company, operating under the name BeFrank, has approximately 170,000 participants and EUR 2.5 billion in assets under management, making it the leader in the PPI market.

Furthermore, NN Life launched a new pension proposition 'Persoonlijke pensioenuitkering' which combines the best product features of Delta Lloyd and NN. It offers user friendly online administration services, competitive pricing and optimal investment flexibility. This product anticipates the need for more flexibility after retirement. It is currently the only product in the Netherlands which allows customers to change their investment profile after the pension payments have started.

Former Delta Lloyd P&C products have been rebranded, and the retail products are available in the 'mijn.nn' customer portal and NN app. All 220,000 healthcare customers have received new NN branded passes. In addition, over 80,000 Delta Lloyd and OHRA internet savings accounts have been successfully migrated to an NN internet savings account.

In the second quarter, NN Non-life entered into an agreement with Van Ameyde to insource its claims handling activities as of 1 July 2018. This will create further efficiencies and strengthen the NN Non-life organisation, underpinned by an excellent customer experience, clear pricing and underwriting, and digital services.

NN Bank issued its second EUR 500 million benchmark covered bond in June at an attractive rate. The issuance was well received in the market, underlining the reliable nature of this funding instrument for NN Bank.

In order to continuously serve our customers' needs, Nationale-Nederlanden has introduced its first chatbot on www.nn.nl. This new automated dialogue function will help customers find answers and navigate through our website. In addition, subject-specific chatbots are being developed, for example to assist in calculating a premium for travel insurance and displaying the telephone number and waiting times of the customer contact centre.

International Insurance

International insurance continues to innovate and enhance the customer experience by launching new products and improving services. NN Romania's Sparklab launched 'NN Bike', the country's first bike insurance for urban riders. NN Bike is an accident insurance that covers cyclists' medical expenses for injuries and hospitalisation caused by an accident.

NN in Hungary launched a new product, 'protect.me'. This innovative product is a pay-as-you-go life and accident insurance available through a mobile app. The on-demand solution can be easily activated or deactivated in just a few seconds, offering a user-friendly opportunity for customers who have an active lifestyle and only want insurance cover for a few hours.

Due to the growing popularity of group insurances in Poland, Nationale-Nederlanden Poland is offering its corporate clients the opportunity to broaden their contracts with additional medical benefits. Customers who choose to sign a supplemental agreement will gain access to cashless services such as rehabilitation, medical tests, and examinations in over 3,000 clinics throughout the country.

COLI sales through Sumitomo Life accounted for 13% of NN Life Japan's total sales in the second quarter. Sumitomo Life agents started offering NN Life Japan's Accelerated Living Disability Benefit and Increasing Term products from the beginning of April 2017, and Critical Illness insurance from April 2018.

In line with the NN brand promise 'You matter', various initiatives in several countries are specifically focused on what is important in life. NN Pensions in Czech Republic was awarded a silver medal in the 2018 Czech PR Awards category 'Financial Market and Financial Services' for its Value of Life project. The project seeks to trigger public debate on topics of wide social relevance, such as attitudes towards old age from the perspective of different generations, pension dreams, financial security and planning, as well as related health and social aspects connected to the different stages of life.

Asset Management

The integration of Delta Lloyd Asset Management (DLAM) into NN IP was completed in the second quarter. The DLAM and NN IP Dutch funds have been merged and rebranded and the majority of the former DLAM systems have been decommissioned.

A memorandum of understanding (MoU) was signed in April with China's leading asset manager, China Asset Management Co., Ltd. (ChinaAMC). The MoU will provide a platform for NN IP and ChinaAMC to explore joint product development opportunities and consequently leverage each other's capabilities in European and Chinese capital markets. In particular, the MoU is expected to strengthen NN IP's and ChinaAMC's environmental, social and governance (ESG) offerings.

The collaboration between NN IP and FMO Investment Management, which aims to support companies in developing countries to achieve sustainable growth, entered a new phase. The joint NN-FMO Emerging Markets Loans Fund saw strong Dutch and international institutional demand at a first close of USD 250 million.

Other events

NN continues to look for investment opportunities and potential partnerships with fintech companies to accelerate its innovation and transformation efforts. For example, NN recently invested in the InsureTech Fund of MTech Capital, which focuses on investments in technology companies with the potential to transform various components of the insurance industry.

Following the latest annual index review, NN Group retained its place in the FTSE4Good Index Series. The FTSE4Good Index Series measures the performance of companies demonstrating strong Environmental, Social and Governance (ESG) practices.

Furthermore, NN Group has been included in the regional Euronext-Vigeo Eiris 120 index as from June 2018 as a result of its improved overall performance. This index comprises the 120 most sustainable listed companies in the Eurozone.

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 call

Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 2Q18 results at 10.30 am CET on Thursday 16 August 2018. 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.

Press

Lard Friese and Delfin Rueda will host a press call to discuss the 2Q18 results, which will be held at 07.45 am CET on Thursday 16 August 2018. 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 2Q18 Financial Supplement, NN Group 2Q18 Analyst Presentation
NN Group 30 June 2018 Condensed consolidated interim financial information
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 on 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 financial information for the period ended 30 June 2018.

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.