ING sells its remaining stake in NN Group. NN Group continues its journey, with the ambition to build a standalone company that truly matters in the lives of its stakeholders.
We act with integrity and do business with the future in mind.
They are stimulated to adopt an innovative mindset with a focus on providing an excellent customer experience, and NN supports internal startups with budgets to bring their ideas to the market. A recent example is Brickler, a NN Bank startup in the Netherlands that drastically simplifies the process of buying a home. Its app helps users in every step of the way, from finding their dream home to finalising their mortgage online.
Expanding our current efforts, we are evaluating what the market has to offer in terms of innovative opportunities and new partnerships. Following our partnership with Startupbootcamp for the fintech and cyber security programme, we are open to further investments in fintech. Our approach to fintech investment is as a means to create strategic, mutually beneficial opportunities and connections, rather than building them ourselves.
A good example is in quarterly reporting, which reflects the challenge of explaining how the company has performed financially and meeting the expectations of analysts and investors in both the short and long term. In parallel, to build an agile, future-proof organisation, NN Group must always be thinking of long term solutions and long term achievements within the businesses, also from the perspectives of all stakeholders.
The most relevant trends and material topics, indicated in the upper right quarter of the matrix, and NN Group’s response to them, are further described in the next chapter of this Annual Review. Although not recognised as most material items by all our stakeholders, we believe it is evident that cyber security and climate change impact our businesses, and therefore they are added to this overview.
Customer centricity Putting customers’ interests first and striving to meet their needs throughout all different life stages is the key to being a customercentric company. The fundamental need of people to protect themselves against life’s uncertainties will continue to drive growth in the insurance industry over the long term. But the way people prefer that need to be met changes over time. These changing customer behaviours point to much quicker decision-making, and require our processes to be continuously adaptable.
Opportunities and risks New technology is also giving rise to new forms of risk, security, and business models. Customers are becoming more comfortable exploring opportunities with non-traditional ‘startup’ companies within the financial sector. They are willing to consider products that offer something different than traditional savings and pension models. This said, they also continue to demand transparent products and services, and prudent management of their investments. Additionally, it is essential to strike a solid balance between innovating for the future and addressing our current business needs and challenges.
We support strong and clear regulation regarding pension reform, and also believe that cooperation between governments, regulators and pension providers is essential to better align the interests of the various parties in the pension sector. Customers will benefit from such a shared approach in creating pension sustainability.
Closely following developments, actively managing relationships with regulators and supervisors alike, and raising any concerns in relevant forums are examples of mitigating the risk of regulatory and political changes.
• We explain the risks, returns and costs of our products and services
In this chapter, we describe how our business model enables us to remain financially strong and competitive and create long term value for our different stakeholder groups, by closely managing our balance sheet.
In April 2016, ING Group sold its remaining 14.1% stake in NN Group. This transaction was in line with ING’s restructuring agreement with the European Commission to divest all of its insurance and investment management businesses, ultimately by the end of 2016. We are grateful to ING Group for their partnership and support in our journey to become a stand-alone company.
Shareholdings in Dutch listed companies of more than 3% must be notified to the Netherlands Authority for the Financial Markets (AFM).
Credit ratings are indicators of the probability of timely and full repayment of interest and the principal amount of fixedincome securities. NN Group has been awarded credit ratings from Standard & Poor’s and Fitch Ratings. The financial strength ratings of NN Group on 31 December 2016 were: A+ Standard & Poor’s CreditWatch negative, 7 October 2016
Influencing companies to take responsibility We believe that active, engaged ownership contributes to generating long term value. It is an important part of our strategy to earn long term returns from the companies in which we invest. One of the most powerful tools of active ownership is well-informed proxy voting. Voting rights are exercised on behalf of: (i) the proprietary portfolio and (ii) the Dutch, Belgian, and Luxembourg funds with at least EUR 100 million assets under management.
Increased focus on climate change As long term investors, we are aware of the risks climate change presents to our investments, and as such we are committed to playing our part in addressing the issue of climate change.
Guided by our responsible investment principles, we also consider opportunities on behalf of NN Group’s proprietary assets that seek a positive impact on society whilst meeting our investment criteria. For example, we invested in green bonds, and provided debt financing for a wind park in Germany.
NN Investment Partners is building momentum in this regard with a Female Leadership Council. The Council developed a business plan to improve gender diversity, including several actions and a governance structure going forward. The focus is on awareness and education, statistics, policies, and creating a network. We sponsor employee participation in several female professional and development networks.
Another way of creating economic opportunities is by encouraging entrepreneurship. In 2016, the Social Innovation Relay (SIR) again took place as the flagship programme of the NN Group and Junior Achievement Europe partnership. The SIR is a global competition that challenges secondary school students to develop an innovative business concept that addresses a social need. Together with Impact Centre Erasmus (ICE) we are conducting an impact study that researches whether participation in the SIR indeed leads to expertise development and skills improvement.
Other good causes In addition to the global community investment target areas under the NN Future Matters umbrella, our businesses and corporate foundations support other local initiatives, within the areas of health and environmental care that are close to our employees’ hearts. With these activities, we connect with our employees, customers, and business partners, and aim to address societal needs together.
Our strategy is to deliver an excellent customer experience, based on strong products and services, and long term relationships Even though the landscape of insurance and asset management is constantly changing, the role we play in supporting people to build and protect their assets and cover their risks has not changed. Therefore our strategy has remained consistent over the past three years: it supports us in fulfilling our purpose and in creating long term value for our company and our stakeholders, as defined in our value creation model.
Also on 5 October 2016, we entered into a long term collaboration agreement with Sumitomo Life Insurance in Japan.
Underpinning our core strategic objectives are four medium term focus areas To capture opportunities for our businesses, we need to keep improving our customer service, increase efficiency and manage the assets entrusted to us – as well as our own assets – in a responsible way. To realise this, we defined four focus areas for the medium term.
Secondly, we aim to further leverage high-quality distribution by accelerating the roll out of digital capabilities to tied agency networks. This brings improved productivity as well as an enhanced customer experience. Opportunities also exist to significantly grow in bancassurance partnerships. In 2016, we added partnerships with six new bancassurance players.
• Slight increase of women in senior management positions (+2 pts); Employee engagement stable, high participation rate of 86%
Invest in a responsible manner by integrating environmental, social and governance factors into the investment processes.
The burning of coal to produce energy is carbon intensive, contributing to climate change. That is why it is an increasing societal concern, and the focus of increasing regulatory policy tightening. Coal-based business models are of particular concern, also to long-term investors. We clarified that NN’s own exposure to coal companies is limited. We have no investments in mining companies deriving more than 25% of revenues from thermal coal; we have invested around 1% of NN’s proprietary assets in utilities, and these companies derive a part of their power-generation capacity from coal. As a long term investor, there are different ways to address potential climate change risks. One of which is by excluding entire sectors. We question however whether this is the most effective way to support the transition towards a low carbon economy. At NN, we prefer active engagement. In 2016, our asset manager started a 2-year engagement with utility companies (refer to pages 30-31 of this Annual Review). If we consider there is not enough progress against engagement goals set, NN may decide to divest. We are further working on a carbon footprint of our proprietary assets, which will contribute to more insights prioritising companies with which to engage.
Total hours of volunteering work (in Future Matters focus areas) 5,685 5,593 1.6% 3,034
We have performed our review on the Annual Report in accordance with Dutch law, including the Dutch Standard 3000:“Assurance engagements other than Audits or Reviews of Historical Financial Information”.
Our procedures consisted primarily of: • Performing an analysis of the external environment, obtaining an understanding of relevant social trends and issues, and of the organisation’s business.