The 2016 Annual Report consists of the 2016 Annual Review and the 2016 Financial Report. It provides an integrated review of the performance of our company. It is in accordance with applicable Dutch law and the International Financial Reporting Standards (IFRS), which were endorsed by the European Union, as well as with the Global Reporting Initiative’s G4 guidelines (GRI) and the guidelines of the International Integrated Reporting Council. It aligns relevant information about our strategy, governance systems, performance and future prospects in a way that reflects the economic, environmental and social contexts in which we operate. Read more about our approach to reporting on page 50 of the Annual Review.
The Annual Review covers NN Group’s operating environment, key trends and material issues, how we create value, our business performance, our strategy, our objectives and achievements related to the social, environmental and governance aspects of our business, and the statement of our CEO. Target audiences are all NN Group stakeholders.
We are an insurance and asset management company active in 18 countries, with a strong presence in Europe and Japan. Our roots lie in the Netherlands, with a rich history that stretches back 170 years. We understand that for our customers, money is usually a means to an end. Life is about living. That is why we do our very best to help our customers achieve their dreams and overcome adversity along the way.
Through our retirement services, insurance, investments, and banking products, we are committed to helping people secure their financial futures. That is our purpose at NN.
With about 11,500 employees, we aim to deliver high-quality retirement services, insurance, investments, and banking products to retail, SME, large corporate and institutional customers
Combined ratio4 103.4% – of which Claims ratio4 73.7% – of which Expense ratio4 29.8%
4. Japan Life 1 Net operating ROE is calculated as the (annualised) net operating result of the segment, divided by the (average) adjusted allocated equity.
2 The solvency ratios are not final until filed with the regulators. The Solvency II ratio is based on the partial internal model 3 Including Mandema & Partners, and Zicht broker businesses.
7 The ‘NN Bank common equity Tier 1 ratio phased in’ is not final until filed with the regulators.
We expect 80% of the book to run off by the end of 2019 (measured from the end of 2016)
Continuing in this Annual Review, our reporting segments are grouped as follows: • Netherlands Life, Netherlands Non-life and NN Bank are part of Netherlands Insurance • Insurance Europe, Japan Life, Japan Closed Block VA and NN Re are part of International Insurance • Asset Management is the asset management business of NN Group: NN Investment Partners
This segment comprises NN Bank, NN Re (excluding reinsurance of the Japan Closed Block VA portfolio), the holding result and other results.
NN Re NN Re is NN Group’s reinsurer. It primarily reinsures risks within NN Group and retrocedes or hedges risks with the market.
Operating result EUR 12 million reinsurance business 56Netherlands Life 5 Netherlands Non-life 16 Insurance Europe 12 Japan Life 11 Asset Management
NN Group operating result ongoing business before tax excluding segment Other (% of total – FY2016)
In 1845, De Nederlanden van 1845 (‘De Nederlanden’) commences operations, specialising in fire insurance. In 1863, Nationale Levensverzekering-Bank (‘Nationale’) opens for business and specialises in life insurance.
De Nederlanden and Nationale merge to form Nationale-Nederlanden. Nationale-Nederlanden pursues acquisitions throughout the world, and starts new operations in Europe and Asia.
In October 2016, NN Group shares its views on the rationale and benefits of combining Delta Lloyd and the Dutch and Belgian activities of NN Group with the Executive Board and the Supervisory Board of Delta Lloyd. In December 2016, NN Group and Delta Lloyd agree on a recommended transaction. On 2 February 2017, we officially launched the offer.
Although we are a company with a long history at our core, we are relatively new in our current setup. The company we are today was only launched three years ago, with the listing of NN Group on Euronext Amsterdam on 2 July 2014.
Our journey in recent years has been instrumental in building a strong company with a solid balance sheet and a well-known brand.
This steady foundation allowed us to take an important step in preparing our company for the future, and bringing consolidation to the Dutch insurance and asset management markets.
EUR 5bn Assets under Management in SRI funds and mandates (2015: EUR 4.5bn)
We were able to maintain a strong capital position with a Solvency II ratio at 241%, making us well positioned to weather volatile markets.
In 2016, already 69% of our total charitable donations of EUR 1.5m went to NN Future Matters and its related target areas.
Full-year 2016 net result down to EUR 1,189 million from EUR 1,565 million in 2015, reflecting the lower operating result ongoing business, lower results at Japan Closed Block VA, and a negative result on divestments, partly compensated by higher non-operating items.
The net operating ROE of the ongoing business for the full-year 2016 was 8.1% compared with 10.8% in 2015, a year which benefited from higher private equity dividends in the Netherlands.
Overall employee engagement remained at a stable level compared to the previous year.
Read more about our non-financial objectives and how we performed on page 45 of this Annual Review.
At NN, our purpose is to help people secure their financial futures. Our values: care, clear, commit, guide us in fulfilling this purpose.
In 2014, we adopted the NN statement of Living our Values, which explains what these values mean to NN. The ‘Living our Values’ programme raises awareness, involves our employees and enables them to fully integrate our values into their every day work. Our senior management is expected to act as a role model when it comes to living our values, which is also reflected in our leadership profile.
of employees feel their team cares about customers and treats them with respect 80% favourable employee perception on openly discussing consistency of actions with values 86% of our employees feel that their colleagues demonstrate a high standard of integrity
One solution could be to shorten the GTCs and use understandable and simple language, whilst still addressing the heart of the matter. However, we must find a balance and ensure that the GTCs are complete. They must still sufficiently explain product conditions to customers.
Code of Conduct While our values provide us with a compass for decision-making, our NN Code of Conduct gives us more detailed guidelines for specific behaviour. The NN Code of Conduct brings together all relevant, conduct-related standards into a small set of comprehensible documents, fully aligned with our values. The renewed NN Code of Conduct came into effect on 1 September 2016.
Throughout 2016, a series of workshops were organised to discuss the content of the NN Code of Conduct and to foster a dialogue on what it means to apply our values and our NN Code of Conduct in our day-to-day activities.
Based on these workshops, a casebook with real life dilemmas is being developed for learning purposes.
Organisational implementation Our values are the foundation for our interaction with customers and other stakeholders, but they are also an integral part of our Human Resources Policies. Compliance with our values is part of our performance management and reward system.
To ensure we hire employees who fit well within our organisation, we made the values an imperative part of our employee value proposition. In 2016, a Personality/ Culture matching tool was added to the recruitment websites. This self-assessment tool enables prospective candidates to assess to what extent their personality and values match the culture and values of NN. They can share their matching results as an annex to a job application if they like. For new employees, we have an onboarding programme that explains the NN values and the expectations of employees to uphold them. In the Netherlands, new employees are also required to take the Oath for Financial Institutions, which was fully integrated in the NN statement of Living our Values. The accompanying ceremonies include a dialogue between employees about the values, and a signatory moment of the values statement or Banking Code. By 1 April 2016, all employees in the Netherlands required to take the oath or promise had done so, meeting the Dutch regulatory requirements.
Over the next few pages we highlight how our values are implemented across our businesses and how they support us in creating long term value for our stakeholders.
‘ It is important that we all feel we can openly share and discuss dilemmas.’ Dorothee van Vredenburch CCO NN Group
Agreed 67 Neutral 26 Disagree 7 98% would encourage a colleague to join the NN Values week next time
During the 2016 Values week, NN Belgium organised a number of events. To promote the NN Values challenge, lunch dates and fun tools to challenge each other were introduced. NN Values ambassadors gave cards to selected employees to compliment them for living the NN values. During the dedicated NN Values days employees could post their personal messages on care (what do you truly care for in your work and personal life?), clear (what should be done to be open and transparent in your daily job?) and commit (what do you commit to?). On the final day of the week, the NN Values challenge finalist and their supporters joined for the grand finale.
Open dialogue With the ‘Living our Values’ programme, we aim to continuously raise awareness of our values, and encourage active engagement from our colleagues. Based on an evaluation conducted in 2015, it was decided to adopt a specific theme for our 2016 ‘Living our Values’ programme, which was ‘open dialogue’. It is important that we all feel we can openly share and discuss dilemmas and our different points of view, and various activities were initiated to support this. A blog series on our social collaboration intranet platform SAM (Share All that Matters), called ‘Making a story together’ was started in which employees could address dilemmas. In 2016, we also continued the ‘serious game’ called the ‘NN Values challenge’, which focused on learning about our values in an innovative and fun way. This game allowed our employees to apply our values in different work-related situations and stimulated discussion around the values.
For senior management a performance management pilot was started to emphasise higher frequency and higher quality of performance dialogue. This pilot consisted of workshops focused on improving coaching skills and an upward feedback survey where participants were asked about the clarity, commitment and care of their manager in performance dialogues.
Through our Yearly Engagement Survey (YES) our employees can express their opinions on different topics, including the extent to which we are living our values and acting with integrity. The 2016 YES showed a slight progress in both areas.
As an investor and advisor on responsible investment solutions, we believe a values-driven culture is an indispensable component of a company’s Environmental, Social and Governance (ESG) profile. And even more importantly, it makes good business sense. With its Mindscope publication on corporate culture, NN Investment Partners demonstrates how strong corporate culture can contribute to better company performance. It outlines important market developments and highlights good practices from companies that have corporate culture high on their agenda. The study provides guidance for investors, board directors and other players in the market to stimulate and help shape a healthy corporate culture.
‘ My manager consistently acts as a role model when it comes to living our values’ (Pulse and YES results, %)
Our innovation approach We continually look for new ways to meet our customers’ needs and keep up with the changing dynamics of our markets. 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, and the way we meet this need will change. We want to be the intuitive partner to help people secure their financial futures. Therefore, innovation is a strategic focus area for NN Group.
Our drive for innovation is about increasing customer satisfaction, intuitive interaction, and efficiency. We will continue to run our core activities with the same commitment as always, focusing on cost savings, generating cash flows, and profitable growth. In a complementary way, investing in innovation allows us to make our businesses stronger and to optimally prepare our company for the future.
Creating a new world of customer experience Our innovative approach is not only about digitalisation, apps and online platforms. Developing products and services that anticipate new customer demands – and meet them in tailored ways – as well as finding other means of distribution, are also at the core of our innovation strategy. The examples below highlight some of our initiatives throughout 2016.
In Turkey, a Self-Service Client Portal was introduced with the purpose of improving our customer experience, using the feedback and suggestions from our customers as the basis for development. This online tool enables customers to view and manage their investments, pensions and insurance, from anywhere, using smartphones, computers and tablets.
NN Life Japan launched a one-stop intuitive service platform for agents, that will strengthen our relationships with distributors, improve the quality of advice and service to customers, improve staff productivity, and create cross-sell, upsell and retention opportunities.
57% of employees think NN Group is innovative in its products and services
NN Group entered into a three-year partnership with Startupbootcamp, a growth accelerator that helps fintech start-ups expand into full-grown businesses. In addition to providing financial support, we offer professional assistance to fintech startups by providing employee mentors. Also, through internships, our employees are given the opportunity to gain insights and hands-on experience in fintech product innovation.
More examples can be found in the ‘Delivering on our strategy’ chapter, pages 41-44 of this Annual Review.
Investments in innovation The most significant investment we are making in terms of innovation is allowing space for it throughout the company. NN colleagues are encouraged to experiment, explore market opportunities, and build new capabilities that support our current business and foster long term growth.
Supporting these goals and projects are our tangible investments in developing new business models, testing new technologies such as blockchain and artificial intelligence, and transferring our IT-infrastructure to the Cloud.
These measures allow our organisation to become more agile and responsive to customer needs and market demands.
Innovation going forward Throughout 2016, our innovation efforts sparked a great deal of energy inside the organisation. Although not all colleagues think we are innovative enough, the majority does feel encouraged to be innovative in their jobs, and we created valuable results for our customers. Now, we are ready to take our efforts to the next level.
Internally, we are focused on further organising ourselves for innovation. Expanding our efforts outside of our current organisation gives us even more opportunities to experiment with new ideas.
Therefore, following the success of Sparklab, our first innovation centre in the Netherlands, we will create a series of similar, connected labs, both centrally and in our business units in different countries. At least seven labs, led by our businesses, will be put in place to launch country or business-specific innovation opportunities. The first new labs are already live in Rotterdam, the Netherlands, and since the beginning of February 2017 in Hungary. Others will be developed in Spain, Poland, and Japan. They are supported by a central lab in the new innovation space The Bridge, located at our headquarters in The Hague.
‘ At NN, we want to help people secure their financial futures, guided by our values: care, clear, commit.’
Securing financial futures 2016 was an eventful and important year for NN Group. It was a year in which we made considerable steps in building a sustainable business for the future.
In April, ING sold its remaining shares in NN Group, completing its divestment of our company – a process that started in July 2014, when NN Group opened for trading on the Euronext Amsterdam stock exchange. Since the earliest activities of our company in 1845, we have merged, grown and changed, but the core of who we are has remained the same. At NN, we want to help people secure their financial futures, guided by our values: care, clear, commit.
After Nationale-Nederlanden Spain successfully implemented a paperless sales process, this concept was also introduced in Poland, the Czech Republic and Slovakia. These examples show that innovation is not only about coming up with new ideas, it is also about sharing them.
Further supporting our agents in Japan, we launched IRIS – an intuitive service platform aimed at strengthening relationships with distributors and improving the quality of service.
Our efforts are being recognised externally, earning over 40 awards in various markets. NN in Greece was awarded the best life insurance company in the country, while NN Life Romania won the Company of the Year award. For the fourth year in a row, NN Life Japan received 3 Stars from the Help Desk Institute (HDI) for its after sales service call centre. And in the Netherlands, NN Life was recognised as ‘the most recommended pension insurer’ for the third time in a row.
For the full year, we delivered a healthy operating result ongoing business of EUR 1,227 million and a good net result of EUR 1,189 million. We produced a higher value of new business and maintained robust Solvency II and cash capital positions – at 241% and EUR 2,489 million respectively. These results allow us to propose a final 2016 dividend of EUR 0.95 per ordinary share at our Annual General Meeting on 1 June 2017. Together with the interim dividend paid in September 2016, this brings the total 2016 dividend to EUR 1.55 per share.
This represents a pay-out ratio of around 51% of the 2016 full year net operating result of the ongoing business.
The Management Board members agreed that both need to be considered and balanced to achieve a future-proof organisation.
Read more about the dilemma videos on page 08 of this Annual Review.
Achieving profitable growth Our financial strength enables us to invest in value-creating opportunities, using capital generated in excess of our capital ambition. On 23 December 2016, we announced that the Boards of NN Group and Delta Lloyd reached an agreement on a recommended public offer on all outstanding ordinary shares of Delta Lloyd, with the aim to combine Delta Lloyd with the Dutch and Belgian activities of NN Group. With this transaction, we take an important step in bringing consolidation in the Dutch insurance and asset management markets while strengthening our leading position in the Netherlands and Belgium.
In line with our strategy to achieve profitable growth through multi-access distribution, in May, we acquired Dom Kredytowy Notus S.A. (‘Notus’), a leading financial broker in Poland. And in Japan, we entered into a long-term collaboration with Sumitomo Life Insurance, focused on selling our Corporate-owned life insurance (COLI) products via tied agents.
Extraordinary teamwork As a financial services company, our business centres around people and trust. I am proud to work alongside our 11,500 colleagues who are committed to serving our customers in a professional, caring and personal way. In our Yearly Engagement Survey, 90% of employees stated they feel their team cares about customers and treats them with respect. A solid result, but we will continue to work hard to further improve this. Overall, our employee engagement level was stable at 71%. As a Management Board, we would like to express our gratitude to all NN employees for contributing to our 2016 achievements.
Investing in society Our company aims to be a positive force in people’s lives, now and for generations to come. To achieve this, we will continue our corporate citizenship efforts in the areas where we believe we can have most impact: improving people’s financial wellbeing and responsible investing.
Throughout 2016, we introduced new tools to help empower our customers to find their way towards a financially secure future. With our NN Future Matters programme, we reached out to more than 27,500 youths in the many communities in which we operate. This brings us closer to our goal of positively impacting the futures of 100,000 young people by 2020.
We also expanded the sustainable solutions range through the launch of innovative impact funds, both in equity and fixed income, as well as a sustainable multi-asset fund. This helped to grow our Assets under Management in SRI funds and mandates to EUR 5bn, an 12% increase compared to 2015.
We have set clear non-financial objectives to further strengthen our performance. We feel encouraged by the improvement of our position in the ranking of the Dow Jones Sustainability Index to 77 points (out of 100), which places NN Group in the top quartile of the global insurance industry.
2017 onwards As we are proceeding with the recommended transaction with Delta Lloyd, our focus will be on further strengthening our position in the Netherlands and Belgium. We will make sure to give Delta Lloyd colleagues and customers a warm welcome, and show them that our brand promise ‘You matter’ defines who we are and what we do, every day. At the same time, we will continue to focus on delivering a robust performance as an international group, with a diverse business culture.
Our ambition going forward remains unchanged: we aim to deliver an excellent customer experience, so we can be a company customers can count on and employees can be proud of – a company that truly matters in the lives of our stakeholders.
Economic conditions such as low interest rates, as well as the continued ageing of populations, impact the environment in which the industry operates. Increased regulation and decisions made by industry supervisors have a large bearing on the offering of products and services. At the same time, the competitive landscape is constantly changing augmented by the rapid developments in the area of digitalisation and changing customer behaviour. Lastly, (geo)-political developments, and uncertainties surrounding them, lead to volatility in the economy and markets. As such, they both directly and indirectly impact the industry. For the sector as a whole, as well as for companies and other constituencies operating in this environment, these conditions require agility and stable, efficient, and responsible responses to challenges. This always with the interest of the customer front and centre.
Economic indicators in several European countries, including the Netherlands, showed better-than-expected developments due to stronger consumption and investments. As a result, economic forecasts for the coming years have been adjusted slightly upwards. Japan continues to show the lowest economic growth figures and outlook on a global scale.
Modest positive signals for the global economy could be under pressure from ongoing economic, market, and political uncertainties. This may trigger corporates and the financial services industry to maintain no-regret policies, as they must be prepared for possible effects of (geo)political tensions, financial market volatility, and rapid changes in technology.
Regulation 2016 marked the start of the implementation of Solvency II regulation. In general, this was successfully completed, as demonstrated by the results of the recent European Insurance and Occupational Pensions Authority (EIOPA) stress tests published in December 2016. In 2018, a first part of the Solvency II regime will be evaluated. This will provide a first opportunity to assess whether the new risk-based approach and prudency built into the design of Solvency II indeed increased the protection of customers and still sufficiently allows insurers to play their role in the economy as long-term investors.
Early 2017, the new IFRS17 standards will come out for the valuation of insurance liabilities, to be implemented in 2021. Together with the already published IFRS9 standards for asset valuation, this will bring insurance IFRS to the market value world.
The financial services industry, which encompasses insurance and asset management companies, is continually faced with various structural changes.
This is most visible in the area of banking payments, but more and more in insurance and asset management as well. Particularly in the Property and Casualty (P&C) market, online sales of products are advancing quickly. Digitalisation also brings opportunities for insurance companies to broaden and deepen product offerings and increase partnerships with technological start-ups.
The asset management industry is currently facing various challenges that put pressure on margins. This is due to low interest rates, digitalisation and the move to passive investment solutions.
(Geo) political developments Over the past few years political shocks became increasingly impactful in driving markets and economies. Political situations in many countries have changed significantly, as demonstrated by the outcome of the Brexit referendum in June 2016.
In 2017, important elections are due in some of Europe’s largest countries such as Germany and France, and in the Netherlands. This may impact the financial services industry as it is yet unknown whether specific new measures will be taken by newly elected governments. In the Netherlands for instance, decisions are expected regarding the future pension system and the labour market.
All in all, there seems to be a higher risk of uncertainty in the political space, accompanied by potentially substantial consequences on markets and the real economy.
Being prepared to drive change What is clear from this general assessment is that the landscape of the insurance and asset management industry is changing rapidly. As in all sectors, businesses that are well-prepared to take advantage of the opportunities these changes bring will be able to create value for stakeholders in the future. Leveraging the opportunities brought with new trends, developments, and market challenges is critical for our long term, sustainable growth. Therefore, in order to further develop and refine our business strategy, it is essential to understand and anticipate the most relevant developments and issues, how these changes affect our business, and how to balance innovative growth with the risks of operating in a dynamic environment.
Weathering market volatility In 2016, businesses were impacted by dynamic economic conditions, reducing the investment income of our insurance businesses. However, NN Group’s capital position remained strong and resilient, allowing us to weather severe market volatility. In the following sections, we address the issues and trends that potentially have the most impact on our businesses, our stakeholders, and the way we are able to serve our customers.
In June 2016, the United Kingdom held a referendum that resulted in a decision to leave the European Union – ‘Brexit’. With the announcement of Brexit, Europe was faced with growing uncertainty and risk in the markets, with a possibility of wide-ranging implications for the global insurance sector. NN Group has immaterial direct exposure to assets and currency in the United Kingdom. The ultimate impact for the financial sector much depends on what conditions UK companies will face to take part in the European Internal Market.
NN considers customers, shareholders, employees, business partners and society at large (including regulators and societal organisations) important stakeholders. We seek feedback from them on different topics in order to learn which issues they consider important. We do this across all levels of the organisation.
The materiality matrix was discussed with NN Group’s Supervisory Board, and validated and approved by the Management Board. These discussions did not affect the division of topics per quartile in the matrix. The outcome of this process is reflected in the figure below.
To earn trust and support, NN Group maintains an open and continuous dialogue with its stakeholders
To date, we reached out to 100% of customers with non-accumulating policies, mortgage related policies and pension related policies (third pillar). NN will reach out to the remaining group before 1 January 2018. From a total of almost one million individual unit-linked policies sold up to 2006, approximately 288,000 policies were still active on 31 December 2016.
In a limited number of cases (less than 500 by the end of 2016), NN has settled disputes with individual customers. These are tailor-made solutions. A limited number of individual customers have put forward their cases at the Dutch Complaints Committee Kifid or at the civil courts. Read more on pages 110-111 of the Financial Report (Note 45).
Opportunities and risks One of our main focus areas will be the way we engage with our customers. To become the partner for retail financial planning, we need to build our own relationships with our customer base. This requires intuitive tooling to facilitate more frequent contact, 24/7 through any means or device customers may use. We need to develop an ecosystem that facilitates direct customer contact. At the same time, it has a role for face-to-face contact with our distribution partners: agents, brokers, banks and other third party distributors. In addition to providing the right tooling, our product offering should anticipate the future needs of our customers, including different relevant social aspects and the shift towards a more sharing economy.
Opportunities and risks NN provides a number of life insurance, pension, income, investment and banking products. Economic conditions, inherent product risks, a highly competitive market and the changing need of consumers, affect the sales of our products and services. Products with guarantees are often no longer affordable. Therefore, we need to transform our propositions to customers. In order to secure our market position, we need competitive products. Products that are designed bottom up, with continuous feedback from our customers. Additionally, we need to price our products according to customer expectations. The use of data analytics is crucial in this process.
Our response We are committed to delivering products and services that are easy to understand and meet customers’ lifetime needs. These are built in a standardised, modular way, with flexible features tailored to the needs of individual customers. We review our product range regularly to ensure that all products and services meet our customer, compliance, risk, capital, and profitability requirements. In order to have a competitive advantage in the market, we develop products that are both intuitive and personal. Before introducing new products and services, they go through our product approval and review processes (PARP). PARP ensures, in all our markets, that transparency and customer interest remain a top priority, aligned with our company’s values. We are also increasingly paying attention to integrating sustainability aspects into our products and services, such as the offering of specialised SRI funds.
Digitalisation and innovation Technological developments continue to evolve at an exponential rate, and with it the ways in which our customers need and wish to interact with us. Technology can make products and services simpler, more direct, transparent and easier to manage. Digitalisation contributes to the optimisation of distribution and flawless processes. It creates the need to make our services accessible anytime and anywhere, while at the same time preserve our personal approach.
Expanding our current innovation efforts, we are evaluating what the market has to offer in terms of innovative opportunities and new partnerships. Our approach to fintech investment is a means to create strategic, mutually beneficial opportunities and connections, rather than building them ourselves.
Opportunities and risks The prevalence of cyber crime poses a real threat to our businesses and to the safety of our customers. Cyber criminals can use an array of online tools to hack into IT systems, ranging from distributing sophisticated malware to ‘man in the middle’ attacks that target our customers’ data. The risk of cyber and data security goes beyond individual customers and businesses. It can also expose the financial industry to increased scrutiny and legal action from regulators, lawmakers, and governments.
Our response At NN Group, we make every effort to provide optimal security and confidentiality of our customers’ data and their transactions. Cyber security is an integral part of our risk management strategy. We work with well-known certification authorities, such as OpenTrust and GlobalSign. We use encryption and authentication mechanisms to secure online communication and transactions.
Read more about how we protect our customers’ data and support them in protecting their data on pages 23 and 25 of this Annual Review.
Our response At NN Group, we aim to have a workforce that reflects the diversity of the communities in which we live and work. When we attract and select employees, we want to ensure there is cultural fit and that they embrace our values care, clear, commit.
In 2016, we specifically invested in leadership and talent development by deploying leadership curriculums and talent development programmes. These opportunities encouraged current and future leaders to live our values, demonstrate personal excellence, develop a deep understanding of the markets in which we operate, and enable others to perform at their best.
Read more about our approach to attract, retain and support our talented people on pages 32-34 of this Annual Review.
Opportunities and risks Slow and fragile economic growth affects societies and industries in different ways. There is the risk that people are underinsured, and long term savings are affected, both of which jeopardise people’s pensions. Political stability is one factor needed to create stability, however current increased protectionism in certain countries is decreasing the connectedness between countries, which is a complicating factor. More than ever, financial services companies can step up to re-engage people and help them to take their financial futures into their own hands.
Our response Our strong capital position allows us to weather severe market volatility and pay a dividend in line with our dividend policy. We limit our exposure to interest rates by matching the cash flows of our assets and liabilities. We diversify our investments and invest part of our capital in bonds, stocks, and other debt instruments. We take on higher yielding assets in a prudent matter.
Regulation and capital requirements In the past years, the financial services industry has been significantly impacted by regulatory changes. New regulations increase operational practices in general, and capital requirements that financial institutions should hold against their risk profiles more specifically. An important change for the insurance industry is the implementation of Solvency II. Solvency II is the regulatory framework for (re-) insurance undertakings and groups domiciled in the EU and replaced the former regulatory regime, which was based on the EU Solvency I directive, as of 1 January 2016.
Opportunities and risks Although insurance companies are generally well positioned to adequately respond to regulatory pressure, increased levels of regulation have created a new operating reality in the financial industry. The implementation of Solvency II impacts the risk profiles of companies, the volatility of the market value balance sheet and the amount of information requirements from regulators and investors.
Our response We recognise the importance of clear and sound regulation, as this helps to build and maintain trust in our sector and company. It is important however to achieve the right balance, and prevent regulation from severely disrupting our operations, which in turn increases costs for our customers and decreases customer engagement. NN Group strongly supports the close collaboration of policymakers and the industry to mitigate these risks.
Opportunities and risks Given the geographical scope of our operations, we deal with many pension systems. Countries have their own pension schemes and their own specifics regarding retirement age, contribution rates, tax deductions, replacement rates, and funding. We need to manage this wide variety of systems and adapt our approach locally.
In several of the countries in which we operate we launched new services and apps, allowing customers to easily access their pension and life insurance accounts, access performance reports of their investment funds, take immediate action in case of pension deficits or just provide them with relevant information.
Climate change Climate change poses a significant threat to the livelihoods and wellbeing of societies. The effects of climate change are already emerging with warmer temperatures and greater volatility in weather patterns. These changes can also pose a risk to the health of economies and financial markets, although the precise impacts and timing are difficult to predict. High uncertainty and the fact that climate change will occur over a long horizon are considered to be reasons why this issue was not indicated as most material for our company by all stakeholders. Nevertheless, NN considers climate change an issue that warrants attention.
Our response We aim to effectively manage our environmental footprint by reducing our use of natural resources, seeking green alternatives and compensating our carbon emissions (refer to page 35). In the non-life business, evaluating and managing the day-to-day impact of weather-related events is part of our core skills. Furthermore, a diverse range of products and a strong balance sheet help to provide resilience to these kind of risks. In managing investment portfolios, we integrate environmental, social, and governance factors in our analyses and decision making processes. Steps to address climate change also include proactive engagement with carbon-intensive companies and increasing our insights by measuring the carbon footprint of investments. Furthermore, we capture opportunities by offering clients sustainable products and solutions. We have taken note of the proposed recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) and are committed to further align our disclosures to these recommendations in our future reporting. To this end, a multi-disciplined working group will regularly inform the Management Board of our progress and challenges.
Read more about our responsible investment and climate approach on pages 30-31 of this Annual Review.
NN Group wants to be a company that truly matters in the lives of our stakeholders: customers, shareholders, employees, business partners and society at large To create long term value we focus on understanding our stakeholders’ needs and leveraging our core skills.
The outputs we realised and the outcomes we aim to achieve
EUR 1.5m donations to charitable organisations 22 kilotonnes CO₂ emitted, 100% compensated
Read more about the Sustainable Development Goals on page 49 of this Annual Review.
Our core skills are vital to generating value within our business model.
What we do differently We invest most of our assets, as well as our own capital (together called proprietary assets) through our asset management business, NN Investment Partners. We match our asset portfolio to our liabilities with optimal strategic asset allocation and by limiting any mismatches to an acceptable degree. Our portfolio managers are provided with in-house research and information that helps them identify attractive investment opportunities.
What we do Underwriting and product development are essential to the insurance business. Underwriting capabilities are needed in understanding, managing, and pricing risks. Our underwriters evaluate the physical and moral risk exposures of prospective businesses and clients. Together with our actuarial department, our underwriters determine the price of premiums to charge in order to insure our customers.
What we do Data analytics is not only used to identify, assess, and calculate risks, but also to create personal and relevant products and services for our customers. By using it to identify our customers’ needs and demands, we improve our product designs, allowing us to stay relevant in a changing and competitive industry. It increases customer satisfaction and decreases costs. Our models are only used for our own commercial and communication purposes, and we always respect the privacy of our customers.
What we do differently To further improve our data analytics skills, we started the Advanced Analytics Lab in the Netherlands. This lab analyses opportunities and threats that can be solved using machine learning. The lab works for our Dutch business units, NN Group, NN Re and NN Investment Partners. Outside the Netherlands, we run a Customer Intelligence programme to significantly increase our data analytics capabilities.
At NN Group, we perform a yearly risk assessment to identify and assess the top risks for our company, The 2016 process brought attention to many risks and resulted in the following top risks for NN Group (in no particular order).
Financial market exposure relates to adverse market movements and volatility. A well-diversified portfolio, a natural hedge with our liabilities, and specific hedging programmes aim to keep this risk within set limits.
Adapting our longer term business model in a timely manner is managed through NN Group’s strategy process and related Business Planning cycle. A Chief Innovation Officer channels and supports innovation initiatives.
As a pension provider, longevity risk is the largest quantifiable risk for which we investigate options to transfer part of the risk on short term and seek relief on the longer term by rebalancing our portfolio of Defined Benefit and Defined Contribution products.
Client and product suitability refers to the risk that products do not cover clients’ interests over the full lifetime against a reasonable price. A product approval and review process ensures new products meet our criteria for products. A periodic review of existing products contributes to continuous customer care.
Just like any large organisation, we have a risk of ineffective operations and related inefficiencies, which can lead to slow or incorrect decision making, a cost base that is too high, and reputational damage. An effective control framework aims to mitigate these risks to acceptable levels.
How this helps create value Risk Management is at the core of our value creation process. We protect the financial and capital value of NN Group by employing our risk activities to limit falling short on our long term business objectives. We do not try to predict the future, but rather manage potential risk. This encompasses all risks to all business objectives. We are clear and transparent throughout the organisation for the benefit of management and stakeholders alike.
Our customers entrust their money to us when purchasing our products and services. We invest and manage this money actively to be able to pay out claims and benefits. We are committed to offering products and services that are easy to understand and that empower our customers with the knowledge and tools they need to make sound financial decisions. Through our multi-access distribution approach, we aim to be where our customers want us to be, supported by efficient and effective operations. This is reflected in our strategy to deliver an excellent customer experience.
Read more about our strategy on pages 38-45 of this Annual Review..
Customer suitability We strive to meet customers’ needs throughout all different stages in their lives. We want to offer them fair value for money and an experience that is straightforward, personal, and caring. This means that we need to deliver insurance products that are suitable, transparent, and contribute to the financial wellbeing of our customers. Our Customer Golden Rules express that: • We offer fair value to customers
As a financial services provider, NN Group is always concerned about security. We have vast quantities of personal and financial customer data, which we treat with utmost care.
At NN Group, we make every effort to provide optimal security and the confidentiality of our customers’ data and transactions. We also recognise our role in supporting our customers in their own fight against cyber crime. Therefore, we have launched the Dutch Cyber Collective, an overarching alliance between suppliers and users in the cyber sector.
This initiative, officially launched in 2017, has been set up to help small- and mediumsized enterprises in the Netherlands to reduce cyber crime. Initiated by NN Group, the Dutch Cyber Collective connects associations, commercial companies, NGOs, and other parties who are committed to cyber security.
We strive to help mortgage customers in financial distress by looking for solutions to address their financial situation. We realise that there is no ‘one size fits all’ solution to financial issues. This is why we try to offer assistance in various ways, based on an analysis of income and expenses of mortgage customers in arrears.
Financial inclusion NN reaches out to people who may not have access to insurance and could benefit from additional support. We want to provide a positive and inclusive experience for many different groups of people by anticipating their specific needs and individual situations.
In Romania, we developed a health insurance product that offers affordable access to private care, as health care is becoming increasingly expensive to lower- and middle-income families. The core of this new proposition is extensive care for patients and less financial worry for their families. This health care product also aims to address the long term sustainability of Romanian public healthcare. In a collateral project, our Insurance Romania business unit focuses on disadvantaged children and children placed in foster care.
In 2016, NN Bank developed a pilot project focused on mortgage customers at risk of being in arrears. Via an early warning system, we proactively reached out to a group of customers to help them before they became behind in their payments. Measures we offer include grace periods, interest holidays, budget coaching, and job coaching.
By partnering up with initiatives of Wijzer in Geldzaken, a stakeholder platform coordinated by the Dutch Ministry of Finance, we aim to increase awareness of pensions. Nationale-Nederlanden in the Netherlands was nominated for an award from Wijzer in Geldzaken for our online service Pension Help. Pension Help starts ten years before a person’s retirement date, and aims to help customers by sending them customised and relevant information step-by-step.
Additionally, NN is involved with the Foundation for Sustainable Micro Pensions in Developing Countries (SDMO), through our membership of the Dutch Association of Insurers. The micro pensions programme works with a local partner – the Development of Human Action (DHAN) Foundation – which supports one million families in India. The pension is a defined contribution product with two options upon retiring: pensioners either take a higher pension which ends when they die, or they take a slightly lower pension and the remainder is paid when they die to their families.
Measuring our brand and reputation We measure how our customers value our products and services using – amongst others – the Net Promoter Score (NPS) methodology. With NPS we collect, evaluate, and act on a constant stream of customer feedback. This information drives improvements in our product portfolio and customer service. In 2016, all of our insurance businesses maintained or improved their Relationship NPS scores compared with the previous year, with the exception of Life in Romania. The NPS for Romania Life is still well above market average and the highest score compared of all our business units.
The NN Global Brand Health Monitor monitors how our brand is perceived externally, amongst our customers and society at large. Twice a year, we measure our main brand indicators and provide insight in the development of the brand performance. The Global Brand Health Monitor measures the brand awareness per business line per country, and whether customers feel we are living our values.
7 Poland yes n.a. yes 8 Romania no n.a. yes 9 Slovak Republic yes n.a. yes 10 Spain yes n.a. yes 11 The Netherlands1 n.a. yes yes 12 Turkey yes n.a. yes 1 Due to product portfolio and organisational set-up, the Dutch Life products are embedded in the Non-life and Pension results.
NN Life Japan launched a new value proposition – COLI critical illness insurance. It offers protection to business owners from the risk of deadly diseases. The product was developed to support business continuity when SME owners cannot stay at the helm of their company due to illness. We also opened a sales office in Kitakyushu. It enables us to better provide business continuity protection as well as other products related to business issues that SMEs are facing today
Creating value as a listed company We raise the financial capital that we need to manage our business from our shareholders and investors, as the owners of our company. They invest their money in NN Group and expect to be compensated in a responsible way. Maintaining a strong balance sheet is key to absorbing market volatility and ensuring NN Group and our operating entities are sufficiently capitalised at all times.
According to the AFM register as at 14 March 2017, the following shareholders have an interest of more than 3% in NN Group on the notification date: Thornburg Investment Management (3.03% – 7 Aug 2016), Norges Bank (3.22% – 27 Jun 2016), Franklin Mutual Series Fund Inc. (3.87% – 27 May 2015), Temasek Holdings (Private) Limited, (4.27% – 2 Feb 2016), BlackRock, Inc. (5.15% – 28 Oct 2016), and RRJ Capital II Ltd. (10.13% – 30 Jun 2016).
The stated percentages are the interests reported by the relevant shareholder to the AFM on the indicated dates. It is possible that the stated interests differ from the current interests of the relevant shareholder.
Relationship agreement RRJ RRJ Capital II Ltd (‘RRJ’) and NN Group have entered into a relationship agreement which was signed on 3 October 2016 and has a term of four years. Prior to the expiry of this agreement, NN Group and RRJ will discuss its potential continuation in good faith. RRJ intends to be a long term shareholder in NN Group and has expressed its continuous support and confidence in NN Group’s strategy and management.
Shareholder investment NN Group strives for a strong and diversified shareholder base, as we believe this is in the interest of all our stakeholders. A diverse shareholder base allows for cost-effective access to capital and business support.
Besides the financial benefits of a broad shareholder base it also provides greater flexibility and strengthens the corporate reputation.
Diverse shareholder base (Nasdaq shareholder analysis as at 31 January 2017 (%))
On 19 December 2016, RRJ, its owners and certain associated companies, received a Declaration of No Objection (DNO) from the Dutch Central Bank (DNB), as referred to in section 3:95 of the Dutch Financial Supervision Act (WfT), to hold an interest in NN Group not exceeding 12.5% of the issued share capital of NN Group.
On the date the DNO was issued by DNB, RRJ held an interest of 10.26% in the issued share capital of NN Group.
On 7 October 2016, Standard & Poor’s announced that it had placed the credit ratings of NN Group on ‘CreditWatch negative’ as a result of the proposed acquisition by NN Group of Delta Lloyd. On 4 January 2017, Standard & Poor’s announced that it will maintain the credit ratings of NN Group on ‘CreditWatch negative’ and expects to resolve or update this assessment within 90 days.
On 10 January 2017, NN Group issued EUR 500 million of senior unsecured debt with a fixed rate coupon of 0.875% per annum and a maturity of six years. The proceeds are planned to be used to repay EUR 476 million of subordinated debt of NN Group on its first call date in May 2017. This debt does not qualify as Own Funds under Solvency II.
On the same date NN Group issued EUR 850 million of subordinated debt with a maturity of 31 years and first callable after 11 years with a fixed rate coupon of 4.625% per annum until the first call date and a floating rate coupon thereafter. This subordinated debt qualifies as Tier 2 capital under Solvency II. The proceeds have been used to repay EUR 823 million of hybrids loans outstanding with ING Group which ceased to be grandfathered as Tier 1 capital under Solvency II from 1 January 2017.
To be able to remain competitive and continue to create value for stakeholders, we closely monitor our capital position including the use of debt instruments.
More information about the share buybacks is available in the Financial Report, pages 63, 146, and 151, or on our corporate website.
When proposing a dividend, NN Group will take into account, among other things, its capital position, leverage and liquidity position, regulatory requirements, and strategic considerations, as well as the expected developments thereof.
NN Group intends to pay dividends either in cash, after deduction of withholding tax if applicable, or in ordinary shares from the share premium reserve at the election of the shareholder. We intend to neutralise the dilutive effect of the stock dividend through repurchase of ordinary shares.
NN Group targets a single A financial strength rating. The financial strength rating of NN Group by both Standard & Poor’s and Fitch is A+.
As a long term and active investor, NN Group is committed to investing responsibly We strive to conduct our business in an environmentally and socially responsible way. This means managing our own assets, as well as those our customers entrust to us, in a responsible way. NN Group’s Responsible Investment Policy Framework sets out our vision and approach on how we integrate Environmental, Social and Governance (ESG) aspects in our investment decision-making process and active ownership practices. It also addresses our investment restrictions and the offering of specialised SRI products.
NN Group also developed responsible investment guidelines for Private Equity. These guidelines define our approach to integrate ESG factors in the selection, appointment and monitoring of our (external) private equity managers.
Dialogue and engagement with companies are part of our fundamental approach to the investment process. Because of NN Investment Partners’ active investment strategies, our analysts and portfolio managers are in continuous dialogue with investee companies. During company meetings, they also address ESG issues that may have a material impact for the company.
Furthermore, we have an in-house team that focuses in more detail on ESG issues that may have a material impact on our customers’ holdings. The engagements they conduct are often in collaboration with other investors. For example, during 2016, we participated in two working groups of the Principles for Responsible Investment (PRI) that focused on human rights in the extractive industry, and on identifying good practices for companies’ director nominations processes.
In 2016, a second study was conducted with the University of Maastricht’s European Centre for Corporate Engagement (ECCE). This study aimed at understanding how ESG factors affect share price performance in emerging markets (EM) equities. The study finds that investing in EM equities with high ESG ratings leads to better performance when adjusted for country and sector factors. NN Investment Partners uses these results to improve the ESG integration in the investment process.
EUR 5bn AuM in SRI funds and mandates number of shareholder meetings at which we voted number of ESG dialogues
By supporting the annual Climate Change Information Request that the Carbon Disclosure Project (CDP) sends to publicly listed companies worldwide, we encourage companies to adopt a long term mindset, and to provide better disclosure regarding climate change-related risks and opportunities. In 2016, we also joined CDP’s Water programme, through which we will encourage companies to disclose better information about their water usage.
Sound investment decisions start with having the right information. To better understand investment exposure to potential environmental risks, NN Investment Partners partnered with South Pole Group, one of the leading providers of carbon, waste and water data. By building an in-house portfolio screening tool, we are able to meet current and future information requirements of clients, enabling on-demand reporting across asset classes. Among the first requests, a carbon footprint report is being prepared for NN Group’s proprietary portfolio.
Making a positive impact through our investments By offering specialised SRI funds and responsible investment solutions, NN Investment Partners meets our customers’ growing demand for products that generate solid financial returns and have a positive impact on society and the environment. NN Investment Partners has a long track record of managing sustainable products across asset classes. In addition to NN Investment Partners’ flagship sustainable equity and credit funds, a number of new funds were introduced in 2016. This included a new sustainable balanced fund that invests in a mix of assets classes. NN Investment Partners also grew its presence in impact investment strategies through the launch of a euro green bond fund and a global impact fund focusing on listed equity. These offerings aim to generate measurable impact alongside financial return. The total assets under management in all our sustainable equity and fixed income products have grown with 12% to EUR 5,062 million at year-end 2016.
Read more about stakeholder engagement and international commitments on pages 48-49 of this Annual Review.
Creating value as an employer NN is committed to maintaining a caring, healthy, and respectful workplace in which people can work and thrive. NN’s ambition to become more agile, and to increasingly focus on customer-driven innovation, drives our effort to empower our people and to support a more entrepreneurial culture.
Over the past year, these goals have been advanced through efforts dedicated to developing leaders. This includes creating the right mindset for all of us to deliver on our strategy. Overall, this means stimulating a culture that balances left-brain strengths such as ratio, logic, analysis and facts, with right-brain capabilities such as outside-in orientation, creativity, empathy and an entrepreneurial mindset. It is our belief that this fosters authentic employees who wish to develop themselves and take initiative. Although we see this as a long term journey, we have already received a number of HR awards that signal we are on the right track.
Leadership development In 2016, NN specifically invested in leadership development by deploying a leadership curriculum focused on encouraging current and future leaders to live our values, demonstrate personal excellence, develop a deep understanding of the markets in which we operate, and enable others to perform at their best.
One of the most notable interventions was a three-day leadership development programme for all senior leaders. Similarly, we launched leadership development programmes for trainees, mid-career, and senior-career talents. In general, these programmes take the form of a development journey lasting between 6 and 36 months. This allows these talented colleagues to accelerate their development and grow their leadership skills in line with our NN values, leadership model, and strategic direction.
We also understand that diversity itself does not guarantee results in terms of cooperation and better decision-making. This is why in our development programmes we provide managers with tools to increase awareness around the reasons behind differences in behaviour and how to leverage these differences when working in teams and business units. Working for NN worldwide in 2016, 20% of our senior leaders in the so called Top 50 were female and 26% had an international background. The NN Supervisory Board is made up of seven members, two of whom are female. This shows that our continuous effort to improve diversity is bringing small visible improvements, and we look forward to better fulfilling this potential.
An overview of our Central and European Works Council members can be found on page 28 of the Financial Report.
For specific target groups, we developed training programmes for professional development on specific topics, such as Solvency II, Wet financieel Toezicht, and the Art of Insurance and Asset Management. This strengthens our learning communities, and enables knowledge sharing between professional practitioners.
‘How do we create a more entrepreneurial environment in which employees feel engaged and empowered to make decisions, act as owners, come up with innovative ideas and are committed to deliver results?’ This was the starting point that led to an extensive engagement programme led by a dedicated group of change ambassadors from across the organisation within Nationale-Nederlanden Poland.
This resulted in a bank of initiatives that encourage employees to search for and create for new ideas for business development and improvement. Simultaneously, everyone’s personal development was accelerated through ‘speed-dating’ events and a new training offer. Poland won an award in the Employee Engagement and Loyalty category from a leading Polish newspaper for their approach.
To further optimise the efficiency of our businesses, several restructurings were announced or implemented in 2016. Two examples are NN Bank and NN Life in the Netherlands.
In the second half of 2016, NN Bank prepared a Request for Advice to significantly change its organisational structure and governance. The main goal of this reorganisation is to become a more agile organisation. Furthermore, it enables NN Bank to further reduce the cost/income ratio in future years. The new organisation became effective as of 1 January 2017.
These restructurings lead to organisational changes and redundancies. NN remains committed to supporting those employees who are directly affected by these organisational changes. To guide and help our people through these challenging times, we introduced various initiatives to provide employees with training, coaching and advice. In addition, NN stimulates and enables ongoing development, with a view to improve and strengthen the employability of all our employees.
Stable engagement levels At NN, we believe that engaged employees are at the heart of a successful organisation. To understand how our employees feel about our company and to get an understanding of their engagement levels, we ask their opinion and get their views through an annual employee survey. The response rates this year – 86% of all employees completing the survey – was high, showing the commitment of our employees to have their voice heard and make our company an even better place to work. Despite ongoing restructuring, overall employee survey results show engagement levels that remain fairly stable at 71%. Furthermore, survey results show our continued focus on our customer, the need to continue to invest in collaboration and innovation, and reflect that colleagues feel all of us truly live our values – care, clear, commit – on a day-to-day basis throughout NN.
In addition, the vast majority of NN Group’s employees are covered by a collective labour agreement (CLA) or locally agreed policies. The first NN CLA in the Netherlands was agreed upon in 2011, followed by a new (CDC) pension plan in 2012 and an agreement on the financial independence of the ING Pension Fund in 2014. In 2016, both a new CLA and a new agreement on our Social Plan were reached where ‘Investment in continuous employee development’ is at the heart of these agreements. NN’s process of co-creation of the CLA (with contribution of employer, employees, trade unions and works councils) has been inspiring and is seen as best practice by other companies and governmental institutions.
The ‘Your Health matters’ programme in the Netherlands offers energy workshops and sports clinics as well as tools and information on work-related stress and mental wellbeing. This is so employees can discuss their perceived workload with their managers and make appropriate agreements. We provide information and support on volunteer care duties and how to deal with these circumstances.
We integrate our vitality tools and workshops in the employability programme, so people are able to meet the constantly changing requirements of their jobs and have enough energy and vitality to remain productive in their work. The international running sponsorship platform and several other society related activities provide additional opportunities for employees to engage in a healthy lifestyle.
Topics included: ‘sense making in a dynamic context’, ‘understanding how entrepreneurial thinking, innovation and customer centricity translate into managerial decision making’ and ‘how to more effectively leverage the collective intelligence’.
Sustainable supplier management With an annual spend of around EUR 1 billion, our procurement activities support our business strategy. A substantial part of this investment goes towards real estate, professional services, IT and facility management.
Our relationship with suppliers is based on our NN values, and we aim to work together in a mutually beneficial way. We have the supplier qualification process and governance in place for managing sustainability – related to social, environmental and financial aspects – which is improving every year.
Managing our environmental footprint In 2016, we continued to effectively manage our direct environmental footprint by efficiently using natural resources; by identifying and implementing green alternatives; and ultimately by compensating for the remainder of our carbon footprint.
NN Group encouraged employees to drive cleaner by introducing more electric cars in the NN car pool, and installing additional charging stations at our offices in the Netherlands.
We offset the remainder of our CO2 emissions through the purchase of Voluntary Carbon Units (VCUs), Gold standard. As a result, we achieved 100% carbon neutrality over 2016. The carbon credits that we acquired come from a windmill park in Manisa, Turkey. The park exists of 23 modern wind turbines with a total capacity of 57.5 MW. The park provides renewable electricity to around 20,000 households. The project ensures that less greenhouse gas emissions will be emitted as fossil fuels are replaced by wind energy.
NN Group asked Climate Neutral Group in 2016 to make an analysis of our air travel. Climate Neutral Group identified four areas for reduction of CO2 emissions: reducing business class flights, using the train for short trips, booking more efficient flights and replacing trips with video conferencing.
Electricity 32 Renewable electricity 26 Natural gas 29 District heating 13
Tax strategy and policy We believe that being a responsible tax payer means that in our tax planning we take due account of long term considerations and carefully weigh the long term interest of our stakeholders. We have a set of tax principles to which we adhere as well as communicate to the public on our website.
NN Group reports various tax elements on a country-by-country basis. We expect the impact of such reporting to be low as it reflects our policy that transactions must have a business rationale. Besides the public disclosure, we also report country-bycountry information to the tax authorities in line with the BEPS initiatives.
To raise internal awareness of the standards and policies we have in place that are relevant for all managers to know and act upon, we included these principles in the Manager annex of NN’s Code of Conduct, which became applicable in September 2016.
The income tax paid is reflected in the consolidated statement of cash flows in the Financial Report and amounted to EUR 197 million in 2016 (2015: EUR 39 million).
NN Group reduced its mobile footprint through collaboration with the organisation Closing the Loop and its ‘One for One’ programme. For every mobile phone we replaced, Closing the Loop bought a broken mobile phone in Africa and thereby prevented phones from ending up in landfills. Together, we created new value for discarded mobile phones and contributed to the circular economy.
In addition to the Social Innovation Relay, in Spain, JA and NN together also organised an Innovation Camp to promote social integration of people with intellectual disabilities. Students from High School, Baccalaureate, Vocational Schools together with Aprocor, a social foundation with more than 25 years of experience supporting students with intellectual disabilities to achieve social inclusion, worked together to create social innovations.
We focus our efforts on three complementary target areas: promoting financial empowerment, creating economic opportunities, and alleviating financial distress. With international and local partners involved, the programme is both globally consistent and locally relevant.
Creating economic opportunities By helping young people prepare for the future, we believe we add value by increasing their opportunities in the labour market. Our colleagues provide job training to young people who may lack specific skills or role models. This is in cooperation with JINC, a Dutch not-for-profit organisation focused on helping young people become better prepared for the labour market.
The main questions addressed are if the participating students improve their skills and expertise, and do they show a more innovative, entrepreneurial and socially responsible attitude that they can use in their future career. A total of 12,631 students participated in ten countries.
In Japan, NN Life continued their partnership with the Social Entrepreneurship School (ETIC). Two young entrepreneurs grew their business by receiving mentoring and advice from various NN experts and senior social entrepreneurs.
For example in the Netherlands, we partner with the LINDA.foundation, a charity that helps families in financial distress. In 2016, we organised several initiatives to raise funds, such as an employee winter fair. In addition, volunteers helped assemble packages with gift vouchers for the families concerned. Our customers are also involved in the LINDA.foundation through our special credit card that donates ten eurocents for each transaction to the LINDA.foundation.
As part of the promotion of the NN Rotterdam Marathon event, we partnered with the Jeugdsportfonds, a charity that helps children from families without the financial means, to become members of a sports association of their choice. In Bulgarian NN running events, our colleagues ran for one of our local charity partners SOS Children’s Village.
The NN Future Matters scholarship programme is a collaboration between NN and EP-Nuffic and gives students the opportunity to complete a Master’s programme while gaining the experience of studying abroad. These scholarships are intended for students from selected countries wishing to complete a Master’s programme in the Netherlands, with a particular focus on those who are the first in their families to go on to higher education. The students are matched to an NN mentor, who supports them during the year.
‘ To help young people grow their economic opportunities what better than to provide talented and ambitious students a scholarship to take their future into their own hands.’ Delfin Rueda CFO and NN Future Matters mentor 27,529 young people reached through NN Future Matters programme 69% of total charitable donations to NN Future Matters and its related target areas
Excellent balance sheet management Disciplined capital and risk management to keep customers’ money safe
Read more about our innovation efforts and achievements on pages 10-11 of this Annual Review.
Leverage our asset management capabilities The fundamental need of people to protect themselves against life’s uncertainties will not disappear and will therefore continue to drive growth in the insurance industry over the long term. With the combination of our asset management, life insurance and retirement service capabilities, we differentiate ourselves in the market. In this context, asset management needs to be even more integral to the core of NN Group. With regard to our portfolio, we are involved in banking, non-life and health on an opportunistic basis, where we have clear chances to succeed or where it helps us build the needed scale.
Make clear capital allocation choices Capital generated in excess of NN Group’s capital ambition is expected to be returned to shareholders, unless it can be used for other appropriate corporate purposes, including investments in value-creating opportunities. We continuously perform a strategic assessment of NN Group’s portfolio. During the year, we announced several transactions.
On 18 July 2016 we announced the sale of Mandema & Partners to Van Lanschot Chabot in the Netherlands.
On 4 October 2016, our whollyowned reinsurance entity in Ireland, NN Re (Ireland) Ltd., signed a portfolio transfer agreement with Canada Life International Re Limited.
The transaction will create a well-diversified leader in the Dutch pensions, life and non-life insurance and banking sectors, with a strong asset management platform, attractive international presence, ample growth opportunities, and appealing customer propositions. It creates consolidation in the insurance sector, and as such brings additional stability in the markets, and will generate materially higher cash return to our shareholders over time through benefits of scale.
Read more on page 118 of the Financial Report (Note 51).
Netherlands Insurance Personal, digital, and relevant Embracing the main trends of individualisation and digitalisation, our Dutch business units continue to invest in innovating our customer experience by offering personal service in a digital and relevant way. It is a personal approach, with products and services relevant to the customer delivered through their preferred channel.
Whereas the focus in 2016 was mainly on increasing digitalisation and getting the basics right, going forward the ambition is set to increase our efforts to become more personal and relevant to our customers. Another clear goal is to increase pension awareness. This is paramount in the Netherlands, as its pension system is expected to change considerably over the next five years. NN actively contributes to the discussions on the direction of these changes. At the same time, cost savings remain a priority in the Netherlands. After NN Group announced the sale of Mandema & Partners on 18 July 2016, the target to achieve an annual administrative expense base for the Netherlands was reduced from EUR 700 million to EUR 685 million by the end of 2018.
International Insurance Strategic focus on profitable growth In order to drive profitable growth while innovating our customer experience, a first priority for the international insurance businesses is to focus on disciplined capital allocation at portfolio and proposition levels. This enables the business to improve return on equity of the overall portfolio and also improve the value of new business written as we focus on innovating customer propositions that fit the low interest rate environment.
A third priority is to drive growth through innovative product development mainly in the areas of protection and long term savings. Finally, we want to differentiate through excellent customer experience by continuously digitalising and innovating the customer touchpoints and leveraging customer intelligence and data analytics. Successfully implementing a digital strategy is critical to firstly meet and progressively beat our customer expectations.
Asset Management Sharpening strategic focus NN Investment Partners, our asset management business, continues to sharpen its strategic focus on creating relevant solutions for both institutional and private investors. NN Investment Partners aims to develop close partnerships and explore new opportunities to accelerate growth across its third party client base. The main focus therefore lies on segments where distinct investment skills meet strong or growing client demand.
NN Investment Partners will also focus on delivering operational efficiencies, especially in IT processes, and further enhance its cooperation with the businesses of NN Group.
Our medium term focus areas are translated by the different businesses into local strategies, responding to their own market characteristics.
95% 95% of our businesses using NPS, compared to 2015 remains unchanged or improved.
With our strategy to deliver an excellent customer experience, we put the customer at the heart of everything we do 2016 All our businesses delivered on this strategy 48,000 In a bid to increase the access of insurance products to underserved groups, NN Poland has insured over 48,000 SMEs.
30-55 The ‘Vrouwenplan 2016’ campaign targets 30-55 year old Dutch women by encouraging them to plan for their financial futures.
EUR 5bn Assets under Management in SRI funds and mandates, an increase of 12% compared to 2015.
Netherlands Insurance NN Life launched a roll-over pension product and a pension service which provide (non-)customers insight in their pensions and opportunities to take action in case of deficits.
NN Non-life improved their Employers Package and extended the coverage. By managing absenteeism, the customer (the employer) affects the premiums that have to be paid: lower absenteeism leads to lower premiums.
International Insurance NN Turkey launched a cancer care product and a multi critical illness product that covers 17 diseases including cancer. This product insures customers for critical illness risks and provides financial security in their recovery period.
NN Romania launched private health insurance, a flexible one-year renewable health insurance with direct reimbursement for inpatient services and direct access to outpatient services.
NN Group is committed to delivering products and services that are easy to understand and meet customers’ lifetime needs. They are built in a standardised, modular way, with flexible features tailored to the needs of individual customers. We review our product range regularly to ensure that all products and services meet customer, compliance, risk, capital and profitability requirements. Here, we highlight several examples.
Non-life implemented intermediary segmentation, for example based on portfolio and growth potential, and on intermediary needs, ultimately resulting in improved servicing to customers. It also offers specific product information via nn.nl and My NN.
International Insurance NN Japan entered into a collaboration agreement with Sumitomo Life Insurance, which will sell our corporate-owned life insurance through their nationwide network. It also opened a sales branch to cover the Kitakyushu city and Yamaguchi prefecture, increasing our distribution reach.
NN Spain has opened 121 Orange Points since 2012 – a network of tied agents to reach customers and prospects in smaller cities that are not covered by NN Spain’s branch network.
Netherlands Insurance In our individual-life closed book, the first product portfolios were transferred to a new IT system, leading to better service and lower costs.
Our pension company decreased service lead times in call centres, improving the speed of service to our customers.
NN Poland developed an outbound call centre automation which facilitates outbound sales and services for customers.
NN Belgium optimised their process for dealing with pledged contracts at maturity for their life products. As a result customers receive payments quicker.
NN Romania ran a wide process automation project for pensions products that included enrolment digitalisation and implementation of a new asset management software that highly improves reporting, trading, investment risk monitoring, and NAV calculations.
Asset Management NN Investment Partners introduced robotics to enhance straight through processing and reduce manual errors, especially in the reporting domain, for the purpose of increasing efficiency.
A more agile way of working was introduced in NN Investment Partners’ Operations & IT and HR departments. This method enables short-cycled change adapted from outcomes, increases entrepreneurship by moving decision power to the level of knowledge, and encourages a bottom-up flow of ideas.
NN Group aims to make processes as efficient and effective as possible in order to deliver value to our customers. As well as implementing a new operating model with more standardised processes, we are simplifying and improving our IT infrastructure. We are also developing our customer intelligence skills so that we can adopt a more holistic way of servicing our customers and, ultimately, provide them with even better service. More on our data analytic skills can be found on page 21 of this Annual Review. Here, we highlight several examples.
We reduced the administrative expense base of our Netherlands units by almost 25% to EUR 761 million. We are well on our way to reaching our current target of EUR 685 million by the end of 2018. Thirdly, we increased the net operating return on equity of the ongoing business to 8.1% for 2016.
Financial objectives Annual growth rate on average of 5–7% of operating result before tax of the ongoing business, in the medium term.
Reduce administrative expenses by approximately 15% to achieve a cost base of EUR 685 million by 2018 for Netherlands Life, Netherlands Non-life and Corporate/Holding. The reduction of administrative expenses in Netherlands Life, Netherlands Non-life and holding entities by EUR 200 million, compared to 2013, was completed in 2015.
• Provide tools to improve our customers’ financial decision making • Be recognised as the ‘You matter’ company and improve
• Strive for 30% women in senior management positions by 2020 • Continue to strengthen employee engagement
• Reach out to at least 100,000 young people by 2020 • 70% of total charitable giving towards NN Future Matters related areas through time and charitable donations by 2020
Minimise our environmental footprint by reducing the use of natural resources and seeking green alternatives. Making responsible choices in procurement contributes to this.
NN Group operates under a two‑tier board system NN Group N.V. is a public limited liability company (‘naamloze vennootschap’) incorporated under the laws of the Netherlands. It has a two‑tier board structure consisting of an Executive Board and a Supervisory Board. The company also has a Management Board.
htm 22 years average experience in the financial services industry of an NN Group Management Board member
For more information, refer to the Report of the Supervisory Board, pages 07-13 of the Financial Report.
The Executive Board is entrusted with the management, strategy, and operations of NN Group under the supervision of the Supervisory Board.
The Management Board is entrusted with the day-to-day management of NN Group and the overall strategic direction of the company.
For more information about Corporate Governance, refer to the Corporate Governance chapter, pages 14-23 of the Financial Report.
Executive Board Management Board 1. Lard Friese (1962) Chief Executive Officer
Stan Beckers was appointed to the Management Board as Chief Executive Officer NN Investment Partners on 7 July 2014. Stan is responsible for NN’s asset management business. Over the past 26 years, he has also been a member of the Investment Committees at several pension funds and of the Supervisory Board at KAS Bank, Robeco, Econowealth and St Lawrence Trading Inc. Stan is also a visiting professor at KU Leuven. As announced on 16 February 2017, Stan is retiring on 1 April 2017 and will be succeeded by Satish Bapat, currently CEO of NN Life Japan.
Dorothee van Vredenburch was appointed to the Management Board as Chief Change and Organisation (CCO) on 7 July 2014. Dorothee is responsible for NN’s human resources, communications and sustainability. She joined ING/NN in 2009 as managing director of Corporate Communications and Affairs of ING Group. She brings 27 years’ experience in the financial services industry starting as an investment banker, and held leadership positions at amongst others Citigate First Financial.
Delfin Rueda was appointed to the Executive Board as Chief Financial Officer on 1 March 2014 and as member of the Management Board on 7 July 2014. Previous to that he was CFO and member of the Management Board ING Insurance Eurasia N.V. since 2012. Delfin is responsible for NN’s finance departments and investor relations. He brings 23 years of experience in the financial services industry. Prior to joining ING in 2012, he was Chief Financial and Risk Officer and member of the Management Board at Atradius. He also held leadership positions at J.P. Morgan, UBS and Andersen Consulting.
The Management Board is entrusted with the day‑to‑day management and overall strategic direction of NN Group. Its members have, on average, 22 years’ experience gained from significant and varied roles in the financial services industry.
We would like to thank our cultural partner, the Mauritshuis Museum in The Hague, The Netherlands, for allowing us to take this group photo in their iconic entrance.
NN Group identifies stakeholders based on their relevance to NN Group. Parties are regarded as stakeholders when they have a significant impact on our business, or who are impacted by our business. We consider customers, shareholders, employees, business partners and society at large (including regulators and societal organisations) important stakeholders. We seek feedback from them on different topics in order to learn which issues they consider important.
This input is used in defining our strategy and in our decision-making processes, and tells us how we can best align the interests of our business with the needs and expectations of our various stakeholder groups.
In 2016, we were confronted with various developments, issues, and challenges. These were brought to our attention by, or discussed with, different stakeholders. Below we provide a snapshot of the key developments and dilemmas.
Following its policy paper ‘CSR Pays Off’ and a sector risk analysis by KPMG presented in 2014, the Dutch government is supporting the development of sector‑based covenants with Dutch sector associations.
The covenants are intended to be the product of multi-stakeholder dialogue between sector associations, member companies, government, trade unions and civil society organisations. Through these covenants, sector associations can identify leading International Corporate Social Responsibility (ICSR) risks facing their sector and develop collaborative approaches to address them. This work is being undertaken in close collaboration with the Social and Economic Council of the Netherlands (SER), the advisory and consultative body of employers’ representatives, union representatives, and independent experts that have been fostering sustainable supply chain management among Dutch industry. In 2016, the Dutch insurance sector has expressed its commitment to working on the development of an ICSR sector covenant. Within a reasonable period of time parties aim to come to agreements related to risks in the area of human rights, labour situations and the environment for the investment activities of Dutch insurers.
This often includes a dialogue to improve our understanding of stakeholder expectations. In 2016, we were invited for a dialogue session organised by the Dutch Association of Investors for Sustainable Development and PwC in honour of the 2016 Tax Transparency Benchmark. The report acknowledged the large improvement NN made compared to 2015. We shared our experience and how the benchmark was used as a practical guide to take several steps in the area of tax transparency. We expressed that the benchmark remains valuable, but that it is important that the method remains stable. In another example, NN representatives attended a meeting organised by the Fair Guide, a Dutch NGO initiative, to discuss their revised annual sustainability assessment. We expressed our concerns on the overly detailed policy expectations. Furthermore, the methodology is focused on exclusion of sectors and activities from investment, which is not in line with our approach. NN’s policy is aimed at the integration of Environmental, Social and Governance (ESG) issues into our investment decisionmaking process. An important principle is to encourage businesses to positive change through engaging in a dialogue with them. By publishing our policies and guidance papers, we hope to provide our stakeholders with a better understanding of our approach.
Prior to and at our Annual General Meeting of Shareholders, a Polish NGO asked us to divest from coal companies.
Decent work and economic growth Promote sustained, inclusive and sustainable economic growth, full and productive employment and decent work for all
Early 2017, we invited a group of 20 stakeholders to engage in a conversation on our potential impact on the SDGs, and how these relate to our strategy and our key objective; creating long-term value for all stakeholders. Government representatives, regulators, investors, NGOs, academics and peers were present, and the dialogue was hosted by Dorothee van Vredenburch, member of our Management Board.
As an insurance and asset management company with a purpose to help people secure their financial futures, we learned that SDG 8 (Decent work and economic growth) and SDG 12 (Responsible consumption and production) resonate most with our core activities. Regarding our investment activities, we discussed that different investment instruments, such as ESG integration, dialogue and engagement, and impact investing, might be linked to additional SDGs. More specifically, SDG 3 (Good health and well-being), SDG 7 (Affordable and clean energy) and SDG 9 (Industry, innovation and infrastructure) were mentioned as potential goals. The outcomes of this stakeholder dialogue will be used to strengthen our strategy going forward.
Approach to human rights Respect for human rights is an integral part of our values as confirmed in the NN statement of Living our Values. The principles contained in the UN Guiding Principles for Business and Human Rights guide us in implementing human rights in our business activities and interactions with stakeholders. The principles make a clear reference to internationally accepted standards, such as the UN Declaration of Human Rights.
Through various policies and related due diligence, NN Group seeks to meet its responsibility to respect human rights in our role towards employees, suppliers, clients, investments and the communities in which we operate. Examples of such internal policies are our Human Capital policy, Procurement policy and our Responsible Investment Policy Framework. To provide our stakeholders, including investors and NGOs, with more insight and to guide our analysts in their assessment, we published an Investor Guidance paper on Human Rights in July 2016. In addition to these policies, we developed an overarching corporate Human Rights Statement in 2016. This statement, endorsed by the Management Board, underlines our commitment to human rights and was published early 2017.
In this year’s Annual Report, we made a next step towards integrated reporting. Elements such as our materiality matrix, and a description of how our business model creates values for our stakeholders, are again included in the Annual Review. The performance data regarding responsible investment, human capital, community investment and environmental footprint that were in the Sustainability Supplement last year are now included in the Annual Review. It aligns relevant information about our strategy, governance systems, performance, and future prospects in a way that reflects the economic, environmental and social contexts in which we operate.
As of the financial year 2016, NN Group will also publish a Solvency and Financial Condition Report (SFCR), which will include public quantitative and qualitative disclosures on Solvency II, either through a specific reference to this Annual Report or as supplemental information. The SFCR will be published later in 2017 on NN Group’s corporate website in accordance with the relevant deadlines.
We believe that this reporting strategy enables us to tailor our reporting for different stakeholders, many of whom require different depths of information.
Reporting profile This is NN Group’s third standalone Annual Report, after our separation from ING Group and becoming a publicly listed company on 2 July 2014. It is published on 16 March 2017. We report annually, on a calendar year basis (1 January – 31 December).
Information in this review is based on extensive reporting from our countries, businesses and functions. All information is reviewed by NN Group’s Disclosure Committee and is subject to approval of our Executive Board and Supervisory Board before publication.
We aim to provide transparency and enhance the reliability of the reported content for our stakeholders. Therefore, our external auditor KPMG provided limited assurance on the Annual Review. We provide evidence to our external auditor to support the statements we make in this report. The non-financial information in scope of the assurance engagement of KPMG is defined as related to the material topics: transparent products and services, customer centricity, sustainable products and services, innovation, employee health, wellbeing and employee engagement, diversity and equal opportunities, human capital development, attracting and retaining talented employees, environmental footprint, financial inclusion and literacy, community investment, responsible investment, climate change and human rights. The non-financial information is included on the following pages of the Annual Review: About NN (pages 05-11), Marketplace and trends (pages 16-17, 19, 21), Our business model (pages 22, 25-27, 30-37), Our strategy (page 45), Governance (pages 48-50), Facts and figures (pages 53-56). Please see page 57 of this Annual Review for their assurance report.
Boundary and scope of the reported data The boundaries of this report are defined by the topics included in the materiality assessment and the results that are presented in the materiality matrix.
We have sourced the HR data directly from the HR data analytics department. The financial data reported in this review has been fully sourced and aligned with NN Group’s 2016 Financial Report.
Reporting guidelines The information and data in the NN Group Annual Review is in accordance with the G4 guidelines (Core) from the Global Reporting Initiative (GRI). It aims to make information available in a manner that is understandable and accessible to stakeholders using the report and reflects different aspects of the organisation’s performance to enable a reasoned assessment of overall performance.
The GRI Index table states the indicators NN Group is reporting on, including where to find the respective information, either in this Annual Review, Financial Report and/or the NN Group website. The index table can be found on www.nn-group.com/annualreport. In this document you can also find the Progress reports for the UN Principles for Sustainable Insurance and the UN Global Compact.
Consolidated balance sheet As at 31 December Amounts in millions of euros, unless stated otherwise notes 2016 2015
References related to the notes starting on page 39 of the Financial Report. These form an integral part of the Consolidated annual accounts.
Share of result from associates and joint ventures 6 377 221
Assets under Management (end of period, in EUR billion) 195 187 4.2% 195
– Insurance business units scoring on/above level previous year 95% n.a. n.a.
Total donations to charitable organisations (x EUR 1,000)¹ 1,500 1,500 0% 1,100 1 Includes cash donations to charitable causes, corporate foundations and partnerships.
– as part of total Assets under Management NN Investment Partners 2.6% 2.4% 2.2%
– NN (L) Euro Sustainable Credit (including Financials) 96 85 12.9% 31
Agenda items on which we voted (#) 18,335 26,580 -31.0% 20,005
% of open positions filled by internal candidates 29.2% 25.4% 43.2%
Total employee wages and benefits (in EUR million) 1,160 1,159 0.1% 1,100 1 Dutch business units only; this counts for more than 50% of the total organisation 2 Five grievances in 2016 refer to the same subject
Total donations to charitable organisations (x EUR 1,000)1 1,500 1,500 0% 1,072
Total number of young people reached through NN Future Matters programme2 27,529 9,069 203.6%
Business travel – car travel (km x 1 million)1 45 9 45 8 1.4% 46 9
2 Cultural partnerships and sponsorships are not included. Refer to www.nn-group.com for more information on how we support arts and culture.
The report includes prospective information such as ambitions, strategy, plans, expectations and estimates. Inherently the actual future results may differ from these and are therefore uncertain. We do not provide any assurance on the assumptions and achievability of prospective information.
This review engagement is aimed to obtain limited assurance. Our responsibilities under this standard are further described in the ‘Our responsibilities for the review of the non-financial information‘ section in our report.
We are independent of NN Group in accordance with the Verordening inzake de onafhankelijkheid van accountants bij assurance-opdrachten (ViO, Code of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence regulations in the Netherlands. Furthermore, we have complied with the Verordening gedrags- en beroepsregels accountants (VGBA, Dutch Code of Ethics).
Description NN Group performed a materiality assessment to determine the non-financial topics of material significance for inclusion in the 2016 Annual Review. Aspects of material significance are defined as aspects of which omission could substantially influence the stakeholders' decisions. They are defined by prioritising the aspects based on shown interests by stakeholders and the impact NN Group has on the aspect and vice versa. The pre-selection of material aspects is subject to significant management judgement and was therefore identified as a significant area for our review.
Our response We reviewed the process that NN Group executed to identify and prioritise the (non-financial) topics to be reported in the 2016 Annual Review. We also conducted a media search and a peer benchmark to assess potential other material aspects to be included and compared these with NN Group’s materiality analysis. We assessed the (non-financial) topics as included in the Annual Review against the results from the materiality analysis.
Our observation Based on our procedures performed it appears that the Annual Review sufficiently reflects both positive and negative aspects of NN Group’s performance over the year.
Description Responsible Investment is considered as a material topic for NN Group. In this context NN Group reported in the 2016 Annual Review on its assets under management in Socially Responsible Investing (SRI) funds and mandates. Since generally recognised definitions and guidelines for sustainable assets / investments are not available and this is a critical indicator to assess NN Group’s progress regarding responsible investing, we identified the assets under management in SRI funds and mandates as an important indicator for our review.
Our response On the basis of our sector knowledge and expert judgement we assessed the applicability and clarity of the definitions for assets under management in SRI funds and mandates. In addition, we reviewed on a limited sample basis whether the mandates of the SRI funds are in line with the definitions for assets under management in SRI funds and mandates of NN Group. Finally we reviewed whether the explanation on the topic in the 2016 Annual Review provides a clear and proper reflection of NN Group’s progress regarding responsible investing.
The sections: Introduction, What we do and how we are structured, and the CEO statement contain (references to) other non-financial information.
We have read the other parts of the Annual Review. Based on our knowledge and understanding obtained through our review of the non-financial information we have considered whether the non-financial information included in other parts of the Annual Review contains material misstatements.
Responsibilities of the Executive Board and Supervisory Board for the non-financial information
The Executive Board of NN Group is responsible for the preparation of the non-financial information in accordance with the GRI Sustainability Reporting Guidelines version G4 and the internally developed criteria as described in Our approach to reporting on page 50. The Executive Board is also responsible for such internal control as it determines is necessary to enable the preparation of the non-financial information that are free from material misstatement, whether due to fraud or error.
The Supervisory Board’s Audit Committee is responsible for overseeing NN Group’s reporting process.
• Evaluating the appropriateness of the reporting criteria and its consistent application, including the evaluation of the reasonableness of management’s estimates.
• Evaluating the design and implementation of the reporting systems and processes related to the non-financial information.
• An analytical review of the data and trends submitted for consolidation at group level.
App An application; typically a small, specialised programme downloaded onto mobile devices to support NN Group’s ability to provide a quick, easy, confidential customer experience across digital channels.
Carbon neutrality Achieving net zero carbon emissions by balancing a measured amount of carbon released with an equivalent amount sequestered or offset, or buying enough carbon credits to make up the difference.
Community investment Activities that are focused on making a positive contribution to communities, including investments in education programmes and partnerships that aim to bring sustainable developments.
Credit rating Credit ratings, as assigned by rating agencies (such as Standard & Poor’s and Fitch), are indicators of the likelihood of timely and complete repayment of interest and instalments of fixed income securities.
ECCE European Centre for Corporate Engagement – the world’s leading research institute on sustainable finance and responsible investing located in Maastricht, The Netherlands.
An emerging market economy describes a nation’s economy that is progressing toward becoming more advanced, usually by means of rapid growth and industrialisation. These countries experience an expanding role both in the world economy and on the political frontier.
Employee engagement Employee engagement is a property of the relationship between an organisation and its employees, measured by NN Group through such means as the Pulse and YES employee surveys.
Employee Value Proposition The Employee Value Proposition (EVP) represents what our employees experience and benefit of during their employment period within NN and what we expect from them. It is the rational and emotional articulation of the tangible benefits employees receive as a result of working for the NN Group. The EVP highlights the attractive factors in NN for the labour market.
Eumedion Eumedion represents institutional investors’ interests in the field of corporate governance and related sustainability performance.
GIIN Global Impact Investing Network – current campaign explores the role of impact investing in achieving the United Nations Sustainable Development Goals, and calls for impact investors to take action.
The Global Reporting Initiative is an international independent standards organisation that helps businesses, governments and other organisations understand and communicate their impacts on issues such as climate change, human rights and corruption.
ICE Impact Centre Erasmus – A centre for scientific knowledge and skills aimed at gaining traction with a diverse group of organisations on the realisation of their social ambitions. (paraphrased from Dutch from their website)
Junior Achievement Europe Junior Achievement Europe is Europe’s largest provider of education programmes for entrepreneurship, work readiness and financial literacy, reaching 3.5 million students in 39 countries in 2016.
KiFiD The Dutch institute for consumer complaints about the financial services industry (Klachteninstituut Financiële Dienstverlening). It mediates in disputes between consumers and banks, insurers, brokers and other financial service providers. Mediaton occurs by the public advocate (Ombudsman) or through a (usually) binding advice of the Disputes Committee or the Appeals Committee.
Net Promoter Score A management tool that can be used to gauge the loyalty of a firm’s customer relationships. It serves as an alternative to traditional customer satisfaction research.
NL II Netherlands Investment Institution – established to enable institutional investors such as pension funds and insurers to invest directly in the Dutch economy.
Qredits Qredits – A microfinancing organisation assisting entrepreneurs with loans, mentoring and e-learning
Remuneration Reward to NN Group’s employees in the form of salary or compensation, either fixed or variable, including benefits.
Retail investors An individual who purchases securities for his or her own personal account rather than for an organisation.
Robo-advice The use of automation and digital techniques to build and manage portfolios of exchange-traded funds (ETFs) and other instruments for investors.
SER Social and Economic Council of the Netherlands advises the Dutch Government and Parliament on key points of social and economic policy. It also undertakes activities arising from governance tasks and self-regulatory matters, and functions as a platform for discussions of social and economic issues. The Council consists of independent Crown-appointed members, employers, and employees.
Socially Responsible Investment (SRI) funds are specialised sustainable investment products which cater to the increasing demand for products that not only generate good financial returns, but are also good for society and the environment.
YES The Yearly Engagement Survey (YES) is designed as a questionnaire measuring how NN Group’s brand and values are experienced by our employees, how our leaders live up to the high standards we set and how we fulfil our employee value proposition as an organisation. The results reflect employee engagement expressed as a percentage score.
Disclaimer NN Group’s 2016 Annual Report consists of two documents: the 2016 Annual Review and the 2016 Financial Report. More information – for example the GRI Index Table and the case studies – is available on the corporate website in the Investors/Annual report section. Later in 2017, in accordance with the relevant deadlines, the SFCR will be published on the corporate website as well.
Certain of the statements in this 2016 Annual Report 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) breakup of the eurozone, (4) changes in the availability of, and costs associated with, sources of liquidity as well as conditions in the credit markets generally, (5) the frequency and severity of insured loss events, (6) changes affecting mortality and morbidity levels and trends, (7) changes affecting persistency levels, (8) changes affecting interest rate levels, (9) changes affecting currency exchange rates, (10) changes in investor, customer and policyholder behaviour, (11) changes in general competitive factors, (12) changes in laws and regulations, (13) changes in the policies of governments and/or regulatory authorities, (14) conclusions with regard to accounting assumptions and methodologies, (15) changes in ownership that could affect the future availability to us of net operating loss, net capital and built-in loss carry forwards, (16) changes in credit and financial strength ratings, (17) NN Group’s ability to achieve projected operational synergies and (18) 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.