Earnings Release • Feb 11, 2015
Earnings Release
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"In 2014 NN Group became a standalone company, separate from ING Group. The successful initial public offering last July marked a new beginning. Although we are still at the start of our journey, we are pleased with the strong performance we are reporting today. The full-year results, with a net result of EUR 588 million, demonstrate the progress we have made so far in achieving our objectives to generate capital and improve earnings, while delivering excellent service and products to our customers.
Our focus on our customers remains our driving force, which is demonstrated by strong new sales growth in 2014. At the same time we continue to strive for more effective and efficient operations which have resulted in a reduction of EUR 142 million in expenses in the Netherlands, showing good progress towards our target of EUR 200 million by 2016. Thanks to our multi-access distribution network, customers can reach us wherever and whenever they want and we will continue to develop this further throughout all regions.
With the strong capital generation of our businesses and our solid solvency ratios we are well prepared for Solvency II. In line with our focus on returning capital to our shareholders we will propose a dividend at our Annual General Meeting in May of approximately 50% of the net operating result of the ongoing business for the second half of 2014.
While we are further shaping our company, we will rebrand our businesses in 2015 and 2016 to the NN brand. A clear and recognisable identity that further unites our businesses and almost 12,000 employees. Over the years, Nationale-Nederlanden, ING Investment Management and ING Insurance, have built leading positions with a strong presence in more than 18 countries. The new branding represents another important milestone, and will further define the profile of NN Group as an international insurance and investment management company."
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Operating result ongoing business | 260 | 220 | 18.2% | 1,086 | 905 | 20.0% |
| Net result | 197 | −157 | 588 | 322 | 82.6% | |
| Net operating ROE | 7.6% | 7.4% | 8.6% | 8.9% | ||
| IGD Solvency I ratio | 303% | 250% | 303% | 250% | ||
| New sales life insurance (APE) | 264 | 292 | −9.6% | 1,315 | 1,227 | 7.2% |
| Investment Management AuM (End of period, in EUR billion) | 186 | 174 | 6.9% | 186 | 174 | 6.9% |
NN Group's strategy is to deliver an excellent customer experience, based on great service and long-term relationships. We aim to achieve this by offering transparent products and services that serve customers' lifetime needs. We do this by making our multi-access distribution network available to customers wherever and whenever they want, and by maintaining effective operations that deliver an excellent customer service.
In the Netherlands Life segment, the focus is on expense reductions and a gradual shift to higher-yielding assets, such as mortgages and loans. Furthermore, NN Life aims to benefit from its strong position in the pension market and to selectively capture growth opportunities. The operating result of Netherlands Life decreased in 2014 as fees and premium-based revenues and technical margin were adversely impacted by the run-off of the individual life closed book and a decrease in interest rates. These impacts were partly offset by a reduction in administrative expenses and a higher investment margin. Administrative expenses were down for the full year, reflecting the positive impact of the transformation programme in the Netherlands. The investment margin in the fourth quarter increased, driven by higher dividends from private equity, the positive effects of increased allocation to higheryielding assets and higher invested volumes. In 2014, new sales (APE) increased, mostly due to pension contract renewals. In the Dutch pension market, pension fund buy-outs are an opportunity for growth. In January 2015 the ENCI company pension fund, with EUR 420 million of assets and around 2,200 participants, transferred its accumulated pension benefits to NN Life. In addition, ENCI chose NN Life's defined contribution PPI solution with additional risk protection insurance for future pension accumulation. The capital position of NN Life improved further, with a Solvency I ratio of 260%, after deduction of a dividend of EUR 350 million paid by NN Life to NN Group in February 2015. Excluding the deduction of this dividend, the Solvency I ratio of NN Life as at 31 December 2014 would be 272%.
Netherlands Non-life aims to improve underwriting performance and to expand in specific market segments where there are clear opportunities for profitable growth. The operating result increased, reflecting favourable claims experience, lower administrative expenses and management actions taken to improve profitability. The combined ratio for 2014 improved to 99.4% from 101.5% over 2013. In 2014, Nationale-Nederlanden received recognition for its innovative car insurance 'Fairzekeren' with smart technology that helps drivers to improve their driving behaviour and as a result reduce the risk of damages for which they can earn a discount on their premium.
Insurance Europe is moving its business mix towards protection products and repositioning its savings and retirement products for the low interest-rate environment. In 2014, the operating result decreased due to a lower investment margin and the impact of the pension reforms in Poland, partly offset by higher fees and premiumbased revenues. New sales (APE) were up 7.7%, compared with 2013 at constant currencies driven by higher life sales in most countries, with new sales of protection products up 16.9%. An example of a successful new service is "Improve your life style". In the Czech Republic and Slovakia this interactive campaign was launched with a special website where visitors can fill in a health test, developed by well-known nutrition specialists, and receive a personalised health evaluation and some tips, via email, on how to improve their lifestyle. On the same website they can set up an appointment with a financial advisor to discuss health protection.
In 2014 Japan Life increased its agency productivity and diversified its distribution channels by substantially expanding its bancassurance channel. It recruited 16 new bank distribution partners over the year and, in order to further improve the service to its distribution partners, the commercial network agents have been equipped with tablets to ensure flexible and more effective support. In line with this, and supported by improved business sentiment, new sales (APE) increased 20.1% from 2013, excluding currency effects.
Assets under Management increased to EUR 186 billion driven by strong market performance. Investment Management aims to grow its third-party business by following a tailored approach for each client segment. In its retail business and in its home markets, Investment Management plans to protect and further expand its leading positions and continues to develop a more distinct range of equity products. Investment Management continues to invest in building and broadening the capabilities of the business, such as the hiring of investment professionals in the convertible bond team in the fourth quarter of 2014. In line with the ambition to grow its third-party business, Investment Management was appointed fiduciary manager of health insurer DSW with 530,000 customers in January 2015, a mandate that underscores its expertise in the insurance industry.
NN Bank continued to grow with the expansion of its mortgage and customer savings activities, and contributed positively to NN Group's results in 2014. In line with its strategy, NN Bank's mortgage portfolio increased to EUR 7.9 billion from EUR 6.2 billion at the beginning of 2014. Customers and financial advisors granted NN Bank an award for mortgage suppliers 'Gouden Spreekbuis Hypotheekverstrekkers 2014' in December, because it 'reinvented itself as a mortgage provider'. NN Bank also expanded its product offering in 2014, with the introduction of a consumer lending product in February and a credit card in October. Consumer savings continued to grow by offering attractive products under the strong Nationale-Nederlanden brand, leading to total customer deposits of EUR 7.0 billion at the end of 2014.
Over the years, the Nationale-Nederlanden, ING Insurance and ING Investment Management businesses have built leading positions in Europe and Japan. In 2014 these businesses came together under the holding company name NN Group. After the successful IPO of NN Group in July 2014, which represented the final step in becoming a standalone company separate from ING Group, the businesses will be rebranded in line with the NN brand identity. The operational and legal entity rebranding will take place in 2015 and will be supported by marketing campaigns in the various markets in 2015 and 2016. Over these two years, NN Group expects to incur rebranding expenses of approximately EUR 135 million in total, which will be reported as special items, with the majority of rebranding activities expected to be completed in 2015.
NN Group continues to prepare for Solvency II. The NN Group Solvency II capital ratio (based on our current interpretation of the Standard Formula) is estimated to be in a range around 200% at 31 December 2014. NN Group is considering to apply for the usage of a Partial Internal Model. The Solvency II capital ratio remains subject to significant uncertainties, including the final specifications of the Solvency II regulations and the regulatory approval process.
An important financial objective is to generate capital and pay dividends to our shareholders. In line with that, at the Annual General Meeting (AGM) on 28 May 2015, a dividend will be proposed of EUR 0.57 per ordinary share, or approximately EUR 200 million in total based on the current number of outstanding shares. This is equivalent to a dividend pay-out ratio of around 50% of NN Group's net operating result of the ongoing business related to the second half of 2014. The final dividend will be paid in cash or ordinary shares at the election of the shareholder. NN Group will neutralise the dilutive effect of the stock dividend on earnings per ordinary share through repurchase of ordinary shares, which may include a repurchase of part of ING Group's shareholding in NN Group. Going forward, and barring unforeseen circumstances, NN Group intends to pay ordinary dividends on a semiannual basis. In line with NN Group's stated dividend policy, capital generated in excess of NN Group's capital ambition is expected to be returned to shareholders unless it can be used for any other appropriate corporate purposes, including investments in value creating corporate opportunities. NN Group is committed to distributing excess capital in a form which is most appropriate and efficient for shareholders at that specific point in time, such as special dividends or share buy backs which may include a repurchase of part of ING Group's shareholding in NN Group.
| In EUR million | 4Q14 | 4Q20131) | Change | FY14 | FY131) | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Netherlands Life | 157 | 192 | −18.2% | 615 | 709 | −13.3% |
| Netherlands Non-life | 35 | 12 | 191.7% | 128 | 79 | 62.0% |
| Insurance Europe | 40 | 48 | −16.7% | 176 | 199 | −11.6% |
| Japan Life | 12 | 15 | −20.0% | 140 | 161 | −13.0% |
| Investment Management | 41 | 28 | 46.4% | 158 | 130 | 21.5% |
| Other | −24 | −73 | −130 | −373 | ||
| Operating result ongoing business | 260 | 220 | 18.2% | 1,086 | 905 | 20.0% |
| Non-operating items ongoing business | 93 | −117 | 198 | −229 | ||
| of which gains/losses and impairments | 5 | 29 | −82.8% | −28 | 97 | −128.9% |
| of which revaluations | 21 | 15 | 40.0% | 143 | 3 | |
| of which market & other impacts | 67 | −161 | 83 | −329 | ||
| Japan Closed Block VA | −24 | −423 | 109 | −252 | ||
| Insurance Other | 0 | −4 | 0 | −18 | ||
| Special items before tax | −58 | −29 | −687 | −126 | ||
| Result on divestments | −3 | 48 | −106.3% | 57 | 84 | −32.1% |
| Result before tax from continuing operations | 269 | −304 | 762 | 364 | 109.3% | |
| Taxation | 63 | −138 | 135 | 54 | 150.0% | |
| Net result from continuing operations | 205 | −166 | 628 | 310 | 102.6% | |
| Net result from discontinued operations | 1 | 17 | −94.1% | −16 | 20 | −180.0% |
| Minority interests | 8 | 8 | 0.0% | 23 | 8 | 187.5% |
| Net result | 197 | −157 | 588 | 322 | 82.6% | |
| Net result per share in EUR | 0.56 |
| In EUR million | 4Q2014 | 4Q20131) | Change | FY14 | FY131) | Change |
|---|---|---|---|---|---|---|
| Ongoing business | ||||||
| Gross premium income | 1,821 | 1,917 | −5.0% | 9,334 | 9,525 | −2.0% |
| New sales life insurance (APE) | 264 | 292 | −9.6% | 1,315 | 1,227 | 7.2% |
| Value of new business | 196 | 129 | 51.9% | |||
| Internal rate of return of new business | 10.8% | 9.7% | ||||
| Total administrative expenses | 455 | 462 | −1.5% | 1,758 | 1,807 | −2.7% |
| Cost/income ratio (Administrative expenses/Operating income) | 37.6% | 38.1% | 36.2% | 37.1% | ||
| Combined ratio (Netherlands Non-life)2) | 99.4% | 103.6% | 99.4% | 101.5% | ||
| Investment Management Assets under Management3) | 186 | 174 | 6.9% | 186 | 174 | 6.9% |
| Life general account invested assets3) | 78 | 75 | 4.0% | 78 | 75 | 4.0% |
| Investment margin/Life general account invested assets (bps)4) | 93 | 89 | ||||
| Total provisions for insurance & investment contracts3) | 105 | 96 | 9.4% | 105 | 96 | 9.4% |
| of which for risk policyholder3) | 28 | 25 | 12.0% | 28 | 25 | 12.0% |
| NN Life Solvency I ratio5) | 260% | 223% | 260% | 223% | ||
| Net operating result6) | 191 | 149 | 28.2% | 806 | 666 | 21.0% |
| Net operating ROE7) | 7.6% | 7.4% | 8.6% | 8.9% | ||
| Japan Closed Block VA | ||||||
| Account value | 13,248 | 14,687 | −9.8% | 13,248 | 14,687 | −9.8% |
| Number of policies | 294,263 | 346,306 | −15.0% | 294,263 | 346,306 | −15.0% |
| Total NN Group | ||||||
| IGD Solvency I ratio5) | 303% | 250% | 303% | 250% | ||
| Total assets3) | 165 | 145 | 13.8% | 165 | 145 | 13.8% |
| Shareholders' equity | 20,355 | 14,062 | 44.8% | 20,355 | 14,062 | 44.8% |
| Employees (FTEs, end of period) | 11,659 | 12,245 | −4.8% | 11,659 | 12,245 | −4.8% |
1) The figures for this period have been restated to reflect the change in accounting policy, covering the move towards fair value accounting for Guaranteed Minimum Death Benefits for reserves of the Japan Closed Block VA segment as of 1 January 2014
2) Excluding Mandema and Zicht broker businesses
3) End of period, in EUR billion
4) Four-quarter rolling average
5) The 2014 solvency ratios are not final until filed with the regulators
6) Net operating result of the ongoing business, adjusted for the accrued coupon on undated notes classified in equity
7) Net operating ROE is calculated as the (annualized) net operating result of the ongoing business, adjusted for the accrued coupon on undated notes classified in equity divided by the average allocated equity of the ongoing business adjusted for revaluation reserves and excluding undated notes classified in equity Note: Operating results are non-GAAP measures. These are derived from figures according to IFRS-EU by excluding impact from divestments, discontinued operations and special items, gains/losses and impairments, revaluations and market & other impacts
The operating result of the ongoing business was EUR 260 million, up 18.2% from the fourth quarter of 2013, reflecting lower administrative expenses in the Netherlands and lower funding costs. Improved results from Netherlands Non-life, Investment Management and NN Bank, also contributed to the increase, partly offset by lower results in Netherlands Life, Insurance Europe and Japan Life.
Total administrative expenses of the ongoing business were EUR 455 million, down 1.3% from the fourth quarter of 2013, excluding currency effects. FTEs decreased 4.8% year-on-year to 11,659. Administrative expenses in the Netherlands decreased consistent with the target to reduce administrative expenses in Netherlands Life, Netherlands Non-life and corporate/holding entities by EUR 200 million by 2016, compared with 2013. For fullyear 2014, cost reductions of EUR 142 million were realised, of which EUR 15 million by Netherlands Life, EUR 38 million by Netherlands Non-life and EUR 89 million by corporate/holding entities.
The improved operating result of Netherlands Non-life was supported by favourable claims experience in P&C. Investment Management's operating result improved driven by higher fee income as AuM grew, while increased mortgage production and higher customer savings led to a higher net interest margin at NN Bank.
The operating result of Netherlands Life decreased to EUR 157 million from EUR 192 million in the fourth quarter of 2013, which included favourable non-recurring items. Excluding these items, the Netherlands Life operating result declined 9.2% due to the run-off of the individual life closed book, structurally lower fee income on the unitlinked portfolio and the decrease in interest rates impacting the unit-linked guarantee provisions, partly offset by a higher investment margin. Insurance Europe's operating result decreased largely due to the impact of an investment performance bonus received in the fourth quarter of 2013 and the impact of the pension reforms, both in Poland. The operating result of Japan Life decreased to EUR 12 million from EUR 15 million in the fourth quarter of 2013, due to a decrease in the technical margin, partly compensated by higher fees and premium-based revenues on strong sales and larger in-force volumes.
The full-year 2014 operating result of the ongoing business increased to EUR 1,086 million, up 20.0% from 2013, reflecting lower administrative expenses in the Netherlands as a result of the transformation programme and lower funding costs. In 2014, NN Group successfully issued two subordinated loans in a favourable fixed income market and thereby secured attractive funding costs. In combination with reduced debt levels, this translated into lower funding costs for the company. Improved results at Netherlands Non-life, the reinsurance business, NN Bank and Investment Management also contributed to the increased operating result, offset by lower operating income in Netherlands Life, Insurance Europe as well as by currency impacts at Japan Life.
The fourth-quarter 2014 result before tax from continuing operations increased to EUR 269 million compared with EUR -304 million in the fourth quarter of 2013, which included a EUR 575 million charge to restore reserve adequacy of the Japan Closed Block VA to the 50% confidence level. The fourth quarter of 2013 also included a EUR 177 million negative impact from the refinement of the market interest rate assumption to further align the accounting and the hedging for the separate account pension contracts in the Netherlands.
Gains/losses and impairments were EUR 5 million compared with EUR 29 million in the fourth quarter of 2013, which included a EUR 48 million gain on the sale of government bonds in Insurance Europe, partly offset by a loss on the sale of debt securities in Netherlands Life. Revaluations amounted to EUR 21 million, compared with EUR 15 million in the fourth quarter of 2013. The current quarter reflects positive revaluations on real estate investments, partly offset by negative revaluations on private equity. Market and other impacts amounted to EUR 67 million compared with EUR -161 million in the fourth quarter of 2013. The result in the current quarter reflects the movement in the provision for guarantees on separate account pension contracts (net of hedging) in Netherlands Life following assumption updates, partially offset by a negative hedge result. Market and other
impacts in the fourth quarter of 2013 largely reflected the aforementioned EUR 177 million negative impact from the refinement of the market interest rate assumption for separate account pension contracts in the Netherlands.
The result before tax of Japan Closed Block VA was EUR -24 million compared with EUR -423 million in the fourth quarter of 2013. The current quarter included a EUR -39 million market related result net of hedging while the fourth quarter of 2013 reflected the aforementioned EUR 575 million charge taken to restore reserve adequacy.
The Insurance Other segment ceased to exist as of 1 January 2014. The EUR 4 million loss in the fourth quarter of 2013 related to shareholder expenses of ING Group that were allocated to NN Group.
Special items amounted to EUR -58 million compared with EUR -29 million in the fourth quarter of 2013. Special items in the current quarter reflect expenses for the transformation programme in the Netherlands and expenses related to the operational and legal entity rebranding of NN Group's subsidiaries to "NN".
The full-year 2014 result before tax from continuing operations increased to EUR 762 million compared with EUR 364 million in 2013 which included the aforementioned EUR 575 million charge in Japan Closed Block VA and a EUR 177 million negative impact from the refinement of the market interest rate assumption in Netherlands Life. The increase was driven by the improved operating result of the ongoing business, offset by the EUR -541 million impact of the agreement to make ING's closed defined benefit pension plan in the Netherlands financially independent.
The net result from continuing operations improved to EUR 205 million from EUR -166 million in the fourth quarter of 2013. The effective tax rate in the fourth quarter of 2014 was 23%. The net result from continuing operations for full-year 2014 increased to EUR 628 million, compared with EUR 310 million in 2013. The effective tax rate for 2014 was 18%.
The net result from discontinued operations was EUR 1 million versus EUR 17 million in the fourth quarter of 2013. In July 2013, the investment management business in South Korea was agreed to be sold to Macquarie Group. The transaction closed on 2 December 2013. In the fourth quarter of 2014, a provision was recognised following a claim letter that NN Group received from Macquarie Group under the share purchase agreement. The fourth quarter of 2014 also reflects the gain on sale of NN Group's 50% stake in ING-BOB Life Insurance Company which was closed on 30 December 2014, as well as a release of a provision related to past divestments.
Total new sales (APE) at NN Group were EUR 264 million, down 8.0% from the fourth quarter of 2013 on a constant currency basis. New sales (APE) declined 60.7% in Netherlands Life, as the fourth quarter of 2013 included accelerated conversion of group pension contracts to a new defined benefit pension product. This was partially mitigated by sales growth of 16.1% in Japan Life, driven by higher agency productivity and channel diversification. At Insurance Europe, fourth-quarter 2014 sales were stable as higher life sales were offset by lower pension sales. Total new sales for full-year 2014 amounted to EUR 1,315 million, up 12.9% from 2013 on a constant currency basis, driven by higher sales in Netherlands Life (10.3%), Insurance Europe (7.7%) and Japan Life (20.1%).
Value of New Business (VNB) for 2014 amounted to EUR 196 million, up 51.9% from EUR 129 million in 2013. The increase largely reflects the renewal of a few large group life contracts on more favourable terms at Netherlands Life and higher sales in Japan Life. The internal rate of return (IRR) on new sales increased to 10.8% in 2014 from 9.7% in 2013, in line with the improved VNB.
The net operating ROE for the ongoing business of NN Group improved to 7.6% compared with 7.4% in the fourth quarter of 2013, largely attributable to the higher net operating result. The adjusted average allocated equity base also increased following the EUR 1 billion debt-to-equity conversion at the end of the fourth quarter of 2013 and a EUR 850 million capital injection from ING Group in the second quarter of 2014.
For full-year 2014, the net operating ROE for the ongoing business of NN Group decreased to 8.6% from 8.9% in 2013, as the increase of the adjusted average allocated equity base from the aforementioned capital transactions was proportionally higher than the growth of the net operating result.
NN Group will propose to the 2015 AGM the appointment of KPMG Accountants N.V. as its auditor. Under Dutch legislation, NN Group is required to change its auditor as of 1 January 2016. The nomination of KPMG is the result of a thorough process overseen by the Audit Committee of the Supervisory Board, in accordance with the NN Group policy on Auditor's Independence.
If the AGM appoints KPMG, it will perform the audit of NN Group starting with the 2016 financial year. The audit of the 2015 annual accounts will be performed by Ernst & Young Accountants LLP (EY), NN Group's current auditor.
NN Group reached an agreement with ING Bank Slaski to acquire the remaining 20% stake in the Polish Pension fund, Powszechne Towarzystwo Emerytalne S.A (ING PTE) in which NN Group currently holds 80% of the shares for a consideration of PLN 210 million (approximately EUR 48 million at current exchange rates). As previously announced, the parties entered into a non-binding agreement in May 2014, in line with the EC restructuring plan which requires ING to divest its insurance and investment management businesses. The purchase price is supported by a fairness opinion and is subject to adjustments for dividends paid before closing the transaction. The transaction is subject to regulatory approval and is expected to close by the third quarter of 2015.
ING PTE manages the second pillar open-ended pension fund ING Otwarty Fundusz Emerytalny (ING OFE), which is among the leaders in the pension funds market in Poland, and the open-ended third-pillar voluntary pension fund ING Dobrowolny Fundusz Emerytalny. Total assets managed by ING PTE were EUR 8.4 billion as at 31 December 2014.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Investment margin | 175 | 145 | 20.7% | 630 | 557 | 13.1% |
| Fees and premium-based revenues | 95 | 94 | 1.1% | 404 | 461 | −12.4% |
| Technical margin | 15 | 84 | −82.1% | 102 | 237 | −57.0% |
| Operating income non-modelled business | 0 | 0 | 0 | 0 | ||
| Operating income | 285 | 322 | −11.5% | 1,136 | 1,255 | −9.5% |
| Administrative expenses | 114 | 114 | 0.0% | 457 | 472 | −3.2% |
| DAC amortisation and trail commissions | 14 | 16 | −12.5% | 64 | 75 | −14.7% |
| Expenses | 128 | 131 | −2.3% | 521 | 547 | −4.8% |
| Operating result | 157 | 192 | −18.2% | 615 | 709 | −13.3% |
| Non-operating items | 88 | −158 | 115 | −345 | ||
| of which gains/losses and impairments | 0 | −18 | −62 | −43 | ||
| of which revaluations | 23 | 21 | 9.5% | 139 | 27 | 414.8% |
| of which market & other impacts | 65 | −161 | 38 | −329 | ||
| Special items before tax | −10 | 14 | −171.4% | −352 | −22 | |
| Result on divestments | 0 | 6 | −100.0% | 0 | 6 | −100.0% |
| Result before tax | 235 | 53 | 343.4% | 377 | 347 | 8.6% |
| Taxation | 52 | 9 | 477.8% | 41 | 65 | −36.9% |
| Minority interests | 7 | 4 | 75.0% | 9 | 6 | 50.0% |
| Net result | 176 | 40 | 340.0% | 327 | 276 | 18.5% |
| New business | ||||||
| Single premiums | 99 | 178 | −44.4% | 649 | 610 | 6.4% |
| Regular premiums | 14 | 44 | −68.2% | 182 | 163 | 11.7% |
| New sales life insurance (APE) | 24 | 61 | −60.7% | 247 | 224 | 10.3% |
| Value of new business | 25 | −53 | ||||
| Internal rate of return | 10.5% | 4.5% | ||||
| Key figures | ||||||
| Gross premium income | 492 | 573 | −14.1% | 3,084 | 3,240 | −4.8% |
| Total administrative expenses | 114 | 114 | 0.0% | 457 | 472 | −3.2% |
| Cost/income ratio (Administrative expenses/Operating income) | 40.0% | 35.4% | 40.2% | 37.6% | ||
| Life general account invested assets1) | 58 | 55 | 5.5% | 58 | 55 | 5.5% |
| Investment margin/Life general account invested assets (bps)2) | 111 | 104 | ||||
| Total provisions for insurance & investment contracts1) | 73 | 65 | 12.3% | 73 | 65 | 12.3% |
| of which for risk policyholder1) | 20 | 18 | 11.1% | 20 | 18 | 11.1% |
| Allocated equity (end of period) | 14,255 | 9,491 | 50.2% | 14,255 | 9,491 | 50.2% |
| Net operating ROE | 7.3% | 8.1% | 7.7% | 8.3% | ||
| NN Life Solvency I ratio3) | 260% | 223% | 260% | 223% | ||
| Employees (FTEs, end of period) | 2,174 | 2,571 | −15.4% | 2,174 | 2,571 | −15.4% |
1) End of period, in EUR billion
2) Four-quarter rolling average
3) The 2014 solvency ratios are not final until filed with the regulators
The operating result of Netherlands Life decreased to EUR 157 million from EUR 192 million in the fourth quarter of 2013 which included favourable non-recurring items. Excluding these items, the operating result declined 9.2% due to the run-off of the individual life closed book, structurally lower fee income on the unit-linked portfolio and a decrease in interest rates impacting the unit-linked guarantee provisions, partly offset by a higher investment margin.
The investment margin increased to EUR 175 million from EUR 145 million in the fourth quarter of 2013, supported by a EUR 23 million private equity dividend. The positive effects of an increased allocation to higher-yielding assets and higher invested volumes also contributed to the increase. These effects were partly offset by EUR 14 million of interest expenses on two subordinated loans provided by NN Group to NN Life.
Fees and premium-based revenues were flat at EUR 95 million compared with EUR 94 million in the fourth quarter of 2013, which included a EUR -22 million non-recurring adjustment following an alignment of reserving rates with the premium increases. Excluding this adjustment, fees and premium-based revenues declined 18.1% reflecting the individual life closed book run-off and the structural lower fee income on the unit-linked portfolio.
The technical margin decreased to EUR 15 million from EUR 84 million in the fourth quarter of 2013, which included EUR 41 million of non-recurring benefits primarily related to a provision release. The fourth quarter of 2014 reflects a EUR 19 million increase in the unit-linked guarantee provision due to a decrease in interest rates, as well as lower mortality results.
Administrative expenses were EUR 114 million, flat compared with the fourth quarter of 2013 which included a release of personnel provisions which have been reallocated to the segment 'Other' as of the third quarter of 2014. Excluding the impact of this provision release, administrative expenses were down 6.1%, mainly reflecting the effects of the transformation programme in the Netherlands. DAC amortisation and trail commissions decreased to EUR 14 million from EUR 16 million in the fourth quarter of 2013, reflecting the gradual run-off of the individual life closed book and regulatory changes.
The result before tax was EUR 235 million compared with EUR 53 million in the fourth quarter of 2013. The lower operating result was more than offset by higher non-operating results. Revaluations were EUR 23 million, reflecting higher real estate revaluations. Market and other impacts were EUR 65 million, reflecting a movement in the provision for guarantees on separate account pension contracts (net of hedging) following assumption updates partially offset by a negative hedge result. The fourth quarter of 2013 included a EUR -177 million impact from the refinement of the market interest rate assumption for the separate account pension business.
New sales (APE) decreased to EUR 24 million from EUR 61 million in the fourth quarter of 2013, which reflected the accelerated conversion of group pension contracts to defined benefit pension products.
Netherlands Life's full-year 2014 operating result declined to EUR 615 million from EUR 709 million in 2013, due to a lower technical margin and lower fees and premium based revenues, partly compensated by a higher investment margin and lower administrative expenses. The technical margin was adversely impacted by the movement in the unit-linked guarantee provisions; these provisions increased by EUR 43 million in 2014 following a decrease in interest rates, whereas the technical margin in 2013 benefited from a decrease of EUR 24 million in these provisions. In addition, the technical margin in 2014 includes a EUR 20 million one-off negative impact on a legacy book of paid-up pension contracts, whereas 2013 included EUR 41 million non-recurring benefits primarily related to a provision release. The lower fees and premium-based revenues reflect the individual life closed book run-off and structurally lower fee income on the unit-linked portfolio. These items were partly compensated by a higher investment margin driven by increased allocation to higher-yielding assets, higher invested volumes and EUR 43 million private equity dividends, as well as lower administrative expenses.
The full-year 2014 result before tax was EUR 377 million compared with EUR 347 million in 2013. The nonoperating items improved to EUR 115 million compared with EUR -345 million in 2013, which included a EUR -177 million impact from the refinement of the market interest rate assumption for the separate account pension business. Higher revaluations on real estate investments also contributed to the improved non-operating items. This was partly offset by a lower operating result and a special item of EUR -322 million related to the agreement to make ING's closed defined benefit pension plan in the Netherlands financially independent. New sales (APE) in 2014 increased to EUR 247 million from EUR 224 million in 2013 mainly driven by higher group pension renewals, partly offset by lower individual life sales. The Value of New Business (VNB) for Netherlands Life improved from EUR -53 million in 2013 to EUR 25 million in 2014, largely reflecting the renewal of a few large group life contracts on more favourable terms. Consequently, the internal rate of return (IRR) increased from 4.5% in 2013 to 10.5% in 2014.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Earned premiums | 377 | 384 | −1.8% | 1,525 | 1,546 | −1.4% |
| Investment income | 31 | 29 | 6.9% | 114 | 115 | −0.9% |
| Other income | 1 | −2 | 0 | −17 | ||
| Operating income | 409 | 410 | −0.2% | 1,640 | 1,644 | −0.2% |
| Claims incurred, net of reinsurance | 259 | 279 | −7.2% | 1,049 | 1,077 | −2.6% |
| Acquisition costs | 59 | 57 | 3.5% | 245 | 241 | 1.7% |
| Administrative expenses | 57 | 61 | −6.6% | 222 | 251 | −11.6% |
| Acquisition costs and administrative expenses | 116 | 119 | −2.5% | 467 | 492 | −5.1% |
| Expenditure | 375 | 398 | −5.8% | 1,516 | 1,569 | −3.4% |
| Operating result insurance businesses | 34 | 13 | 161.5% | 123 | 75 | 64.0% |
| Operating result broker businesses | 1 | −1 | 4 | 4 | 0.0% | |
| Total operating result | 35 | 12 | 191.7% | 128 | 79 | 62.0% |
| Non-operating items | 0 | 7 | −100.0% | 10 | 4 | 150.0% |
| of which gains/losses and impairments | 0 | 2 | −100.0% | −3 | −1 | |
| of which revaluations | 0 | 5 | −100.0% | 14 | 5 | 180.0% |
| of which market & other impacts | 0 | 0 | 0 | 0 | ||
| Special items before tax | −6 | 6 | −200.0% | −97 | −16 | |
| Result on divestments | 0 | 0 | 0 | 0 | ||
| Result before tax | 29 | 25 | 16.0% | 41 | 66 | −37.9% |
| Taxation | 6 | 5 | 20.0% | 4 | 14 | −71.4% |
| Minority interests | 0 | 0 | 0 | 0 | ||
| Net result | 23 | 20 | 15.0% | 38 | 53 | −28.3% |
| Key figures | ||||||
| Gross premium income | 239 | 240 | −0.4% | 1,566 | 1,582 | −1.0% |
| Total administrative expenses | 76 | 82 | −7.3% | 294 | 332 | −11.4% |
| Combined ratio1) | 99.4% | 103.6% | 99.4% | 101.5% | ||
| of which Claims ratio1) | 68.7% | 72.7% | 68.8% | 69.7% | ||
| of which Expense ratio1) | 30.7% | 30.9% | 30.6% | 31.8% | ||
| Total insurance provisions2) | 3 | 3 | 0.0% | 3 | 3 | 0.0% |
| Allocated equity (end of period) | 760 | 734 | 3.5% | 760 | 734 | 3.5% |
| Net operating ROE | 27.3% | 5.8% | 23.3% | 13.3% | ||
| Employees (FTEs, end of period) | 1,708 | 1,999 | −14.6% | 1,708 | 1,999 | −14.6% |
1) Excluding Mandema and Zicht broker businesses
2) End of period, in EUR billion
The operating result of Netherlands Non-life increased to EUR 35 million from EUR 12 million in the fourth quarter of 2013, driven by a favourable claims experience in P&C and lower expenses.
The combined ratio improved to 99.4% from 103.6% in the fourth quarter of 2013 as a result of an improved claims experience in P&C, in particular in Fire.
The operating result in D&A decreased to EUR 21 million from EUR 30 million in the fourth quarter of 2013, which included substantially higher results on prior accident years. The fourth-quarter 2014 results on prior accident years reflect a more normal level, resulting in a D&A combined ratio of 101.4% compared with 94.0% in the fourth quarter of 2013.
The improved operating result in P&C was driven by a favourable claims development in the fourth quarter, which saw mild weather conditions and a limited number of large claims, whereas the fourth quarter of 2013 was impacted by EUR 13 million of claims related to severe storms and large Fire claims of EUR 10 million. Furthermore, administrative expenses in P&C decreased compared with the fourth quarter of 2013, driven by the effects of the transformation programme and ongoing cost reduction efforts. The combined ratio of P&C improved to 97.8% from 110.9% in the fourth quarter of 2013.
The result before tax increased to EUR 29 million from EUR 25 million in the fourth quarter of 2013. The improved operating result was partly offset by lower revaluations on private equity and the impact of special items related to the transformation programme.
The operating result of Netherlands Non-life for full-year 2014 increased to EUR 128 million from EUR 79 million in 2013. This was driven by an 11.4% decrease in administrative expenses from EUR 332 million to EUR 294 million as a result of the transformation programme in the Netherlands. Results in D&A improved, driven by the effects of the recovery plan as well as by a favourable claims development on prior accident years. Operating results in P&C improved slightly as the impact of large and weather-related claims in Fire and Motor was larger in 2013 than in 2014. As a result, the full-year 2014 combined ratio improved to 99.4% from 101.5% in 2013.
The full-year 2014 result before tax decreased to EUR 41 million compared with EUR 66 million in 2013, as the increase in operating result was more than offset by a special item of EUR -82 million in 2014 related to the agreement to make ING's closed defined benefit pension plan in the Netherlands financially independent.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Investment margin | 21 | 25 | −16.0% | 90 | 105 | −14.3% |
| Fees and premium-based revenues | 132 | 133 | −0.8% | 518 | 507 | 2.2% |
| Technical margin | 49 | 49 | 0.0% | 194 | 191 | 1.6% |
| Operating income non-modelled business | 1 | 5 | −80.0% | 4 | 20 | −80.0% |
| Operating income Life Insurance | 203 | 211 | −3.8% | 806 | 824 | −2.2% |
| Administrative expenses | 84 | 77 | 9.1% | 310 | 310 | 0.0% |
| DAC amortisation and trail commissions | 77 | 89 | −13.5% | 322 | 319 | 0.9% |
| Expenses Life Insurance | 161 | 166 | −3.0% | 632 | 630 | 0.3% |
| Operating result Life Insurance | 42 | 46 | −8.7% | 174 | 194 | −10.3% |
| Non-life operating result | −2 | 2 | −200.0% | 1 | 5 | −80.0% |
| Operating result | 40 | 48 | −16.7% | 176 | 199 | −11.6% |
| Non-operating items | 0 | 47 | −100.0% | 66 | 53 | 24.5% |
| of which gains/losses and impairments | −3 | 48 | −106.3% | 21 | 55 | −61.8% |
| of which revaluations | 0 | −1 | 1 | −3 | ||
| of which market & other impacts | 2 | 0 | 44 | 0 | ||
| Special items before tax | −12 | −3 | −32 | −9 | ||
| Result on divestments | −2 | 0 | −2 | 0 | ||
| Result before tax | 26 | 91 | −71.4% | 207 | 243 | −14.8% |
| Taxation | 1 | 34 | −97.1% | 46 | 77 | −40.3% |
| Minority interests | 2 | 3 | −33.3% | 14 | 9 | 55.6% |
| Net result | 23 | 54 | −57.4% | 146 | 156 | −6.4% |
| New business | ||||||
| Single premiums | 341 | 303 | 12.5% | 1,094 | 1,005 | 8.9% |
| Regular premiums | 105 | 110 | −4.5% | 418 | 410 | 2.0% |
| New sales life insurance (APE) | 140 | 140 | 0.0% | 528 | 510 | 3.5% |
| Value of new business | 78 | 96 | −18.8% | |||
| Internal rate of return | 9.3% | 9.7% | ||||
| Key figures | ||||||
| Gross premium income | 618 | 646 | −4.3% | 2,327 | 2,344 | −0.7% |
| Total administrative expenses | 90 | 80 | 12.5% | 331 | 323 | 2.5% |
| Cost/income ratio (Administrative expenses/Operating income) | 40.5% | 34.8% | 37.7% | 36.3% | ||
| Life general account invested assets1) | 11 | 12 | −8.3% | 11 | 12 | −8.3% |
| Investment margin/Life general account invested assets (bps)2) | 76 | 80 | ||||
| Total provisions for insurance & investment contracts1) | 19 | 19 | 0.0% | 19 | 19 | 0.0% |
| of which for risk policyholder1) | 7 | 7 | 0.0% | 7 | 7 | 0.0% |
| Assets under management pensions1)3) | 14 | 23 | −39.1% | 14 | 23 | −39.1% |
| Allocated equity (end of period) | 2,103 | 1,898 | 10.8% | 2,103 | 1,898 | 10.8% |
| Net operating ROE | 8.0% | 7.2% | 8.4% | 8.2% | ||
| Employees (FTEs, end of period) | 4,085 | 4,016 | 1.7% | 4,085 | 4,016 | 1.7% |
1) End of period, in EUR billion
2) Four-quarter rolling average
3) The numbers shown under AuM are client balances which exclude IFRS shareholders' equity related to the respective pension businesses and include the assets under administration
The operating result of Insurance Europe was EUR 40 million, down from EUR 48 million in the fourth quarter of 2013, which included an investment performance bonus in Poland. The current quarter reflects a lower investment margin and the impact of the pension reforms in Poland. This was partly mitigated by higher fees and premiumbased revenues in Belgium, Spain and Romania.
The investment margin was EUR 21 million, down from EUR 25 million in the fourth quarter of 2013, due to lower reinvestment rates and lower invested volumes.
Fees and premium-based revenues decreased to EUR 132 million, from EUR 133 million in the fourth quarter of 2013 which included an investment performance bonus in Poland. The reclassification from operating income nonmodelled business to fees and premium-based revenues in Turkey, higher life sales in Belgium and Spain and higher pension inflows in Romania, were partly offset by the negative impact of the pension reforms in Poland.
The technical margin was stable at EUR 49 million. The current quarter includes the positive impact of the reclassification from operating income non-modelled business to the technical margin in Turkey, as well as higher morbidity results in Greece, whilst the fourth quarter of 2013 reflected the reclassification of the crisis tax to DAC amortisation and trail commissions in Belgium.
Administrative expenses increased to EUR 84 million compared with EUR 77 million in the fourth quarter of 2013, reflecting a EUR 4 million write-off of receivables in Turkey and higher project expenses across the region.
DAC amortisation and trail commissions decreased to EUR 77 million from EUR 89 million in the fourth quarter of 2013, reflecting the aforementioned reclassification of the crisis tax in Belgium from the technical margin to DAC amortisation and trail commissions.
The result before tax decreased to EUR 26 million from EUR 91 million in the fourth quarter of 2013, which included a EUR 48 million gain on the sale of Dutch and German government bonds in Belgium. Special items before tax were EUR 12 million, reflecting rebranding expenses across the region and disentanglement expenses in Belgium.
New sales (APE) were EUR 140 million, stable compared with the fourth quarter of 2013. Higher life sales in most countries were fully offset by lower pension sales.
The full-year 2014 operating result of Insurance Europe was EUR 176 million compared with EUR 199 million for 2013. The lower investment margin and the impact of the pension reforms in Poland were only partly compensated by higher fees and premium-based revenues. The result before tax declined to EUR 207 million from EUR 243 million in 2013, reflecting the lower operating result and higher special items.
The full-year 2014 new sales (APE) increased to EUR 528 million from EUR 510 million in 2013, driven by higher life sales.
Value of new business (VNB) for 2014 declined to EUR 78 million from EUR 96 million in 2013, largely reflecting a negative impact from refinements to persistency assumptions and expense overruns in Turkey, a non-recurring commission overrun in Poland, lower interest rates and currency impacts. These impacts were partially offset by higher volumes and improved quality of sales, reflecting repricing actions, commission changes and a better business mix. The internal rate of return (IRR) on new sales correspondingly decreased to 9.3% in 2014 from 9.7% in 2013.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results1) | ||||||
| Investment margin | 0 | 1 | −100.0% | −2 | 7 | −128.6% |
| Fees and premium-based revenues | 89 | 81 | 9.9% | 437 | 436 | 0.2% |
| Technical margin | −13 | −3 | −13 | 2 | ||
| Operating income non-modelled business | 0 | 0 | 0 | 0 | ||
| Operating income | 76 | 79 | −3.8% | 422 | 445 | −5.2% |
| Administrative expenses | 26 | 28 | −7.1% | 97 | 106 | −8.5% |
| DAC amortisation and trail commissions | 38 | 36 | 5.6% | 185 | 177 | 4.5% |
| Expenses | 64 | 64 | 0.0% | 282 | 283 | −0.4% |
| Operating result | 12 | 15 | −20.0% | 140 | 161 | −13.0% |
| Non-operating items | 4 | −2 | 1 | 30 | −96.7% | |
| of which gains/losses and impairments | 5 | −1 | 3 | 42 | −92.9% | |
| of which revaluations | −1 | −1 | −2 | −11 | ||
| of which market & other impacts | 0 | 0 | 0 | 0 | ||
| Special items before tax | −1 | 0 | −2 | 0 | ||
| Result on divestments | 0 | 0 | 0 | 0 | ||
| Result before tax | 14 | 13 | 7.7% | 139 | 192 | −27.6% |
| Taxation | 5 | 7 | −28.6% | 48 | 71 | −32.4% |
| Minority interests | 0 | 0 | 0 | 0 | ||
| Net result | 9 | 6 | 50.0% | 91 | 121 | −24.8% |
| New business1) | ||||||
| Single premiums | 7 | 23 | −69.6% | 48 | 126 | −61.9% |
| Regular premiums | 100 | 88 | 13.6% | 536 | 480 | 11.7% |
| New sales life insurance (APE) | 100 | 90 | 11.1% | 541 | 493 | 9.7% |
| Value of new business | 93 | 86 | 8.1% | |||
| Internal rate of return | 14.3% | 17.3% | ||||
| Key figures1) | ||||||
| Gross premium income | 462 | 444 | 4.1% | 2,323 | 2,322 | 0.0% |
| Total administrative expenses | 26 | 28 | −7.1% | 97 | 106 | −8.5% |
| Cost/income ratio (Administrative expenses/Operating income) | 34.2% | 35.4% | 23.0% | 23.8% | ||
| Life general account invested assets2) | 9 | 8 | 12.5% | 9 | 8 | 12.5% |
| Total provisions for insurance & investment contracts2) | 8 | 7 | 14.3% | 8 | 7 | 14.3% |
| of which for risk policyholder2) | 0 | 0 | 0 | 0 | ||
| Allocated equity (end of period) | 1,579 | 1,259 | 25.4% | 1,579 | 1,259 | 25.4% |
| Net operating ROE | 2.5% | 2.4% | 7.9% | 8.4% | ||
| Employees (FTEs, end of period) | 614 | 637 | −3.6% | 614 | 637 | −3.6% |
1) JPY/EUR average quarterly fx rates: 142.83 (4Q2014), 137.46 (4Q2013) and JPY/EUR end of period fx rates: 145.12 (4Q2014), 144.66 (4Q2013)
2) End of period, in EUR billion
The operating result of Japan Life was down to EUR 12 million from EUR 15 million in the fourth quarter of 2013, reflecting a lower technical margin partly offset by higher fees and premium-based revenues.
The investment margin was EUR 0 million compared with EUR 1 million in the fourth quarter of 2013, due to lower interest rates on reinvested assets, as well as the impact of capital gains realised due to asset rebalancing in 2013, which lowered subsequent investment income.
Fees and premium-based revenues were EUR 89 million, up 14.1% from the fourth quarter of 2013, excluding currency effects, driven by higher sales and larger in-force volumes.
The technical margin decreased to EUR -13 million from EUR -3 million in the fourth quarter of 2013, mainly due to a lower result on surrenders.
Administrative expenses were EUR 26 million, down 3.7% compared with the fourth quarter of 2013, on a constant currency basis.
DAC amortisation and trail commissions were EUR 38 million, up 8.6% compared with the fourth quarter of 2013, excluding currency effects, due to higher premium income.
The result before tax was EUR 14 million, compared with EUR 13 million in the fourth quarter of 2013. The fourth quarter in 2014 benefitted from EUR 5 million in capital gains from the sale of fixed income investments, partly offset by the lower operating result.
New sales (APE) increased to EUR 100 million, up 16.1% from the fourth quarter of 2013, excluding currency effects, driven by higher agency productivity and channel diversification.
The full-year operating result of Japan Life for 2014 was EUR 140 million compared with EUR 161 million for 2013, down 4.2% excluding currency effects, reflecting a decrease in both the investment margin and the technical margin. The investment margin declined EUR 9 million due to lower interest rates on reinvested assets, as well as the impact of capital gains realised due to asset rebalancing in 2013, which lowered subsequent investment income. Fees and premium-based revenues increased 10.3%, excluding currency effects, driven by higher sales and larger in-force volumes, partially offset by higher DAC amortisation and trail commissions. Administrative expenses decreased to EUR 97 million, reflecting a EUR 6 million one-off benefit from a change in pension liability. The fullyear result before tax for 2014 was EUR 139 million compared with EUR 192 million for 2013 which included the aforementioned realised capital gains due to asset rebalancing.
For full-year 2014, new sales (APE) increased to EUR 541 million from EUR 493 million in 2013, due to improved business sentiment, higher agency productivity and channel diversification.
The value of new business (VNB) for 2014 increased to EUR 93 million, from EUR 86 million in 2013, reflecting higher sales partially offset by lower interest rates. The internal rate of return (IRR) on new sales in 2014 decreased to 14.3% from 17.3% in 2013, due to lower interest rates and a change in reinsurance arrangements.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Investment income | 0 | 0 | 0 | 1 | −100.0% | |
| Fees | 129 | 111 | 16.2% | 486 | 444 | 9.5% |
| Operating income | 129 | 111 | 16.2% | 486 | 445 | 9.2% |
| Administrative expenses | 88 | 83 | 6.0% | 328 | 314 | 4.5% |
| Operating result | 41 | 28 | 46.4% | 158 | 130 | 21.5% |
| Non-operating items | 0 | 0 | 0 | 0 | ||
| of which gains/losses and impairments | 0 | 0 | 0 | 0 | ||
| of which revaluations | 0 | 0 | 0 | 0 | ||
| of which market & other impacts | 0 | 0 | 0 | 0 | ||
| Special items before tax | −2 | 0 | −124 | 0 | ||
| Result on divestments | 0 | 0 | −2 | 0 | ||
| Result before tax | 38 | 28 | 35.7% | 31 | 131 | −76.3% |
| Taxation | 10 | 8 | 25.0% | 5 | 34 | −85.3% |
| Minority interests | 0 | 0 | 0 | 0 | ||
| Net result1) | 29 | 20 | 45.0% | 26 | 97 | −73.2% |
| Key figures | ||||||
| Total administrative expenses | 88 | 83 | 6.0% | 328 | 314 | 4.5% |
| Cost/income ratio (Administrative expenses/Operating income) | 68.2% | 74.8% | 67.5% | 70.6% | ||
| Net inflow Assets under Management (in EUR billion) | 0 | −3 | −11 | −10 | ||
| Assets under Management2) | 186 | 174 | 6.9% | 186 | 174 | 6.9% |
| Fees/average Assets under Management (bps) | 28 | 25 | 27 | 25 | ||
| Allocated equity (end of period) | 386 | 359 | 7.5% | 386 | 359 | 7.5% |
| Net operating ROE | 31.5% | 22.2% | 32.4% | 26.7% | ||
| Employees (FTEs, end of period) | 1,151 | 1,134 | 1.5% | 1,151 | 1,134 | 1.5% |
1) Excluding the Net result from discontinued operations
2) End of period, in EUR billion
| In EUR billion | 4Q2014 | FY2014 |
|---|---|---|
| AUM rollforward | ||
| Beginning of period | 180 | 174 |
| Net inflow | 0 | −11 |
| Acquisition / Divestments | 0 | 2 |
| Market performance (incl. FX Impact) and Other | 6 | 21 |
| End of period | 186 | 186 |
Total AuM at Investment Management were EUR 186 billion at the end of the fourth quarter of 2014, up from EUR 180 billion at the end of the third quarter. The increase in the current quarter reflects strong market performance. Total AuM at the end of the fourth quarter were up 6.9% from EUR 174 billion at the end of 2013, driven by positive market performance which was partly offset by the partial outflow of assets managed for the ING Pension Fund in the first quarter of 2014.
The fourth-quarter 2014 operating result increased 46.4% to EUR 41 million from EUR 28 million in the fourth quarter of 2013, driven by higher income partly offset by higher expenses.
Fees were EUR 129 million, up 16.2% compared with the fourth quarter of 2013, as a result of higher AuM and a more favourable asset mix. The increase in fees also reflects the introduction of a fixed service fee in the Netherlands as of January 2014, as well as EUR 4 million non-recurring fee income.
Administrative expenses were EUR 88 million, up 6.0% from the fourth quarter of 2013 due to the introduction of the fixed service fee in 2014 (with an offsetting impact in fee revenues), as well as higher staff and IT expenses.
The result before tax was EUR 38 million, up 35.7% from the fourth quarter of 2013, almost fully attributable to the higher operating result.
The operating result of Investment Management for full-year 2014 was EUR 158 million, up 21.5% from 2013. Positive market performance led to higher AuM and as a consequence to higher fee income, which was partly offset by higher expenses. Administrative expenses in the first two quarters of 2014 benefited from EUR 10 million of personnel provision releases.
The full-year 2014 result before tax was EUR 31 million compared with EUR 131 million in 2013, as 2014 included a special item of EUR -122 million related to the agreement to make ING's closed defined benefit pension plan in the Netherlands financially independent.
| In EUR million | 4Q14 | 4Q13 | Change | FY14 | FY13 | Change |
|---|---|---|---|---|---|---|
| Analysis of results | ||||||
| Interest on hybrids and debt | −26 | −33 | −122 | −167 | ||
| Investment income and fees | 16 | 0 | 50 | 8 | ||
| Holding expenses | −24 | −46 | −123 | −183 | ||
| Amortisation of intangible assets | −2 | −2 | −7 | −7 | ||
| Holding result | −36 | −81 | −201 | −348 | ||
| Operating result reinsurance business | 4 | 5 | −20.0% | 31 | −15 | |
| Operating result NN Bank | 7 | −1 | 27 | −11 | ||
| Other results | 1 | 3 | −66.7% | 13 | 1 | |
| Operating result | −24 | −73 | −130 | −373 | ||
| Non-operating items | 2 | −11 | 6 | 29 | −79.3% | |
| of which gains/losses and impairments | 3 | −2 | 14 | 44 | −68.2% | |
| of which revaluations | −1 | −9 | −8 | −14 | ||
| of which market & other impacts | 0 | 0 | 0 | 0 | ||
| Special items before tax | −27 | −45 | −80 | −79 | ||
| Result on divestments | 0 | 7 | −100.0% | 6 | −50 | |
| Result before tax | −49 | −123 | −198 | −473 | ||
| Taxation | 3 | −43 | −18 | −93 | ||
| Minority interests | 0 | 0 | 0 | 0 | ||
| Net result | −52 | −80 | −180 | −380 | ||
| Key figures | ||||||
| Total administrative expenses | 60 | 74 | −18.9% | 251 | 259 | −3.1% |
| of which reinsurance business | 4 | 2 | 100.0% | 13 | 11 | 18.2% |
| of which NN Bank | 31 | 24 | 29.2% | 112 | 52 | 115.4% |
| NN Bank common equity Tier 1 ratio phased in | 14.1% | 16.4% | 14.1% | 16.4% | ||
| Total assets NN Bank1) | 9 | 7 | 28.6% | 9 | 7 | 28.6% |
| Total provisions for insurance and investment contracts1) | 1 | 1 | 0.0% | 1 | 1 | 0.0% |
| Employees (FTEs, end of period) | 1,838 | 1,777 | 3.4% | 1,838 | 1,777 | 3.4% |
1) End of period, in EUR billion
The operating result of the segment 'Other' improved to EUR -24 million from EUR -73 million in the fourth quarter of 2013, reflecting lower holding expenses, lower funding costs, higher investment income and a higher operating result at NN Bank.
The holding result improved to EUR -36 million compared with EUR -81 million in the fourth quarter of 2013. Interest costs on hybrids and debt were EUR 7 million lower, mainly following the refinancing of loans and the redemption of hybrid debt using the proceeds of the undated subordinated notes issued in July 2014 which are classified as equity under IFRS. The interest on the undated notes is recognised through equity while the interest on the hybrid debt redeemed with these notes was recognised in the profit and loss account. Investment income increased to EUR 16 million and includes interest income on the two subordinated loans provided by NN Group to NN Life in the first half of 2014. Holding expenses decreased to EUR 24 million, reflecting the transformation programme in the Netherlands and a EUR 7 million release of personnel provisions for retired personnel in the Netherlands.
The operating result of the reinsurance business remained stable at EUR 4 million.
The operating result of NN Bank increased to EUR 7 million from EUR -1 million in the fourth quarter of 2013. NN Bank has been successful in the past year in increasing its production of mortgages and attracting customer savings, leading to a higher net interest margin, partly offset by higher expenses supporting its continued growth. From 2015, NN Bank will incur additional expenses, estimated at approximately EUR 10 million on a full-year basis, as a result of the revised Deposit Guarantee Scheme in the Netherlands.
The result before tax improved to EUR -49 million compared with EUR -123 million in the fourth quarter of 2013, mainly driven by the improved operating result and lower special items.
Total administrative expenses were EUR 60 million in the fourth quarter of 2014, down EUR 14 million compared with the fourth quarter of 2013. Holding expenses were down EUR 22 million, offset by EUR 7 million higher expenses at NN Bank.
The operating result of the segment 'Other' for full-year 2014 improved substantially to EUR -130 million from EUR -373 million in 2013. The improved holding result of EUR -201 million was favourably impacted by lower interest costs on hybrids and debt, following a lower amount of debt outstanding and the refinancing of external debt, as well as the interest income on the subordinated loans provided by NN Group to NN Life and lower holding expenses. The operating result of the reinsurance business improved to EUR 31 million from EUR -15 million in 2013, reflecting better underwriting results as well as a EUR 31 million one-off loss on a specific reinsurance contract in 2013. NN Bank's operating result improved to EUR 27 million from EUR -11 million in 2013 as it successfully expanded its mortgage and customer savings activities.
The full-year 2014 result before tax improved to EUR -198 million compared with EUR -473 million for 2013, in line with the improvement in operating result.
| In EUR million | 4Q14 | 4Q132) | Change | FY14 | FY132) | Change |
|---|---|---|---|---|---|---|
| Analysis of results1) | ||||||
| Investment margin | 0 | 0 | 0 | 0 | ||
| Fees and premium-based revenues | 30 | 33 | −9.1% | 117 | 136 | −14.0% |
| Technical margin | 0 | 0 | 0 | 0 | ||
| Operating income non-modelled business | 0 | 0 | 0 | 0 | ||
| Operating income | 30 | 33 | −9.1% | 117 | 136 | −14.0% |
| Administrative expenses | 8 | 2 | 300.0% | 21 | 18 | 16.7% |
| DAC amortisation and trail commissions | 3 | 3 | 0.0% | 12 | 38 | −68.4% |
| Expenses | 11 | 6 | 83.3% | 33 | 56 | −41.1% |
| Operating result | 19 | 27 | −29.6% | 84 | 80 | 5.0% |
| Non-operating items | −43 | −450 | 24 | −333 | ||
| of which gains/losses and impairments | 0 | 0 | 0 | 1 | ||
| of which revaluations | 0 | 0 | 0 | 0 | ||
| of which market & other impacts | −43 | −450 | 24 | −334 | ||
| Special items before tax | 0 | 0 | 0 | 0 | ||
| Result on divestments | 0 | 0 | 0 | 0 | ||
| Result before tax | −24 | −423 | 109 | −252 | ||
| Taxation | −14 | −157 | 8 | −110 | ||
| Minority interests | 0 | 0 | 0 | 0 | ||
| Net result | −10 | −266 | 101 | −142 | ||
| Key figures1)3) | ||||||
| Allocated equity | 1,012 | 1,071 | −5.5% | 1,012 | 1,071 | −5.5% |
| Account value | 13,248 | 14,687 | −9.8% | 13,248 | 14,687 | −9.8% |
| Net Amount at Risk | 133 | 663 | −79.9% | 133 | 663 | −79.9% |
| IFRS Reserves | 556 | 1,086 | −48.8% | 556 | 1,086 | −48.8% |
| Number of policies | 294,263 | 346,306 | −15.0% | 294,263 | 346,306 | −15.0% |
| Employees (FTEs) | 89 | 111 | −19.8% | 89 | 111 | −19.8% |
1) JPY/EUR average quarterly fx rates: 142.83 (4Q2014), 137.46 (4Q2013) and JPY/EUR end of period fx rates: 145.12 (4Q2014), 144.66 (4Q2013)
2) The figures for period have been restated to reflect the change in accounting policy, covering the move towards fair value accounting for Guaranteed Minimum Death Benefits for reserves of the Japan Closed Block VA segment as of 1 January 2014
3) End of period
The result before tax of Japan Closed Block VA improved to EUR -24 million from EUR -423 million in the fourth quarter of 2013. The result before tax in the fourth quarter of 2013 reflected a EUR 575 million charge resulting from a full write-off of the DAC, as well as reserve strengthening in order to bring the reserve adequacy of the segment to the 50% confidence level.
The operating result decreased to EUR 19 million from EUR 27 million in the fourth quarter of 2013, as fees and premium-based revenues declined in line with the run-off of the portfolio and due to higher administrative expenses.
Fees and premium-based revenues were EUR 30 million, down 6.3% from the fourth quarter of 2013, excluding currency impacts, in line with a lower account value caused by a decreasing number of policies.
Administrative expenses increased to EUR 8 million from EUR 2 million in the fourth quarter of 2013, mainly caused by higher processing costs due to an increase in surrenders as well as to higher project costs to prepare for the large volumes of future maturities expected in the portfolio.
Market and other impacts were EUR -43 million compared with EUR -450 million in the fourth quarter of 2013, which included the aforementioned charge of EUR 575 million. The current quarter largely reflects a marketrelated result net of hedging of EUR -39 million as market volatility increased.
The Net Amount at Risk in the Japan Closed Block VA decreased to EUR 133 million from EUR 663 million in the fourth quarter of 2013, primarily driven by equity markets appreciation.
The full-year 2014 result before tax increased to EUR 109 million from EUR -252 million for 2013, which reflected the aforementioned charge of EUR 575 million. The full-year 2014 result includes an operating result of EUR 84 million and a market related result net of hedging of EUR 21 million.
| in EUR million | 31 Dec 14 | 30 Sep 14 | 31 Dec 131) | 31 Dec 14 | 30 Sep 14 | 31 Dec 131) | |
|---|---|---|---|---|---|---|---|
| Assets | Equity | ||||||
| Cash and cash equivalents | 7,530 | 5,529 | 7,155 | Shareholders' equity | 20,355 | 18,344 | 14,062 |
| Financial assets at fair value through P&L | 49,549 | 47,862 | 43,933 | Minority interests | 76 | 70 | 68 |
| - trading assets | 628 | 607 | 736 | Undated subordinated notes | 986 | 986 | 0 |
| - non-trading derivatives | 7,207 | 5,450 | 3,126 | Total equity | 21,417 | 19,400 | 14,130 |
| - investments for risk of policyholders | 41,221 | 41,298 | 39,589 | Liabilities | |||
| - other | 492 | 506 | 482 | Subordinated debt | 2,297 | 2,299 | 2,892 |
| Available-for-sale investments | 72,277 | 69,249 | 61,014 | Senior debt | 400 | 400 | 1,000 |
| - debt securities | 65,991 | 63,295 | 55,394 | Other borrowed funds | 5,467 | 4,419 | 3,817 |
| - equity securities | 6,286 | 5,954 | 5,620 | Insurance and investment contracts | 119,237 | 119,118 | 111,769 |
| Loans | 27,802 | 28,965 | 25,319 | - life insurance provisions | 73,639 | 73,281 | 67,700 |
| Reinsurance contracts | 241 | 267 | 252 | - non-life insurance provisions | 3,540 | 3,670 | 3,584 |
| Investments in associates | 1,617 | 1,602 | 1,071 | - provision for risk of policyholders | 41,285 | 41,393 | 39,675 |
| Real estate investments | 1,104 | 1,022 | 721 | - other | 772 | 773 | 810 |
| Property and equipment | 139 | 145 | 164 | Customer deposits | 6,981 | 6,597 | 5,769 |
| Intangible assets | 357 | 360 | 392 | Financial liabilities at fair value through P&L | 3,142 | 2,529 | 1,843 |
| Deferred acquisition costs | 1,403 | 1,431 | 1,353 | - non-trading derivatives | 3,142 | 2,529 | 1,843 |
| Other assets | 3,462 | 3,626 | 3,754 | Other liabilities | 6,540 | 5,421 | 4,071 |
| Total assets excl. assets held for sale | 165,481 | 160,059 | 145,128 | Total liabilities excl. liabilities held for sale | 144,064 | 140,783 | 131,161 |
| Assets held for sale | 0 | 128 | 187 | Liabilities held for sale | 0 | 3 | 24 |
| Total liabilities | 144,064 | 140,786 | 131,185 | ||||
| Total assets | 165,481 | 160,186 | 145,315 | Total equity and liabilities | 165,481 | 160,186 | 145,315 |
1) The figures of 31 December 2013 have been restated to reflect the change in accounting policy, covering the move towards fair value accounting for Guaranteed Minimum Death Benefits for reserves of the Japan Closed Block VA segment as of 1 January 2014. The 31 December 2013 figures have also been restated to reflect the implementation of IFRS 11 which replaced proportional consolidation for joint ventures by equity accounting
Cash and cash equivalents increased by EUR 2.0 billion to EUR 7.5 billion. This increase reflects a EUR 1.9 billion shift from cash deposits with a maturity longer than 3 months, which are presented as part of Loans, to balances with a shorter maturity, which are presented as part of Cash and cash equivalents.
Non-trading derivatives increased by EUR 1.8 billion to EUR 7.2 billion, reflecting positive revaluations on interest rate swaps as interest rates declined in the fourth quarter.
Debt securities available-for-sale increased by EUR 2.7 billion to EUR 66.0 billion, mainly driven by higher market values as long-term interest rates declined in the quarter.
Loans decreased by EUR 1.2 billion mainly reflecting EUR 1.9 billion decrease in cash deposits with a maturity longer than 3 months, partly offset by a EUR 0.7 billion increase in the mortgages portfolio.
Other borrowed funds increased by EUR 1.0 billion to EUR 5.5 billion, due to received collateral related to the increased market value of non-trading derivatives.
Shareholders' equity increased by EUR 2.0 billion to EUR 20.4 billion reflecting a EUR 2.2 billion increase in the available-for-sale investments revaluation reserves. This was partially offset by EUR 1.0 billion higher deferred profit sharing to policyholders. The net result for the period of EUR 0.2 billion and EUR 0.7 billion increase in the cash flow hedge reserve also contributed to the increased Shareholders' equity in the fourth quarter.
Changes in Shareholders' equity for the quarter and for the full year and comparative year were as follows:
| in EUR million | 4Q 2014 | FY14 | FY13 |
|---|---|---|---|
| Shareholders equity beginning of period | 18,344 | 14,062 | 25,949 |
| Net result for the period | 197 | 588 | 323 |
| Unrealised revaluations available-for-sale investments and other | 2,190 | 6,385 | −11,419 |
| Realised gains/losses transferred to the profit and loss account | −9 | 1 | 90 |
| Change in cash flow hedge reserve | 673 | 1,738 | −832 |
| Deferred interest crediting to life policyholders | −987 | −2,950 | 2,154 |
| Remeasurement of the net defined benefit asset/liability | −23 | −121 | −42 |
| Exchange rate differences | −30 | 117 | −651 |
| Dividend | −315 | −882 | |
| Capital contributions | 850 | 1,330 | |
| Impact of IPO ING U.S. | −1,958 | ||
| Total changes | 2,011 | 6,293 | −11,887 |
| Shareholders' equity end of period | 20,355 | 20,355 | 14,062 |
The composition of Total equity at the end of the quarter/year and at the end of the previous quarter and the previous year were as follows:
| in EUR million | 31 Dec 14 | 30 Sep 14 | 31 Dec 13 |
|---|---|---|---|
| Share premium/capital | 12,140 | 12,140 | 11,605 |
| Revaluation reserve available-for-sale investments and other | 10,168 | 7,961 | 3,802 |
| Revaluation reserve cash flow hedge | 4,464 | 3,791 | 2,726 |
| Revaluation reserve crediting to life policyholders | −5,529 | −4,542 | −2,579 |
| Remeasurement of the net defined benefit asset/liability | −118 | −95 | −1,042 |
| Currency translation reserve | −198 | −123 | −252 |
| Retained earnings and other reserves | −572 | −788 | −198 |
| Shareholders' equity | 20,355 | 18,344 | 14,062 |
| Minority interests | 76 | 70 | 68 |
| Undated subordinated notes | 986 | 986 | |
| Total equity | 21,417 | 19,400 | 14,130 |
| Shareholders' equity per share in EUR1) | 58 | 52 | 40 |
1) Shareholders' equity per share at 31 December 2013 is calculated based on the NN Group shares outstanding as of 7 July 2014
| in EUR million | 31 Dec 14 | 30 Sep 14 | 31 Dec 13 |
|---|---|---|---|
| Shareholders' equity | 20,355 | 18,344 | 14,062 |
| Qualifying undated subordinated debt1) | 1,823 | 1,823 | 2,394 |
| Qualifying dated subordinated debt1) | 1,000 | 1,000 | 0 |
| Required regulatory adjustments2) | −9,005 | −7,934 | −5,501 |
| Total capital base (a) | 14,172 | 13,233 | 10,955 |
| EU required capital (b) | 4,683 | 4,683 | 4,385 |
| NN Group IGD Solvency I ratio3) (a/b) | 303% | 283% | 250% |
| NN Life Solvency I ratio3)4) | 260% | 252% | 223% |
1) Subordinated debt included at notional value in the IGD capital base
2) The 31 December 2013 IGD ratio has been restated from 257% to 250% to reflect the move towards fair value accounting for the Guaranteed Minimum Death Benefits reserves of the Japan Closed Block VA segment and that the eligible and dated hybrids are capped at 50% and 25% respectively of the EU required capital
3) The 2014 solvency ratios are not final until filed with the regulators
4) The 31 December 2013 Solvency I ratio of NN Life has been updated to 223% from 222% shown in the NN Group Annual Report 2013
NN Group's IGD Solvency I ratio increased to 303% at the end of the fourth quarter from 283% at the end of the third quarter. This was mainly driven by the net result of EUR 197 million and positive revaluations resulting from market movements, partly offset by the proposed dividend to shareholders of EUR 200 million. Excluding the proposed dividend, the fourth quarter 2014 IGD Solvency I ratio was 307%. The IGD Solvency I ratio increased from 250% at the end of 2013, largely due to a EUR 850 million capital injection by ING Group into NN Group in May 2014, the full-year 2014 net result of EUR 588 million and positive revaluations resulting from market movements.
The Solvency I ratio of NN Life increased to 260% from 252% at the end of the previous quarter mainly driven by equity market appreciation and a decrease in interest rates as well as by a net positive impact of model and assumption changes. These items were partly offset by the deduction of a dividend of EUR 350 million paid by NN Life to NN Group in February 2015.
The Solvency I ratio of NN Life improved from 223% to 260% as at 31 December 2014, supported mainly by the issuance of EUR 1,050 million subordinated debt to NN Group and the tightening of credit spreads. This was partly offset by the impact of the pension agreement (EUR -231 million) and the dividend paid to NN Group in February 2015 (EUR 350 million).
NN Group's Solvency II capital ratio, calculated as the ratio of Own Funds (OF) to the Solvency Capital Requirement (SCR) based on our current interpretation of the Standard Formula, is estimated to be in a range around 200% as at 31 December 2014. NN Group is considering to apply for the usage of a Partial Internal Model. The Solvency II capital ratio remains subject to significant uncertainties, including the final specifications of the Solvency II regulations and the regulatory approval process.
As of 1 January 2015, insurance companies in the Netherlands are required to begin reporting on a Solvency II basis to the Dutch Central Bank (DNB), in addition to the existing Solvency I reporting. The Solvency II reporting replaces the Theoretical Solvability Criterion (commonly referred to as 'Solvency 1.5') and is also used to determine whether dividend payments from the Dutch insurance entities require a declaration of no objection from DNB.
| in EUR million | 4Q14 | FY14 |
|---|---|---|
| Beginning of period | 1,184 | 1,363 |
| Cash divestment proceeds | 112 | 296 |
| Dividends from subsidiaries1) | 206 | 710 |
| Capital injections into subsidiaries2) | −71 | −1,313 |
| Other3) | −17 | −116 |
| Free cash flow at the holding | 229 | −424 |
| Capital flow from / (to) shareholders | 0 | 674 |
| Increase / (decrease) in debt and loans | 0 | −200 |
| End of period | 1,413 | 1,413 |
| Free cash flow at the holding | 229 | −424 |
| IPO related capital transactions4) | 0 | −874 |
| Adjusted free cash flow at the holding | 229 | 450 |
Note: cash capital is defined as net current assets available at the holding company
1) Includes interest on subordinated loans provided to subsidiaries by the holding company
2) Includes the change of subordinated loans provided to subsidiaries by the holding company
3) Includes interest on subordinated loans and debt, holding company expenses and other cash flows
4) Consists of IPO related transactions regarding the capital strengthening of NN Life of EUR 1,050 million through subordinated debt and EUR 176 million of cash proceeds received from the divestment of SulAmérica which were upstreamed to ING Group
The cash capital position at the holding company increased from EUR 1,184 million at the end of the third quarter to EUR 1,413 million at the end of the fourth quarter of 2014. This increase was mainly attributable to EUR 206 million of dividends received from subsidiaries (of which EUR 100 million from ING Re Netherlands) and EUR 112 million cash proceeds received from the completion of the sale of NN Group's 50% stake in ING-BOB Life Insurance Company. The cash capital position at the holding company was EUR 1,363 million at the end of 2013 and was temporarily high, pending a capital injection of EUR 600 million into NN Life which was executed in February 2014 by way of subordinated debt. In 2014, the holding company received EUR 710 million of dividends from subsidiaries.
Free cash flow at the holding company is defined as the change in cash capital position of the holding company over the period, excluding capital transactions with shareholders and debtholders. In 2014, the free cash flow at the holding company was EUR -424 million. This included the IPO related transactions regarding the capital strengthening of NN Life of EUR 1,050 million through subordinated debt and the cash proceeds received from the divestment of SulAmérica of EUR 176 million which were upstreamed to ING Group. Excluding these items, the free cash flow at the holding company was EUR 450 million in 2014.
| (% EUR millions) | 31 Dec 14 Available Capital |
Available over Minimum Required Capital |
Change 2H14 |
Change 2H14 Of which capital flows1) |
Capital generation |
Change FY14 |
Change FY14 Of which capital flows1) |
Capital Generation |
|---|---|---|---|---|---|---|---|---|
| Total of subsidiaries (excluding discontinued operations)2) |
13,556 | 8,747 | 1,126 | −161 | 1,287 | 1,900 | 605 | 1,295 |
| of which NN Life | 8,104 | 5,127 | 909 | −20 | 930 | 1,881 | 1,019 | 862 |
Note: capital generation for subsidiaries (excluding discontinued operations) is defined as the change of available capital over minimum required capital, excluding capital flows, according to local regulatory capital framework – figures are not final until filed with the regulators
1) Capital flows reflect capital injections (including subordinated loans) net of dividends (including interest on subordinated loans) for all subsidiaries (excluding discontinued operations)
2) The EUR 350 million dividend paid by NN Life to NN Group in February 2015 is included in available capital and excluded from capital flows
The capital generated by subsidiaries was EUR 1,287 million over the second half of 2014 mainly supported by the tightening of credit spreads and a decrease in interest rates in combination with positive operating performance and a net positive impact from model and assumption changes.
Over the full-year 2014 the capital generated by subsidiaries was EUR 1,295 million and EUR 1,794 million excluding the impact of the agreement to make ING's closed defined benefit pension plan in the Netherlands financially independent (EUR -406 million) and the impact for ING Re Netherlands resulting from the move towards fair value accounting on the reserves for the Guaranteed Minimum Death Benefit (GMDB) of the Japan Closed Block VA business (EUR -94 million). This was mainly driven by the tightening of credit spreads and a decrease in interest rates in combination with a positive operating performance and a net positive impact of model and assumption changes. The capital generated by NN Life over the full-year 2014 was EUR 862 million and EUR 1,093 million excluding the impact of the pension agreement (EUR -231 million).
| in EUR million | 31 Dec 14 | 30 Sep 14 | 31 Dec 13 |
|---|---|---|---|
| Shareholders' equity | 20,355 | 18,344 | 14,062 |
| Revaluation reserve debt securities | −9,044 | −7,006 | −2,804 |
| Revaluation reserve crediting to life policyholders | 5,529 | 4,543 | 2,579 |
| Revaluation reserve cash flow hedge | −4,464 | −3,790 | −2,726 |
| Goodwill | −265 | −266 | −264 |
| Minority interests | 76 | 70 | 68 |
| Capital base for financial leverage | 12,187 | 11,896 | 10,915 |
| Undated subordinated notes1) | 986 | 986 | 0 |
| Subordinated debt | 2,297 | 2,299 | 2,892 |
| Total subordinated debt | 3,282 | 3,285 | 2,892 |
| Financial debt | 400 | 400 | 1,000 |
| Financial leverage | 3,682 | 3,685 | 3,892 |
| Financial leverage ratio | 23.2% | 23.7% | 26.3% |
| Fixed-cost coverage ratio1)2) | 9.9x | 8.4x | 4.9x |
1) The undated subordinated notes classified as equity are considered financial leverage in the calculation of the financial leverage ratio. The related interest is included on an accrual basis in the calculation of the fixed-cost coverage ratio
2) Measures the ability of earnings before interest and tax (EBIT) of ongoing business and Insurance Other to cover funding costs; calculated on a last 12-months basis
The financial leverage ratio of NN Group improved to 23.2% at the end of the fourth quarter of 2014. The capital base for financial leverage increased by EUR 291 million, largely driven by the fourth-quarter net result of EUR 197 million and positive equity revaluations.
The fixed-cost coverage ratio further improved to 9.9x at the end of the fourth quarter (on a last 12-months basis) versus 8.4x at the end of the third quarter of 2014, mainly due to increased profitability.
At the AGM on 28 May 2015, a dividend will be proposed of EUR 0.57 per ordinary share, or approximately EUR 200 million in total based on the current number of outstanding shares. This is equivalent to a dividend payout ratio of around 50% of NN Group's net operating result of the ongoing business related to the second half of 2014. The final dividend will be paid in cash or ordinary shares at the election of the shareholder. NN Group will neutralise the dilutive effect of the stock dividend on earnings per ordinary share through repurchase of ordinary shares, which may include a repurchase of part of ING Group's shareholding in NN Group. If the proposed dividend is approved by shareholders, NN Group ordinary shares will be quoted ex-dividend on 2 June 2015. The record date for the dividend will be 3 June 2015. The election period will run from 2 June up to and including 23 June 2015. The stock fraction for the stock dividend will be based on the volume weighted average price of NN Group ordinary shares on Euronext Amsterdam for the five trading days from 17 June through 23 June 2015. The dividend will be payable on 30 June 2015.
Going forward, and barring unforeseen circumstances, NN Group intends to pay ordinary dividends on a semiannual basis. In line with NN Group's stated dividend policy, capital generated in excess of NN Group's capital ambition is expected to be returned to shareholders unless it can be used for any other appropriate corporate purposes, including investments in value creating corporate opportunities. NN Group is committed to distributing excess capital in a form which is most appropriate and efficient for shareholders at that specific point in time, such
as special dividends or share buy backs which may include a repurchase of part of ING Group's shareholding in NN Group.
Standard & Poor's latest rating on NN Group is BBB+ with a developing outlook (2 June 2014) and Moody's is Baa2 with a negative outlook (13 November 2014).
| Credit ratings of NN Group N.V. at 11 February 2015 | Rating | Outlook |
|---|---|---|
| Standard & Poor's | BBB+ | Developing |
| Moody's | Baa2 | Negative |
NN Group is an insurance and investment management company with a strong, predominantly European presence in more than 18 countries. With around 12,000 employees the group offers retirement services, insurance, investments and banking to more than 15 million customers. NN Group includes Nationale-Nederlanden, ING Insurance Europe, ING Investment Management and ING Life Japan, and is listed on Euronext Amsterdam (ticker: NN).
Lard Friese and Delfin Rueda will host an analyst and investor conference call to discuss the 4Q14 results at 10:30am CET on Wednesday 11 February 2015. Members of the investment community can join the conference call at +31 20 531 5865 (NL), +44 203 365 3210 (UK) or +1 866 349 6093 (US) or webcast on www.nn-group.com.
Lard Friese and Delfin Rueda will host a press conference to discuss the 4Q14 results and elaborate on the rebranding of the businesses in 2015. The conference will be held at 12.30pm CET on Wednesday 11 February 2015 at NN Group's head office, Amstelveenseweg 500, Amsterdam. The press conference will also be webcasted live. You can join in listen-only mode on + 31 20 531 5863 or watch the webcast on www.nn-group.com.
Ingeborg Klunder +31 20 541 6526 [email protected] Investor enquiries
Investor Relations +31 20 541 5464 [email protected]
NN Group's Annual Accounts are prepared in accordance with International Financial Reporting Standards as adopted by the European Union ("IFRS-EU"). 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 2014. The Annual Accounts for 2014 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, (4) the implementation of the EC Restructuring Plan, (5) changes in the availability of, and costs associated with, sources of liquidity as well as conditions in the credit markets generally, (6) the frequency and severity of insured loss events, (7) changes affecting mortality and morbidity levels and trends, (8) changes affecting persistency levels, (9) changes affecting interest rate levels, (10) changes affecting currency exchange rates, (11) changes in investor, customer and policyholder behaviour, (12) changes in general competitive factors, (13) changes in laws and regulations, (14) changes in the policies of governments and/or regulatory authorities, (15) conclusions with regard to accounting assumptions and methodologies, (16) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (17) changes in credit and financial strength ratings, (18) NN Group's ability to achieve projected operational synergies and (19) the other risks and uncertainties detailed in the Risk Factors section contained in recent public disclosures made by NN Group and/or related to NN Group (such as the most recent annual report of ING Groep N.V.). 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.
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