The Financial Report covers NN Group’s financial developments and annual accounts, the report of the Supervisory Board and our approach to risk management, capital management and corporate governance. Target audiences are shareholders, rating agencies and other stakeholders interested in the financials and governance of NN Group.
Further information, including the GRI Index table and case studies, can be found online by visiting our corporate website www.nn-group.com/annual-report 2016 Annual Review 2016 Financial Report Visit our website
Customers Owners and employees of SMEs, where the company is both the policyholder and the beneficiary of the policy
5 End of period 6 AuM include the mortgage portfolio managed on behalf of NN Life and NN Non-life since 2Q14.
The portfolio is actively managed and hedged on a market consistent basis and is expected to release capital as the block runs off. The exact timing and amount cannot be predicted as it is influenced by the results of the hedge programme.
NN Group has a rich history that stretches back more than 170 years
Nationale-Nederlanden merges with NMB Postbank Groep to form Internationale Nederlanden Groep, better known as ING. ING develops into a leading international financial services company, both through organic growth and acquisitions.
NN Group lists on Euronext Amsterdam, under the ticker symbol NN.
During the financial crisis, ING receives aid from the Dutch state. As a condition of receiving approval from the European Commission (EC) for this support, ING is required to restructure the company, including the divestment of its global insurance and investment management businesses.
On 23 December 2016, we announced a recommended public offer for all outstanding ordinary shares of Delta Lloyd, with the aim to combine Delta Lloyd with the Dutch and Belgian activities of NN Group.
More information about our history is available on our corporate website: www.nn-group.com/Who-we-are/Discover-our-history.htm
Full-year 2016 operating result decreased to EUR 1,227 million from EUR 1,435 million in 2015 which benefited from higher private equity dividends and a significantly higher technical margin in Netherlands Life, while 2016 was impacted by severe storms at Netherlands Non-life.
Assets under Management in SRI funds and mandates showed an increase of 12%. NN Investment Partners launched new SRI products, which contributed to this growth.
We invest in our local communities through our charitable partners and volunteering efforts.
Total Assets under Management increased to EUR 195 billion from EUR 187 billion at the end of 2015 due to positive market performance, partly offset by net outflows primarily in the Other Affiliate segment.
Read more about our financial objectives and how we performed on page 45 of this Annual Review, and in our Financial Report.
Our values are not voluntary suggestions; they apply to each and every employee. They are the foundation of our company culture and guide our employees in their day-to-day interactions with our stakeholders.
Our values are reflected in our policies, standards and processes that guide our businesses in their interactions with customers and other stakeholders. Our key monitoring instruments that measure employee and consumers’ perceptions include questions on how NN is truly living its values. This way our businesses are able to review their scores and generate insight into their values-related behaviour.
Link to NN Statement of Living our Values: www.nn-group.com/Who-we-are/ Corporate-governance/NN-statement-ofLiving -our-Values.htm
NN’s General Terms and Conditions NN’s General Terms and Conditions (GTCs) aim to fully and adequately describe each Insurance product. GTCs can be substantive and, depending on the product, fairly complicated. As a consequence, customers may find them unclear or difficult to understand.
The dilemma NN is facing, is if it is possible to have short and simple GTCs that simultaneously inform customers fully and sufficiently? Or does simplification cause a lack of clarity and transparency regarding coverage and product conditions?
Workshops on the new Code of Conduct were offered to our employees during 2016. For our senior management these were mandatory. During the workshops, employees discussed dilemmas they may encounter in applying the values and Code of Conduct. An eight-steps model is taught to support them in unravelling a dilemma, including a stakeholders’ interest analysis and a decision-making tool.
Common standards for behaviour Our NN values set the standard for our behaviour and express what we stand for – both internally and externally – to all our stakeholders.
Read more about the additional requirements that apply for NN Bank on www.nn.nl/Over-NationaleNederlanden/ NationaleNederlanden-Bank.htm
In a series of four videos on the theme ‘open dialogue’, our Management Board members touched on what open dialogue means to them, and what it means for NN. Themes such as asking questions, listening, trust, and open feedback loops surfaced as common threads amongst our Board members. The first video focused on ‘what is open dialogue’. For the other three videos, the MB Members were challenged to have a discussion on the following dilemmas: • Being entrepreneurial vs Control risk
‘ The Values week in the Netherlands provided a good opportunity to reflect on our values’ (Netherlands Values week survey, %)
Values week The annual NN Values week was again organised in October 2016, and offered an opportunity to reflect on our values and to pay extra attention to open dialogue. Our businesses organised their own local communication campaigns around the values during Values week. Most of them also organised their own finals of the NN Values challenge, and in nine countries our colleagues organised special values related events. In the Netherlands, 30 workshops were organised, with 450 employees participating. Examples include sessions on ‘Navigating your moral compass’, ‘Listening with empathy’ and ‘Cultural intelligence’.
Tone at the top The NN Group Management Board, our senior leadership and line managers play a crucial role when it comes to setting an example. As part of our Yearly Engagement Survey (YES), we asked colleagues if their managers consistently act as role models when it comes to living our values, and if they feel encouraged to act with integrity. The results on YES are displayed in the chart.
The Management Board members play an active role in the ‘Living our Values’ programme. For example in 2016 they kicked off the Values challenge, shared their views in a special interview series (see case study on page 08) and invited employees to breakfast and lunch sessions during the Values week.
Monitoring performance Each year, the Management Board assesses the effectiveness of the implementation of the ‘Living our Values’ programme and the points for improvement. This evaluation is also discussed with the Supervisory Board. We established a number of monitoring instruments to assure the effectiveness of the measures we have taken to embed our values into our corporate culture. The perception of customers and the general public on how our company is living our values, for example, is measured through the Global Brand Health Monitor (GBHM), while our employee perception is measured through our Yearly Engagement Survey (YES). If there is a decrease or stagnation in performance, this is reported to the business units so they can take the appropriate action. One of the recommendations from the 2015 evaluation was to further strengthen the ability for employees to ask questions. Therefore, in 2016 Code & Values Desks were set up in all our business units.
Looking forward Overall employee awareness of the values continues to be very high, and much has been achieved to ensure the ‘Living our Values’ programme remains top of mind for all NN colleagues. We will continue the open dialogue as a global theme and a framework for local initiatives. We will further invest in the ‘role model behaviour’ of managers, as we believe this is a key component of success in the long term. There are a number of other actions planned for 2017 such as further embedding our values in the recruitment processes and further embedding and promoting the local Code & Values Desks with employees.
During the severe storm and flooding in Belgium in 2016, an NN Mobile Office was set up to help customers settle their claims. This temporary office and the service provided were highly valued by customers.
NN Investment Partner’s Dutch investment platform ‘FitVermogen.nl’ offers a nononsense, needs-based solutions investment approach. Reaching out to private individuals in close cooperation with highly valued organisations and companies impacts the customer experience in a positive way. In 2016, the platform won the CASH innovation award and the CashCow Award for best online asset manager.
Our drive for innovation is about customer satisfaction, intuitive interaction, and efficiency
‘ In 2016, all our businesses developed innovative initiatives in support of our strategy to deliver an excellent customer experience.’
‘ This Ab-concept makes me feel safer in my house.’ Paul customer
This is how we will pave the way for innovative growth, leveraging our capabilities and market opportunities. Finally, we will continue our ‘innovation journey’ with our Top 50 leadership group. After evaluating more than 1,000 trends, we identified those opportunities that hold the most potential for NN Group going forward. These insights are being used to further develop our business model.
‘ The Bridge offers everyone to get a taste of innovation initiatives in and outside NN.’ Mariken Tannemaat Chief Innovation Officer NN Group
Innovating our businesses In today’s operating environment, adhering to the status quo is not an option. We continuously invest in change and innovation, with the goal of improving our customer experience, lowering our costs and shaping our business for the long term. I am proud of the progress of all our businesses, enabling us to better meet the changing needs of our customers. Let me share a few examples.
In our Non-life business in the Netherlands, we launched our innovation lab, called ‘Sparklab’. Following its success, in the coming year more labs will be opened in Turkey, Hungary, Spain, Poland and Japan.
We also look for opportunities using new technologies. NN Investment Partners is exploring digital solutions such as roboadvice, and in the Netherlands we are using robotics to facilitate straight-through and errorless processing.
Robust financials Our progress is also reflected in our financial performance over 2016. It shows the resilience of our businesses in an environment which continues to be characterised by low interest rates and market volatility. Most of our businesses made steady progress in delivering on their strategic targets.
In a series of videos for the 2016 NN Values week, members of the Management Board addressed key dilemmas facing NN Group. One dilemma focused on short term profit vs long term value creation.
Additionally, we took steps to further drive the development of responsible investing. NN Investment Partners improved its understanding of the materiality of ESG factors for investment returns through two studies conducted with the academic institute ECCE. The results are used to strengthen the ESG integration in our investment process.
Our company has a solid foundation for the future, but more is yet to be done. In particular, we need to keep investing in becoming more efficient, agile, and innovative to optimally respond to the fastpaced environments in which we operate. In these times of change and growth, we would like to thank our customers for their continued loyalty towards our products and services, our business partners for our long term relationships, and our shareholders for their support and investment.
The developments described on the following pages are a general assessment of the environment in which financial service providers – insurance and asset management companies in particular – have operated in 2016, including an outlook of the expected impact of these developments in 2017.
Economic and demographic developments In the first half of 2016, economic developments in different parts of the world remained rather subdued. Towards the end of the year, some improvement in economic conditions gradually occurred. This was first seen in the US, where the state of the economy was the reason for the Federal Reserve to raise interest rates; Europe later followed suit. In 2017, long term yields are expected to increase, but gradually.
With low fertility rates and continued ageing, the working-age population (between the ages of 15 and 64) has declined over the past decade and is projected to further decline over the next years. These trends are common across the globe, and are set to increase pressure on pension and health care systems.
In the coming years, it is also expected that legislation will be enacted regarding recovery and resolution planning, both at national and European levels. In addition to regulations related to solvency and risk reporting, several consumer related legislations, like for instance the EU Insurance Distribution Directive (IDD) and the EU General Data Protection Regulation (GDPR) will become applicable. To bring more transparency on tax paid in different countries, tax regulation like Base Erosion and Profit Shifting (BEPS) will come into effect.
In a fluctuating environment, we strive to drive change to meet evolving stakeholder needs
Competitive landscape Various trends and developments are impacting the competitive landscape for financial service companies. Most importantly, customer behaviour is changing rapidly, with consumers increasingly asking for digital solutions.
The outlook for life insurance and pension products differs across countries. In light of low interest rates, in some European market levels of guarantees in life products need to be addressed. In other markets the challenge lies in coming to terms with a post-guarantee operating environment which itself necessitates a new set of products and increased competition. In the Netherlands, the market for (individual) life and pension products is challenging. It has been observed by many that (life) insurers are forced to reduce costs and capacity, and to engage in consolidation wherever useful and efficient. Central and Eastern Europe remains an economic region with significant potential for the future as witnessed by rising demand for life insurance products and continued growth of the insurance sector in the region.
In a broader sense, there are many discussions about the consequences of globalisation, and in some major countries, including the US, measures are being proposed that tilt in the direction of protectionism. In general, European political leaders are facing the challenge of deciding on how European integration will further develop in the coming years.
Another country where NN is offering financial services in a volatile environment is Turkey. Further growth of the business is expected, and we are keeping a close eye on political and economic developments.
This is done by discussing trends and issues that are considered important by NN Group and our various constituencies.
Identifying the most relevant developments and issues within our sector, and the potential impact they have on our company is an ongoing process. We also consider these factors relevant to our annual reporting efforts. The guidelines of the Global Reporting Initiative (GRI) define material aspects that reflect an organisation’s significant economic, social and environmental impacts, or that may substantially influence the assessments and decisions of our stakeholders.
This year, we further strengthened our materiality process by redefining our short-list of developments and topics that could potentially impact our company. We did this through an analysis of external research, reporting guidelines, sustainability benchmarks and peer reports. As a result, some topics were added to the list, such as innovation, responsible investment and tax practices; issues such as the use of social media and natural resources scarcity were removed.
To validate these developments and topics, an online survey was conducted amongst an enlarged group of external stakeholders, including investors, regulators, institutional clients, peers, NGOs, academics, and experts in the area of sustainability. Internally, the survey was completed by a group of more than 100 of our most senior managers, the members of our European and Dutch works councils, and representatives of NN Young, our internal network of young professionals. The results from both surveys were combined to create a materiality matrix that presents the developments and topics important to our company, and the relevance of these to our external stakeholders.
This process was supported and executed by an external agency to ensure a balanced and independent process.
Read more about these trends and topics and the impact on our businesses on pages 17-21. Read more about stakeholder engagement on pages 48-49.
Trends and business concerns recognised as most material by our stakeholders
R el ev an ce to e xt er na l s ta ke ho ld er s
Economic performance Regulation and capital requirements Risk management Responsible tax practices Transparent products and services Customer centricity Data privacy and security Sustainable products and services Innovation Integrity and compliance Employee health and wellbeing 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 Human rights Geopolitical developments Low interest rates and stability of financial markets Demographic change New technologies and digital transformation Pension reform 1 Although not recognised as one of the key material issues by all our stakeholders in the materiality assessment, we believe it is evident that climate change and the (future) legislation on data privacy and security impacts our businesses..
The materiality assessment, combined with our own analysis, shows a number of key trends and topics that have the potential to impact the insurance and asset management industries.
In the Netherlands, unit-linked products have received negative public attention since the end of 2006. We have taken this criticism to heart, as our aim is to support our customers as best we can. In recent years, NN has made significant progress in reaching out to (‘activeren’) individual customers who purchased unitlinked products in the past, addressing vulnerable customer groups with priority.
Our response At NN Group, we aim to be a positive force in the lives of our customers. We want to help them secure their financial futures by empowering them to make sound financial decisions. Many people experience difficult financial situations due to unforeseen circumstances. We want to be there for our customers during these times, as well as when things are going well. As we aim to provide a positive and inclusive experience, we also reach out to people who may not have access to insurance and can benefit from additional support. By sharing their feedback with us, our customers help us improve our performance, and enable us to build a future-proof customer engagement model.
Read more about our customer-centric approach on pages 25-27 of this Annual Review.
Read more about our transparent and sustainable products and services on pages 25-27, 31 and 42 of this Annual Review.
Our response Innovation is a key focus area for NN Group’s businesses. Our drive for innovation is about customer satisfaction, intuitive interaction and efficiency at the same time. Developing products and services that anticipate new customer demands – and meet them in tailored ways – as well as finding other means of distribution are at the core of our innovation strategy. Most developments in this area are incorporated in our approach to customers every day.
At the same time, we are continuously replacing and improving our legacy IT systems and portfolios. In 2016, we improved our mainframe. By combining data badges and reducing handovers, our overall data-processing time decreased. Additionally, we are in the process of bringing our IT systems to the Public Cloud. Our Cloud Transformation Programme has its focus on delivering business solutions with built in security and deployment automation. This will further increase the agility of our company.
Read more about our innovation approach on pages 10-11 of this Annual Review.
Data privacy and security With the digitalisation of the insurance and asset management industry comes the increased risk and exposure to cyber crime activities. Although not recognised as one of the material issues by our stakeholders (see the materiality assessment on page 14 of this Annual Review), at NN Group we take data protection and the risk of potential information security breaches very seriously. We are aware of the potential impact of security breaches on our customers, employees, and other stakeholders, and the risk of reputational damage and loss of consumer trust it brings to our company, our brand, and the industry.
Security strategies are implemented at a local level through education and awareness. In order to prevent data breaches, our IT department delivers periodic instructions to all of our employees on how to manage the stored, personal data of our customers. We constantly perform security scans and we employ security guidelines which our businesses must meet to properly protect data, Examples are encryption and additional digital surveillance. We regularly review and update our privacy and security policies, as well as operating procedures, in order to comply with stringent regulatory requirements.
We have set up a Group-wide security organisation which has been implemented in all NN business units. We appointed a Chief Information Security Officer (CISO), who is responsible for the overall data and cyber security of NN Group. Central control and coordination are crucial for an effective security approach. For each business unit there are security teams, led by their own Business Information Security Officers.
Attracting and retaining talented employees Attracting and retaining qualified and skilled colleagues that share our company values and commitment is crucial for the success of any organisation. Offering ongoing development opportunities and an attractive remuneration model tailored to fit market circumstances is part of this process.
Opportunities and risk In order to remain competitive in our industry, NN Group needs to attract high quality talent to the company. In a global marketspace in which industry sectors are increasingly blurred, as well as where new-style businesses are often deemed more attractive than traditionally operating companies, NN is in constant and increasing competition to bring in the best talent from different backgrounds. Moreover, due to rapid technological and regulatory developments, the pressure for financial companies to attract talent with experience, skills, and qualifications in areas such as risk (e.g. actuaries), IT, and customer intelligence continues to increase. It also means that companies are increasingly looking for people that thrive in a dynamic and continuously changing environment.
Many prospective employees recognise that the insurance industry is changing rapidly. They are often attracted to NN because they want to be part of this change. As we are a company with an international footprint, employees have the opportunity to work in a different country for a few years. This creates a diverse corporate culture where differences are appreciated.
To attract and retain talented people we offer opportunities for personal and professional growth, encourage our colleagues to take responsibility, and create a work environment that values authenticity and collaboration. We feel responsible for the continuous development of our workforce. This allows our people to meet our high professional standards, and to remain employable in this rapidly changing environment.
At NN Group we want to attract and retain the best talents who share our passion and commitment. One way we do this is by offering traineeships to the next generation of talented employees and potential leaders.
Our traineeship is centred around personal development, problem solving, insurance, asset management, change management, and innovation. You can read more about how our trainees participated in this programme on our corporate website.
Low interest rates Current macroeconomic conditions and volatile markets keep interest rates low, which pose continued challenges for the financial industry. Low interest rates affect investment yields and the returns for customers, and have a negative impact on profitability. In general, this impacts consumer trust.
We further strengthened the cooperation between our insurance and asset management businesses. For example, in the Netherlands NN Investment Partners and Netherlands Life have a history of developing various defined contribution (DC) propositions and will continue to work close together in the future.
In December 2015, NN Group received approval from the Dutch regulator, De Nederlandsche Bank (DNB), to use our Partial Internal Model (PIM) under Solvency II for NN Group and its insurance subsidiaries in the Netherlands. NN Group was well capitalised at year-end 2016, with a Solvency II ratio of 241% based on the Partial Internal Model.
Read more about our careful financial management to maintain a strong balance sheet, which enables us to weather volatile market circumstances, on pages 28-29 of this Annual Review.
Our response Although we must consider different pensions systems in different countries, we start by placing the customer at the heart of everything we do. We contribute to raising awareness about pensions, and how the changing landscape will affect people’s future income. We aim to engage them early on in an active dialogue, and are focused on offering products and services that give individuals more autonomy and responsibility with regard to their own pensions. Additionally, we aim to offer them security in light of government pension reforms. We have diversified our business and adjusted our product mix by shifting towards defined contribution and investment products.
Read more about how we help people secure their financial futures on pages 25-27 and 41-44 of this Annual Review.
Opportunities and risks As a financial service provider we can be impacted by climate change risks in various ways. For example, in our non-life business, more frequent weather-related events such as wind- or hailstorms could lead to a higher claims ratio, impacting our profitability in certain product lines. Climate change could also have possible impacts on the investments of our life insurance business. The globally agreed goal to keep the temperature rise within 2°C above pre-industrial levels will require significant policy action by governments. This is a source of investment risk as the transition to a low carbon economy may negatively affect company cash flow and profits, particularly in carbon-intensive industries. At the same time, those companies that effectively manage the risks and opportunities may present good investments.
EUR 3,872m total debt 11,955 employees (headcount) Relations with stakeholders 22 MWh (x1,000) electricity used
The primary Sustainable Development Goals (SDGs) to which we aim to contribute
EUR 106bn total provisions for insurance and investment contracts (ongoing business)
Enabling an appropriate return for our investors through our financial management
Creating products and services that allow our customers to improve their financial wellbeing
This is a simplified visualisation of our business model. In developing this model we used the framework of the International Integrated Reporting Council (IIRC) that is based on financial, intellectual, human, and social and relational capital.
Our initial selection of SDGs which was the result of an internal mapping exercise and a stakeholder dialogue: Decent work and economic growth
What we do We help people carry the risks that they cannot bear alone, and we charge a premium for accepting those risks. To pay out claims and benefits to our customers, we invest in different asset classes such as government and corporate bonds, stocks, and other types of investments.
How this helps create value When investing our assets, our priority is to provide the best risk adjusted returns, consistent with matching our assets and liabilities. The asset and liability management process is integral in ensuring adequate liability for policyholder obligations. Additionally, we believe that value can be achieved by integrating environmental, social, and governance (ESG) factors in our investment and active ownership processes.
How this helps create value Underwriting creates value by ensuring that NN Group accepts risk exposures within acceptable limits. This is done by improving the predictability of claims. The expertise of our underwriters also allows us to create value by finding optimal solutions for our customers by developing innovative insurance products that are priced properly and fairly.
What we do differently We offer a comprehensive range of transparent value-for-money products than can be effectively risk managed over the expected life of the contract. Our underwriters perform a variety of roles. Their expertise allows them to be strategically involved in areas such as innovation, product development, and customer experience. This demonstrates how we are moving away from the traditional process of underwriting to a more datadriven business model.
How this helps create value The ability to identify and respond to the unique needs of our customers directly affects how we interact with them, and in turn improves our customer experience. By analysing large data sets of customer behaviour, we can make predictive models that benefit both customers and NN Group. Besides personalising our product offerings, we can, for example, also predict the number of customers calling our call centre, which enables us to tailor our service offering.
Closely related is the risk of a Eurozone/ EU break-up. On short term, NN Group is able to withstand adversity due to the characteristics of its strong balance sheet. Exposures to certain asset classes as well as custody arrangements are frequently reviewed and action is taken where necessary.
Without the right people, the ability to effectively manage our business for sustainable success will be compromised. Good talent management is crucial in attracting, retaining and rewarding world-class talent. We invest proactively in development throughout the careers of our employees as this is the number one engagement driver.
What we do Risk taking is integral to the business model for insurance, asset management, and banking organisations like NN Group. Through our Risk Management practices, we seek to meet our obligations to customers and creditors, manage our capital efficiently and comply with applicable laws and regulations.
What we do differently Our risk philosophy, called ‘Active Risk Management’, is built around four components: strategy, assessment, control, and monitoring. We assess the effectiveness of our philosophy twice a year using Risk Culture Dashboards. We work systematically, aim for completeness and document what we do. Each risk analysis performed is communicated to relevant management.
Tr an sp arent, focused Role of everyonere levant to manage risk
In this chapter, we describe how our business model enables us to create long term value for our customers, by putting them at the heart of everything we do.
Creating value as an insurer and asset manager The core of our business model is to help people carry risks that they cannot bear alone, providing protection for what matters most to them. As such, we offer life insurance products to protect people against the financial risk of living a long life without sufficient means of support, or dying at an early age. In some markets, we also offer non-life products to protect the assets that matter to our customers, and savings and investment products to ensure their long term income.
What matters to our customers matters to us NN Group wants to be known as the ‘You matter’ company: a people-oriented, and authentic service provider in the long term financial planning industry. We want our customers to have an experience with our company that lives up to the promise we make. Therefore, ‘You matter’ is not just a slogan; it defines what we do at NN, influencing every department, every employee, and every interaction with our customers.
With our ‘You matter approach’, we wish to inspire people to think about what matters most to them, and to help instil in them the confidence and knowledge to secure their financial futures. This also means that we take an active role in helping our customers recognise what truly matters to them in life. Our campaigns, focused on understanding the deeper motivations of individuals, and sharing what makes our customers happy, play an important role in this.
In 2016, we launched our new international advertising campaign, ‘It’s different when it’s yours’, celebrating the uniqueness of our individual customers. It focuses on those moments in life we all experience, yet we all experience it differently. So even though NN is proud to help millions of families and businesses every day, we know that the family, home or business of each individual customer will matter most to him or her.
‘ “You matter” is not just a slogan. It defines what we do at NN.’ Lard Friese CEO NN Group
In collaboration with the University of Tilburg, NN conducted an international survey into consumers’ financial behaviour. Around 9,300 people in 14 European countries participated in the research, which focused on the degree to which people feel in control of their financial future. The results will allow us to shape our policies to better meet the needs and wishes of our customers.
Customer empowerment At NN Group, we aim to be a positive force in the lives of our customers. We want to help them secure their financial futures by empowering them to make sound financial decisions. For this reason, we developed several tools to support customers in their financial planning. We also work together with several specialised partners, such as Wijzer in Geldzaken, Nibud and Viva magazine, to contribute to the increased financial awareness and resilience of our customers and society at large.
People may experience difficult financial situations due to unforeseen circumstances in their lives. We want to be there for our customers during these times, as well as when things are going well. For this reason, our business units developed policies for customers in arrears aimed at helping them better overcome these difficulties. In addition to these specific policies, we developed general practical measures for customers, such as the opportunity to receive the help of a budget or career coach.
In Spain, we have the ForYou life insurance product with breast cancer coverage. The insurance provides special coverage in case of breast cancer and allows for a second medical opinion, home assistance, and child care services. Also in Spain, we have ‘Orange points’ which are sales points in small villages. In 2016, we had 121 sales points providing access to our products and services. In Japan, we launched a new life insurance product that provides a critical illness coverage in case of cancer, acute cardiac infarct and stroke. It was developed to support business owners who are unable to manage their company due to critical illness.
In Turkey, we provide fund consultancy services. Fund consultants inform customers via telephone calls about their current funds, returns, and stock market fluctuations. In Spain, we are delivering more information to help customers make the right investment decisions, with the help of a matrix where they can see different investment options. Customers are shown which investment solution best fits their needs by linking their investor profile with the potential risks of different investments. Additionally, we created a newsletter with financial information to increase customers’ knowledge of financial markets.
NN Group is involved in the Netherlands Investment Institution (NLII). The aim of the NLII is to increase long term investment opportunities in the Netherlands by matching supply and demand. This gives institutional investors the opportunity to invest in the Dutch economy, and allows entrepreneurs and SMEs to benefit from additional financing opportunities. We also have a partnership with microfinance organisation Qredits through our membership of the Dutch Association of Insurers (Verbond van Verzekeraars). Qredits offers microfinance loans to both starting and experienced entrepreneurs, who are not able to obtain a regular bank loan.
NPS is measured in all countries where we have business activities. The table shows NPS of our insurance countries. Measurement for the insurance business is conducted for all business lines covering banking, life insurance, and pensions. Our insurance business in Japan is included in a separate study. Luxembourg is also included in a separate study as their clients mostly live outside Luxembourg. Measurements for the asset management business is conducted amongst both institutional and retail investors. For institutional clients we only report the aggregate score, which was +7.
2 Bulgaria yes n.a. yes 3 Czech Republic yes n.a. yes 4 Greece yes n.a. n.a.
Our shares are included in four stock indices: MSCI Global Standard index (since 26 November 2014), STOXX Europe 600 index and FTSEurofirst 300 index (both since 22 December 2014), and Euronext AEX index (since 23 March 2015).
United States 36 Asia 21 United Kingdom 15 The Netherlands 4 Rest of Europe 23 Rest of the World 1
Shareholder returns and dividends NN Group intends to pay an ordinary dividend in line with its medium-term financial performance and envisages an ordinary dividend pay-out ratio of 40-50% of the net operating result from ongoing business. We intend to pay interim dividends calculated at approximately 40% of the prior year’s full year dividend. Barring unforeseen circumstances, we intend to declare the interim dividend with the disclosure of our second quarter results and to propose a final dividend at the Annual General Meeting of shareholders.
Capital generated in excess of NN Group’s capital ambition is expected to be returned to shareholders unless it can be used for any other appropriate corporate purposes, including investments in value creating corporate opportunities. A clear example is our intention to combine Delta Lloyd with the Dutch and Belgian activities of NN Group, by way of a public tender offer for all issued and outstanding ordinary shares of Delta Lloyd, for EUR 5.40 in cash per ordinary share.
NN Group is committed to distributing excess capital in a form that is most appropriate and efficient for shareholders. Examples are our share buybacks as part of the ING selldown in January 2016, and the share buyback programme announced in May 2016.
On 23 December 2016, Fitch announced that it will not take any rating action as a result of the offer that NN Group has made for Delta Lloyd.
More information on this programme and the debt instruments issued by NN Group is available on our corporate website. www.nn-group.com/investors/debt-securities
At the Annual General Meeting on 1 June 2017, a final dividend for 2016 will be proposed of EUR 0.95 per ordinary share. Together with the 2016 interim dividend of EUR 0.60 per ordinary share paid in September 2016, NN Group’s total dividend for 2016 will be EUR 1.55 per ordinary share, which is equivalent to a dividend pay-out ratio of around 51% of NN Group’s full-year 2016 net operating result of the ongoing business.
Strengthening ESG integration processes and tools To support the implementation of NN Group’s Responsible Investment Policy Framework, we set out to create a series of guidance papers that address areas defined by the UN Global Compact. To help develop these papers, two workshops were organised related to human rights and the environment, involving the sector analysts of NN Investment Partners. The first paper published is on Human Rights, which can be downloaded from our website.
We continued to strengthen the integration of ESG factors in our investment processes. For example, NN Investment Partners in the Netherlands collaborated with our teams in Poland and Japan to leverage local expertise, ensuring that we make informed proxy voting decisions in the region, and strengthen the integration of ESG factors in the investment process across all our operations.
The full implementation of last year’s introduced guidelines for Real Estate contributed to a further enhanced performance in the GRESB Real Estate assessment. In 2016, 90% of NN Group’s EUR 5 billion proprietary real estate portfolio was measured in GRESB. The portfolio’s (value-weighted) score in 2016 was 72 on a scale of 1 to 100, while the benchmark average (289 entities) was 59. This represented an improvement, both in absolute terms and relative to peers, from 2015 when the score was 66 versus the benchmark average of 55.
As part of the information barriers (historically known as ‘Chinese Walls’), there are separate voting committees for proprietary and client assets in place. During 2016, NN Investment Partners voted at 1,437 shareholder meetings (94% of total votable meetings) on 18,335 agenda items and 347 resolutions put forward by shareholders.
These resolutions focus on ESG issues. We supported shareholder resolutions related to environmental and social matters in a large number of cases. We voted against when these resolutions would not provide proportionate benefits to shareholders. Our voting record is summarised in the table on page 54.
In 2016, we implemented a more detailed database which allows us to better track and report on ESG dialogues with investee companies. The chart on the next page shows the breakdown between environmental, social and governance issues as a topic of discussion during our company meetings. In total, 310 dialogues were logged by our equity analysts and ESG specialists in the database. These dialogues included 48 engagements conducted by our ESG specialists, which were often in collaboration with other institutional investors or supported by an external service provider.
NN Investment Partners reports in more detail on its proxy voting and on the progress and outcomes of engagements conducted in the Active Ownership and Responsible Investing reports, which are published on their website.
Climate change dominated the environmental shareholder proposals at AGMs in 2016. NN IP voted on 18 different shareholder proposals related to this topic, of which we voted in support of 17. We also continued our engagement in the utility sector focusing on ways to increase power generation from renewable energy sources and reduce their carbon footprint. These engagement activities, supported by engagement specialist GES, focus on a selection of 20 large companies worldwide.
The companies’ responses to our engagement requests differ substantially as a reflection of how mature they are in addressing carbon risks. The range in responses is taken into account when future engagement efforts are calibrated to reach maximum effect.
Advocacy on responsible investment NN Investment Partners actively participated in the Investment committee and the Legal committee of the Dutch corporate governance network Eumedion, the Corporate governance committee of EFAMA as well as the Shareholder rights committee of the International Corporate Governance Network (ICGN).
Representatives of NN Investment Partners also spoke publicly about sustainability and corporate governance at various symposia and congresses around the world. On these occasions, they shared the results of NN Investment Partners’ studies on the effect of ESG data on investment performance. For its European institutional client base, NN Investment Partners hosted several responsible investor conferences in Europe.
More information on NN’s approach to responsible investment is available on our corporate website: www.nn-group.com/In-society/ Responsible-investment
Environmental 19 Social 13 Governance 39 ESG overlapping 29 1 This represents the number of company dialogue and engagements conducted by NN IP’s equity analysts and ESG specialists.
In this chapter, we describe how our business model enables us to create long term value for our 11,500 colleagues by nurturing a culture where their ideas, talents and personalities matter.
In addition to training, we facilitate internships, assignments and job rotation schemes to provide employees with the chance to find out what career steps would be feasible and suitable for them in the future. We also offer students the opportunity to learn and develop by way of internships, supported by challenging assignments and personal coaching.
Building on this approach, we are gradually clarifying and focusing our employer brand in key markets. NN is enhancing its presence on online and social career platforms, and added a ‘personality test’ to the career site in the Netherlands to assess a cultural fit between a candidate and the company.
Our business in Spain was certified as a Top Employer, and also received a special award for Training and Development. Early 2017, our operations in Turkey and Poland achieved a Top Employer certification, where NN Greece is well under way to realising the same achievement.
Stimulating our employees to develop and grow Continuous personal and professional development is necessary to keep up with changing customer behaviour and technological developments. In 2016, much effort was put into stimulating employee dialogue around our values and the mind-set required to be successful. In addition, focus was placed on further cultivating a climate of trust, and on supporting leaders in improving their leadership skills, including ‘setting a clear direction’, ‘creating followership’ and ’coaching and giving feedback’.
Employee rights and representation The way we consult with our employees also depends on local legislation and culture. In some countries, employee consultation is a legal requirement and in many European countries, it is arranged through works councils. At NN Group level, we work with a Central Works Council and a European Works Council, within which we encourage employee participation. In the Netherlands, works councils are often actively involved at an early stage in different processes that are of relevance to the company. Social policy topics are frequently discussed in meetings with the works councils and management. Our dialogue with the works councils accommodates collective interests and facilitates the sharing of information and indirect participation by all employees.
Equal opportunities and diversity NN holds a strong belief in the virtues of diverse teams, and how the collective intelligence of diverse talents, personalities, and expertise leads to better decisionmaking. NN is engaged in a number of activities to stimulate specific aspects of diversity. Our aim is to increase female leadership, better balance our cultural diversity, bring more young talents in, and build an inclusive climate with no barriers with regards to gender, religious beliefs, sexual orientation or otherwise. At the same time we are looking for new ways to optimise how long-experienced employees contribute their knowledge and pass down their skills while working side by side with younger colleagues. As an international company, international mobility across our markets is also increasing.
In addition to these focused actions, we aim to have a higher representation of women in all leadership development programmes, such as senior and mid-career leadership programmes, mentoring, and trainee recruitment.
For all employees that join NN, a professional onboarding programme is offered. Employees are supported in their development through access to a rich variety of learning methods and media, such as e-learning suites, webcasts, games and simulations, as well as more traditional methods such as classroom sessions, training and coaching on the job, and peer learning.
Recognising performance The performance management approach is being transformed at the senior level, from a traditional structure to one that centres on regular performance check-ins throughout the year. The new approach puts more focus on employees’ motivation, development, and growth. The performance management process includes financial objectives, non-financial objectives, and behavioural objectives that when combined drive value for our stakeholders. This is done on all levels in the company and is linked to reward (either in development or other benefits). 98.4% of our employee base completed the 2015 annual appraisal cycle ending in 2016.
About NN Marketplace and trends Business model and value creation Our strategy Governance Facts and figures
NN Life continued to improve the customer experience combined with cost reduction. For the individual life closed book segment, a strategic partnership with a leading outsourcing company was established for the outsourcing of business processes and IT. Combined with the migrations of portfolios to cost efficient IT platforms, the closed book organisation set the course to realise future efficiencies.
Vitality and wellbeing At NN, we strive to create a healthy work environment and support a good worklife balance, which are crucial for fit and engaged employees. Work-life balance and flexibility are key themes in every country where we operate, even if they are not always the norm in every country’s culture. NN strives to forward this through labour conditions that promote flexibility and a healthy way of working. We further support this ideal with office ergonomics, more inspiring workplaces, mindfulness training and different health and vitality programmes.
Restructuring In line with our medium term strategic focus area to become more efficient and agile, we worked on improving our operating model. The aim is to further stimulate a culture of entrepreneurship and accountability within NN Group. As of 2017, our new operating model will be implemented.
Strong, empathetic and inspiring leadership is crucial for achieving our ambitions. In 2016, every senior NN leader was trained in giving coaching and feedback to unlock the full potential of their employees. Each senior leader also joined a three-day day leadership development programme.
In this programme, leaders receive a bird’s-eye-view of an NN-like business, with trade-offs, experiencing external and internal events similar to events occurring in our current context. It provided a rich context in which critical leadership behaviours can be practiced, observed and coached.
Management Board members took an active interest by joining debrief sessions at the end of each programme, focused on how to use the insights that were gained.
Creating value as a corporate citizen We contribute to the society and the communities in which we live and work in various ways. For example, we generate economic activity by purchasing products and services from local suppliers, in addition to regional and global suppliers. To provide revenue to fund public services, we pay taxes to the governments in the markets where we operate. To ensure we do this in a responsible way, we have adopted a set of tax principles. Furthermore, we invest in our local communities through our charitable partners and volunteering efforts.
Our sustainability initiatives continue to focus on energy and business travel efficiency and paper use reduction. We also encourage the recycling of materials inside our office buildings. NN Group’s facility management teams are committed to improving the energy efficiency of our buildings, especially in countries where renewable energy is difficult to purchase. In 2016, we realised a decrease of 33% of energy use. This was partially caused by a reduction of office space in the Netherlands.
In this chapter, we describe how our business model enables us to create long term value for the societies and communities in which we operate, by using our resources to help them achieve long term, sustainable prosperity.
One of NN’s key principles is that we only structure our tax affairs based on business rationale. This means that we do not make use of aggressive tax planning or use ‘tax havens’ to reduce our corporate income tax. Furthermore, due consideration is given to NN’s legitimate interests, reputation, brand, corporate social responsibility when considering tax initiatives. Another key principle is that we strive to be transparent and disclose all relevant facts and circumstances to local authorities. In the Netherlands this is embedded in a ‘horizontal monitoring’ approach where we aim to achieve clarity and upfront certainty around tax matters.
Furthermore, one of the permanent education sessions that NN Group organised for the Supervisory Board last year focused on the topic of tax transparency.
The lower income tax paid in relation to the income tax charge reflects differences between accounting and tax rules as well as loss carryforwards.
We further provide details of both the tax charge as well as the tax paid per reporting segment and per country. A full country-bycountry report is included on pages 87-90 of the Financial Report (Note 34).
‘ This experience always has a huge positive impact on the students and on us, both professionally and personally.’ NN volunteer
Community investment The community investment programme of NN Group is called Future Matters. Its goal is to empower people in the markets where we operate to improve their financial wellbeing. The programme specifically targets 10 to 25 year-olds and underserved groups. In 2016, we reached out to more than 27,500 youths in the many communities in which we operate.
We aim to gradually target our overall charitable giving more towards the Future Matters focus areas. In 2016, 69% of our total charitable donations of EUR 1.5 million went to NN Future Matters and its related target areas.
Promoting financial empowerment By supporting people in their development of financial knowledge, we help them foster a secure and stable financial future. Responsible financial behaviour is often best developed at an early age, so many of our initiatives are focused on young people. During the 2016 Money Week in the Netherlands, NN employees gave in total 162 guest lectures in primary schools, teaching 3,700 children about money and financial risk scenarios.
Alleviating financial distress Even in prosperous societies, formal social support services are sometimes unable to reach out to the disadvantaged and underserved of society. Through fundraising and partnerships with local charities, NN aims to support families with children that grow up in financially challenging circumstances.
To celebrate the second anniversary of NN Future Matters, and to provide the various NN countries with the opportunity to further strengthen their structural partnerships with local charities in line with Future Matters, in 2016, we made extra donations that totalled EUR 127,500 to local charities in 12 of the markets where we operate.
Innovate our customer experience We want to be the intuitive partner to help people secure their financial futures. Our drive for innovation is about enhancing customer satisfaction, intuitive interaction and efficiency at the same time. In order to do that, we will focus on: • Transforming our customer engagement, building up relationships with customers and developing intuitive tooling with 24/7 access
• Transforming our propositions, designing easy-to-understand products with continuous interactions with and feedback from customers
• Transforming our cost base, bringing our costs further down and adjusting our pricing to customer expectations
Develop an efficient and agile operating model To secure long term growth, we continually invest in making our organisation more efficient and agile. In 2016, NN Group further improved its operating model based on the following principles: • Clear accountabilities: have a clear overview of who is responsible for what
• Streamlined decision making: decrease the number of approval committees and increase our speed of decision making
• Simplified governance: outline the specific roles for the business units, head office and Management Board in an updated governance manual
As of 2017, our new operating model will be implemented, based on a balance between ‘responsible freedom’ of our business units and control at Group level. It aims to further stimulate a culture of entrepreneurship and accountability within NN Group.
A good example is the cooperation between our pension administrator AZL and NN Investment Partners in setting up De Nationale Algemeen Pensioen Fonds (APF), Read more about the APF on page 41 of this Annual Review. Also, NN Investment Partners and Netherlands Life have a history of developing various defined contribution propositions and will continue to work closely together in the future.
On 18 May 2016, we acquired 100% of the shares of Dom Kredytowy Notus S.A. (Notus), a leading financial broker in Poland.
On 5 October 2016, we announced the intention to make an offer for all outstanding ordinary shares of Delta Lloyd, aiming to combine Delta Lloyd with the Dutch and Belgian activities of NN Group, which resulted in a recommended offer on 23 December 2016.
The conditional agreement between the Boards of NN Group and Delta Lloyd to combine Delta Lloyd with the Dutch and Belgian activities of NN Group builds on our strategy to deliver an excellent customer experience and generate shareholder return.
The combination of the activities of both companies will result in an organisation better placed to capture innovative opportunities and facilitate continuous improvement in our products, distribution, and customer service. It will provide increased possibilities for knowledge sharing, strengthening capabilities and talent development. And, it will bring growth perspective and lead to opportunities for employees of both NN Group and Delta Lloyd.
To capture a greater part of today’s market and to broaden recognition of its skills, NN Investment Partners continues to invest in products in selected areas. This includes Multi-Asset (such as MA total return strategies and MA factor Investing), Liability Driven Investments, Income (such as Credit and Convertible Bonds), Emerging Markets and Private Debt, while continuing to serve clients in other – more traditional – areas as well.
Furthermore, NN Investment Partners continues to invest in its sustainable solutions range through new fund offerings while further strengthening Environmental, Social and Governance (ESG) considerations across its entire investment process. Our ‘skill-based boutiques’ setup, combined with an overarching approach to responsible investing, supports this.
3 stars For the fourth year in a row NN Life Japan has been awarded 3 Stars for its after sales call centre from the Help Desk Institute (HDI).
‘ After an intense selection process we choose with strong conviction for NN Investment Partners.’ Arno Reekers, Chairman of the Board of Telegraaf Pension Fund
Sigorta Cini operates in 25 insurance shops across the country; it is the second most visited online aggregator in Turkey.
40 awards In 2016 we received over 40 awards. For example NN Greece was awarded the best life insurance company in Greece, while NN Life Romania won Company of the Year.
They also launched Retirement Support, which guides employees who will retire in ten years’ time, in small steps with relevant information about their individual pension.
NN Bank introduced ‘Managed Investments’, a new discretionary online investment management product developed for customers who want to increase their wealth but have little or no knowledge of investments. In this way, NN Bank’s investment experts help customers to take steps in securing their financial futures.
NN Poland received a licence to sell nonlife insurance, an important step as it broadens our value proposition to Polish customers and may strengthen our position in bancassurance.
NN Greece introduced three outpatient health products which can be used for check-ups and diagnostics in an approved medical centre.
NN Hungary launched a new accident insurance product that offers financial support and medical and assistance services after customers are involved in any accident.
Asset Management NN Investment Partners launched new funds designed to expand clients options in the current low-yield environment. Examples are additions to multi-asset funds, our environmental, social and governance (ESG) offering, and a mortgage fund. This is in line with NN Investment Partners’ focus on products in selected growth areas.
The product offering continues to be further tailored towards client needs, with a focus on selected growth areas: more illiquid and higher margin products.
NN Investment Partners continues developing digital solutions for its clients, such as digital factsheets and apps, as well as joint propositions with NN Insurance, for instance via robo advice.
General examples of managing discontinued products are the individual life closed block in the Netherlands and the Japan Closed Block VA. Examples of products ceased in 2016 are the individual pension plans in Turkey, due to legislation change, and For You in Czech Republic, as it was not commercially attractive anymore.
‘ We look at the market position of each product – both present and projected.’
Sigorta Cini, our insurance retail broker in Turkey, continues to grow fast. The company is reachable through 25 insurance shops as well as a 24/7-accessible call centre, and a website that allows for online comparison of products from different providers.
‘ With this platform, Sigorta Cini contributes to NN Group’s focus on multi-distribution.’
Netherlands Insurance More products have become available in the NN mobile app and the ‘MyNN’ portal, such as pension savings, investment products, personal loan and revolving credit.
To track the progress and status of new mortgage applications, an online mortgage application service for customers was launched by NN Bank. More than 50% of the applicants already uses this new service.
To increase pension awareness, Netherlands Life makes an effort to reach their customers through a variety of channels. For example, with the popular Dutch women’s magazine Libelle they developed an online pension course for women.
NN Poland acquired Notus, a leading financial broker in Poland, further strengthening our distribution network with over 350 Notus agents and franchises giving access to 600 financial advisors.
NN Greece has started to sell health insurance to customers online and through a call centre network. The product is tailored for this channel and reflects the needs of our customers.
Asset Management De Nationale Algemeen Pensioen Fonds (APF), an organisation set up by our pension administrator AZL and NN Investment Partners, received a licence from the Dutch regulator. An APF enables pension funds from different companies to merge in a pooled vehicle, offering them lower costs through economies-of-scale. It also relieves them from the governance burden of running a pension fund, which has become increasingly more complex. AZL and NN Investment Partners are the service providers for pension administration, communication and fiduciary management.
In the property & casualty SME domain we digitalised over 800,000 documents. As a result, response times decreased for phone calls and written communication.
Non-life’s Employers Package runs on SAP, with a high degree of straight through processing (STP). In 2016, we transferred most of the policies from two legacy systems to SAP.
NN Bank significantly improved the mortgage interest rate renewal process and introduced new online options, such as automated quotations and mortgage rate averaging tooling, resulting in faster handling times and less failures. Also, the migration of the retail investment products to a new platform provided better online options for customers as well as increased operational efficiency.
International Insurance Following the example from NN Spain, the NN business units in Poland, Czech Republic, and Slovakia launched a paperless sales process.
NN Turkey initiated a Deployment of Claims Handling Module which enables claims handling officers to track and measure claims on a daily basis.
NN Investment Partners trained staff to ensure that continuous process improvement is part of our ‘business as usual’ whilst maintaining positive client satisfaction scores and decreasing time-to-market.
NN Spain operates with a paperless sales process. In just three clicks on an app agents and customers are serviced anytime, anywhere, any place. From purchase to post-sales transactions, customers can manage their policy themselves.
Financial and non-financial objectives In assessing the success of our strategy, we measure our performance in a disciplined way with clear objectives and ambitions we strive for to guide our business. We measure the success of our company both in terms of financial and non-financial performance.
Measuring for the period 2013 to 2016, we delivered on the targets we set. Firstly, we have achieved a compound annual growth rate of 11% of the operating result before tax of the ongoing business.
Aligned with these three targets, we generated a total free cash flow of EUR 3.2 billion and a total net operating result of EUR 2.9 billion in the period 2014-2016, in line with our target. We will be proposing a total 2016 dividend of EUR 1.55 per share, representing a pay-out ratio of around 51% of the net operating results of the ongoing business. This is slightly above the envisaged 40-50% pay-out ratio in our dividend policy. It is also in line with our aim to pay sustainable and predictable dividends. The proposed dividend will be voted on at our annual general meeting of shareholders in June 2017. Including this dividend, we have returned more than EUR 2.1 billion to shareholders in the form of dividends and share buybacks since the IPO in 2014. This demonstrates our commitment to return excess capital to shareholders, unless it can be used for any other appropriate corporate purposes, including investments in value creating corporate opportunities.
• All insurance countries offer (online) tools; Increase of NPS score with 2 points
• Implementation of Responsible Investment Policy Framework strengthened by a guidance paper for investors on Human Rights; Assets under Management in SRI funds and mandates increased with 12%; new SRI products were launched
• Strong increase in young people reached through NN Future Matters, 37% of 2020 target achieved; Charitable giving towards NN Future Matters is 69% of total giving
• Decrease of our direct CO2 emissions with 18%; mainly caused by a reduction of energy use
Increase the net operating return on equity (ROE) of the ongoing business in the medium term, measured against pro-forma 7.1% in 2013.
Over time generate free cash available to shareholders in a range around the net operating result of the ongoing business, assuming normal markets, the current regulatory framework and no material special items.
Non-financial objectives Optimise the customer experience by creating transparent, easy to understand products.
• Further develop Responsible Investment Policy Framework • Continue to grow Assets under Management in SRI funds and mandates and expand product offering
Empower our employees by fostering an open, inclusive and stimulating working environment.
Create positive change in the communities where we operate by supporting people to improve their financial wellbeing and help them overcome adversity.
• Reduce CO2 emissions with 30% in 2020 compared to 2005 (Dutch operations)
The interests of NN Group and its stakeholders In performing its duties, the Boards must carefully consider and act in accordance with the interests of NN Group and its associated business, taking into consideration the interests of all stakeholders of NN Group. The organisation, duties and working methods of the Executive Board, Management Board and Supervisory Board are detailed in charters of these Boards. These charters are available for download on the NN Group corporate website.
For more specific information on the governance relating to our corporate citizenship approach, read more at www.nn-group.com/In-society/ Governance-memberships-andendorsements.
Compliance with relevant codes Dutch Corporate Governance Code As a Dutch listed company NN Group must adhere to the Dutch Corporate Governance Code. NN Group endorses the Code and strongly supports its principles for sound and responsible corporate governance. NN Group considers the principles and best practices of the Code a useful and efficient guide that contributes to NN Group’s effort to carefully take into account the interests of its stakeholders. The Code also supports transparency in decision-making and helps strengthen the principles of good governance. NN Group annually publishes a booklet on its application of the Code. The booklet is available for download on the NN Group corporate website.
NN Group Compliance Charter & Framework NN Group is committed to upholding its reputation and integrity through compliance with applicable laws, regulations and ethical standards in each of the markets in which it operates. All employees are expected to adhere to these laws, regulations and ethical standards, and management is responsible for ensuring such compliance. Compliance is therefore an essential aspect of good corporate governance. The purpose of the NN Group Compliance Charter & Framework, which was renewed in June 2015, is to help businesses to effectively manage their compliance risks. This document is available for download on the NN Group corporate website.
Lard Friese was appointed as member and vice-chair of the Executive Board on 1 March 2014 and as Chief Executive Officer (CEO) and chair of the Management Board and Executive Board on 7 July 2014. Previously he was appointed to the Management Board of ING Insurance as from 3 November 2011. Lard is responsible for the strategy, performance and day-to-day operations of NN. He has been employed by ING/NN since 2008 and brings 27 years’ experience in the financial services industry, most recently with NN Insurance Eurasia and Nationale-Nederlanden.
Robin Spencer was appointed to the Management Board on 1 August 2014, and as Chief Executive Officer International Insurance on 1 September 2014. He is responsible for NN’s Insurance Europe, Japan Life, Japan Closed Block VA and NN Re businesses. Robin was previously Chief Executive Officer of Aviva UK & Ireland General Insurance. He has over 20 years’ experience in the insurance industry across life, non-life and asset management in the UK and internationally.
After more than 17 years with ING and NN, Doug Caldwell stepped down from his position as Chief Risk Officer and member of the Management Board of NN Group as of 1 October 2016 to pursue his career outside of the company. He joined ING in 1999 and was Chief Risk Officer and member of the Management Board since 1 December 2012.
David Knibbe was appointed to the Management Board on 7 July 2014. From 1 September 2014, he was appointed Chief Executive Officer of Netherlands Insurance. In this role, David is responsible for NN’s insurance and banking business in the Netherlands. He is also responsible for IT globally. He brings 19 years’ experience in the financial services industry and held management positions at ING Bank, ING Piraeus in Greece, NN Investment Partners and NationaleNederlanden. David Knibbe is chair of the Dutch Association of Insurers.
Jan-Hendrik Erasmus was appointed to the Management Board on 1 September 2016 and as Chief Risk Officer of NN Group on 1 October 2016. Previously, he was a Partner in Oliver Wyman’s Financial Services business, Head of the UK Insurance Practice and a member of the European Leadership Team. He joined Oliver Wyman in 2009, before which he held leadership positions in Lucida plc and Prudential plc. Jan-Hendrik has more than 14 years of financial services experience across insurance, risk and investment management in the UK and internationally.
To earn trust and support, NN Group maintains an open and continuous dialogue with its stakeholders about various topics and issues, including our products and services, our business performance, and our role in society. We do this across all levels of the organisation, from NN Group to business unit levels.
International commitments and endorsements As a company based in the Netherlands, we adhere to Dutch law and the Dutch Corporate Governance Code (read more on page 44). We observe the laws and regulations in the markets where we operate.
We adhere to international standards and guidelines, including the UN Global Compact and Guidelines for Multinational Enterprises of the Organisation for Economic Cooperation and Development (OECD).
To underline our ambition, NN Group and/or its respective businesses, endorsed various international initiatives, such as: • Principles for Sustainable Insurance
Furthermore, we are a member of various (inter)national network organisations, including: • UN Global Compact
For an overview of all endorsements and memberships go to our website: www.nn-group.com/in-society
Sustainable Development Goals We support the Sustainable Development Goals (SDGs). The SDGs were adopted by world leaders and came into force in January 2016 and relate to climate, poverty, health care, education, and other societal challenges. The SDGs are set for 2030 and in addition to government action, institutional and private investment capital will be needed to help achieve these goals.
NN Group, together with 17 other Dutch financial institutions, contributed to a report called ‘Building Highways to SDG Investing’. In November, the report was presented to the Dutch Minister for Foreign Trade and Development Cooperation at the Global Impact Investing Network (GIIN)’s conference. With this report the group of financial institutions invite the Dutch government and Central Bank to continue to make a concerted effort with them in support of the SDGs. NN joined this initiative as we believe it is important to collaborate on this topic, and because we acknowledge that considering the largest societal challenges is important in our work and investments.
Reporting process Relevant topics were selected for the 2016 Annual Report, more specifically the Annual Review, through a materiality assessment using internal and external research and other sources. In addition, a survey was conducted amongst external and internal stakeholders to help steer our focus.
The scope for community investment and environmental data is all businesses with more than 100 FTE. NN Group used an online system, Credit360, for gathering the information and data for community investment and environmental footprint. We have tried to limit any uncertainties in the reported data through our internal validation process, including application of validation rules in Credit360.
In the reporting year 2016, no significant changes occurred regarding our corporate citizenship strategy, definitions and reported data. Also, no acquisitions or divestments occurred that impacted our scope (see page 39 of this Annual Review), therefore no changes occurred regarding our reporting approach.
Going forward Going forward, we will continue to tailor our reporting to serve different stakeholder groups. This includes further integration of financial and non-financial information and indicators to provide stakeholders with a complete picture of how we create long term value for our company and stakeholders.
– designated as at fair value through profit or loss 873 443
NN Group share price (COB 31 December 2016, in EUR) 32.20 32.55 24.85
– Insurance business units scoring on/above market average n.a. 95% 70%
Assets under Management in SRI funds or mandates (end of period – in EUR million)
– as part of the total Assets under Management 2.6% 2.4% 2.2%
Assets under Management in SRI funds and mandates (end of period) 5,062 4,509 12.3% 4,052
– NN (L) Global Sustainable Equity Fund 673 544 23.7% 268
– NN (L) Euro Sustainable Credit (excluding Financials) 587 471 24.6% 457
Total spending on training and development (in EUR million) 13.7 13.0 5.4% 13.6
2 Numbers reached include partnership with Junior Achievement, main Dutch programmes and for 2016 also the impact numbers of the Future Matters anniversary donations.
Business travel – air travel (km x 1 million) 24 4 25 6 -0.5% 23 4
1 The comparative figures for 2015 and 2014 have been restated according to new data 2 Decrease in 2016 mainly caused by a reduction of office space in The Netherlands
(%) NN Future Matters 69 – Promoting financial empowerment 21 – Creating economic opportunities 32 – Alleviating financial distress 16 Health 23 Nature and animals 1 Disaster relief 0 Arts & Culture2 1 Other 6 1 Includes cash donations to charitable causes, corporate foundations and partnerships.
Assurance report of the independent auditor To: the Stakeholders and the Supervisory Board of NN Group N.V.
We have reviewed the non-financial information - as defined in the chapter Our approach to reporting on page 50 - in the Annual Review 2016 (hereafter: the non-financial information) of NN Group N.V. (hereafter ‘the Group’ or ‘NN Group’) officially based in Amsterdam and headquartered in The Hague.
Based on our review, nothing has come to our attention to indicate that the non-financial information in the Annual Review is not presented, in all material respects, 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.
Key review matters are those matters that, in our professional judgement, were of most significance in our review of the non-financial information. We have communicated the key review matters to the Executive Board and the Supervisory Board. The key review matters are not a comprehensive reflection of all matters discussed.
Our observation We have assessed the materiality assessment process that NN Group executed during 2016 to be sufficiently solid to identify material topics for inclusion in the 2016 Annual Review. We have also observed that the material topics as identified in the process have been reflected in the Annual Review.
Description It is required that the Annual Review provides an unbiased and clear picture of NN Group’s (non-financial) performance to its stakeholders. For a reasoned assessment of the overall performance of NN Group the Annual Review has to reflect both positive and negative aspects of the organisation’s performance as applicable. This area was significant to our review as the assessment of the right balance is inherently subject to a qualitative evaluation of the information gathered and judgment about the extent to which specific information needs to be included in the Annual Review.
Our response Our assurance procedures included, amongst others, obtaining an understanding of the principles that NN Group applied to collect and document information as the basis for preparing the Annual Review. We interviewed relevant staff responsible for preparing the Annual Review and assessed proper inclusion of their insights. Finally, we performed an overall assessment of the Annual Review based on our knowledge of the company and evidence obtained to determine that the Annual Review presents a balanced overall picture of NN Group’s (non-financial) performance over the year.
Our observation We have observed that the definitions as applied by NN Group are sufficiently clear and based on our procedures performed it appears that these definitions have been properly applied.
Report on the non-financial information included in other parts of the annual review
Based on the following procedures performed, we conclude that the non-financial information included in the sections listed above is consistent with the other sections of the Annual Review and does not contain material misstatements.
The scope of the procedures performed is substantially less than the scope of those performed in our review of the nonfinancial information.
The Executive Board is responsible for the preparation of the non-financial information included in other parts of the Annual Review.
Our responsibility is to plan and perform the review assignment in a manner that allows us to obtain sufficient and appropriate assurance evidence for our conclusion.
A review is aimed to obtain a limited level of assurance. Procedures performed to obtain a limited level of assurance are aimed at determining the plausibility of information. The procedures performed consisted primarily of making inquiries of staff within the entity and applying analytical procedures on the information in the Annual Review. The level of assurance obtained in review engagements is therefore substantially less than the level of assurance obtained in an audit engagement.
Misstatements can arise from fraud or errors and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the decisions of users taken on the basis of the non-financial information. The materiality affects the nature, timing and extent of our review procedures and the evaluation of the effect of identified misstatements on our conclusion.
We have exercised professional judgement and have maintained professional scepticism throughout the review, in accordance with the Dutch Standard 3000, ethical requirements and independence requirements.
• Interviewing relevant staff at corporate level responsible for the sustainability strategy and policy.
• Interviewing relevant staff responsible for providing the non-financial information, carrying out internal control procedures on the data and consolidating the data in the Annual Review related to the indicators.
• Reviewing relevant data and evaluating internal and external documentation, based on limited sampling, to assess the accuracy of the non-financial information.
Assets under Management in SRI funds and mandates are assets that are managed with a specific focus on sustainability. This includes our Socially Responsible Investing (SRI) funds and mandates.
CDP Carbon Disclosure Project – global disclosure system for companies, cities, states and regions to manage their environmental impacts and for investors or purchasers to access environmental information for use in financial decisions.
DHAN Development of Human Action Foundation – The Foundation works to make significant changes in the livelihoods of the poor through innovative themes and institutions.
Diversity and inclusion NN Groups approach to diversity includes hiring people of various race, ethnicity, gender, age, sexual orientation, physical abilities and personal philosophies, as well as creating an inclusive culture and diversity of thought – one that welcomes, acknowledges, respects, challenges and benefits from our differences.
EFAMA European Fund and Asset Management Association – the representative association for the European investment management industry. EFAMA represents 28 member associations and 61 corporate members.
ESG factors are a subset of non-financial performance indicators which include sustainable, ethical and corporate governance issues such as managing the company’s carbon footprint and ensuring there are systems in place to ensure accountability.
European Works Council The European Works Council (EWC) is a standing works council body as required by the 2009 European Works Council Directive 2009/38 of the European Commission. The EWC is formed by chosen employee representatives of all eleven European countries where NN Group is active. EWC-members are informed about ‘transnational’ matters twice a year.
Ethics statement introduced in early 2013 for employees in the Dutch financial sector, along with the introduction of a social charter and update of the Banking Code. The oath or promise applies not only to employees of banks but also to employees of other financial enterprises, including insurance companies, investment firms and financial service providers. By taking the oath or promise, employees proclaim that they are bound by the Code of conduct attached to the oath or promise for the ethical and careful practice of their profession.
FinTech A line of business based on using software to provide financial services. Financial technology companies are generally providers of new solutions which demonstrate an incremental or radical innovation development of applications, processes, products or business models in the financial services industry.
ICGN International Corporate Governance Network – in place to influence policy by providing a reliable source of investor opinion on governance and stewardship.
Institutional investors Entities which pool money to purchase securities, real property and other investment assets or originate loans. Institutional investors include banks, insurance companies, pension funds, hedge funds, investment advisors and endowments.
A global coalition of regulators, investors, companies, standard setters, the accounting profession and NGOs. The coalition is promoting communication about value creation as the next step in the evolution of corporate reporting.
No-regret Policy Policy adopted with the objective of gaining capability to cope with forthcoming adversity, including having the optionality to reverse measures if changed circumstances require.
Partial Internal Model A method of calculating the Solvency Capital Requirement (SCR) that combines a standard formula and an approved, internally developed internal model.
Pulse survey A short version of the yearly YES survey, NN Group’s yearly employee engagement survey. It was last conducted internally by NN Group in May 2014 with the goal of evaluating how our strategy, values and brand were impacting people throughout the organisation.
The NN Group N.V. 2016 Report of the Executive Board (Bestuursverslag), as referred to in section 2:391 of the Dutch Civil Code. Specific chapters to be mentioned in this matter are the Annual Review and the following chapters in the Financial Report: the Financial Developments, the Report of the Supervisory Board, Corporate Governance, the Remuneration Report and the Report of the Executive Board on internal control over financial reporting.
The Responsible Investment (RI) Policy Framework sets out NN Group’s vision, approach and key principles on responsible investment. NN Group defines RI as the systematic integration of relevant ESG factors into its investment decision-making and active ownership practices.
SDMO Sustainable Micro Pensions in Developing Countries organisation – joint initiative of the Association of Insurers and the Pension Federation in the Netherlands with support of the Dutch Ministry of Foreign Affairs.
Stakeholders The groups and individuals who, directly or indirectly, influence – or are influenced by – the attainment of the company’s objectives, such as shareholders and other lenders, employees, suppliers, customers and civil society.
UN Global Compact The United Nations Global Compact is an initiative of the United Nations to encourage businesses worldwide to adopt sustainable and socially responsible policies, and to report on their implementation. It is a principle- based framework for business, stating ten principles in the areas of human rights, labour, environment and anti-corruption.