H1 23 results: dispelling scepticism

NN Group’s H1 23 results were above expectations, showcasing robust OCG and higher operating results across all sectors compared to the previous year. The firm reiterated its target for 2025; however, we believe the management has been conservative. While the company restated its 2025 objective, we hold the view that the management’s approach has been cautious. Encouraging advancements are also noted in the Life business, even though the top performer of the release is the Netherlands Non-Life.

FY 22 results: We are (still) not convinced

NN Group H2 results disappointed on operations however OCG remained strong and fed the distribution story. The firm announced a €250m share buyback program but we take a cautious approach regarding any recurring distributions. Impairments and revaluations are a reminder of the firm’s embedded risk.

Strong capital position unveiling frustration on more distribution

NN Group released strong results mainly driven by the outstanding performance in non-operating items. The insurer now benefits from a strong capital position even accounting for distributions. With the upcoming sale of NNIP, NN intends to distribute an extra €750m to shareholders with the proceeds.

Very strong H1 from operations and capital markets

Very strong set of results, concluding a great first half of the year which might not be replicated in H2. However, the overall operating capital generation in most business lines and the asset management review look promising.

The insurer overcomes the difficulties of 2020

Despite a complicated context, NN Group succeeded in posting an improved operating result (up 5.3% to €1,889m). The insurer reached its target of cost reduction (€404m relative to 2016 expense base) and its capital position stood at the comfortable level of 210%. The proposed dividend is €1.47 par share and a new share buy-back programme of €250m was announced. The performance of NN in 2020 is appreciable and confirms the quality of its business model. The 2023 strategic targets remain achievabl

The insurer resumes dividends

NN Group released H1 20 operating result of €926m, up 1.3% yoy. The net result declined by 47.5% to €587m, impacted by non-operating items. The COVID-19-related costs were limited to €30m. The Solvency II ratio stood at 221% and the insurer decided to distribute an interim dividend of €2.26/share, which includes the final dividend of 2019, and to continue the share buy-back programme. Achievements were better than expected. Our numbers will be revised up.

Higher cost reduction and capital generation at the heart of strategy

NN Group is targeting Operating Capital Generation of €1.5bn in 2023, mainly thanks to additional cost savings. The insurer had a solid Solvency II ratio at 227% in May 2020, including the impact of the longevity transactions. The net impact of COVID-19 is estimated at €-100m on the 2020 operating result and OCG. The dividend strategy should remain progressive.

Solid solvency, generous dividend

NN Group’s Q4 19 operating result improved by 24.9% yoy to €428m, bringing the FY 19 operating profit to €1,794m. Except for the Dutch Life business, which confirmed the observed pressures since the beginning of the year, all business units posted improvements. The Solvency II ratio stood at 218%, allowing the insurer to distribute a final dividend of €1.24/share and to initiate a recurring share buy-back programme of €250m.

The Dutch Life business is still pressurised

Like the previous quarter, NN Group’s operating result declined by 2.2% in Q3 19 to €453m under the weight of the Dutch Life business. In 9M, the insurer recorded a 6.5% increase in the operating earnings to €1,366m, thanks to the excellent Q1 accounts. The new regulations in Japan concerning the COLI products led to lower fees and premium-based revenues but the operating performance was positive. The Solvency II ratio stood at 217%. No significant changes in our estimates.

Q2 19 operating result affected by Dutch Life business

NN Group’s operating result declined by 12.3% in Q2 19 to €445m, affected by the Dutch Life business. Since the beginning of the year, the insurer has recorded an 11.3% increase in the operating earnings to €914m. The Japanese business showed resilience despite the suspension of the distribution of some COLI products. €306m of cost reductions were achieved, while the target is set at €400m by 2020. The Solvency II ratio stood at 210%. No significant changes in our estimates.

The Life business boosts the performance of the multi-line insurer

The operating result increased by 49.5% to €468m, boosted by the Netherlands Life division (57.2% of the group operating earnings). The Life business in Japan recorded rapid growth thanks to a jump in COLI products’ sales. €310m of costs reduction were achieved while the target is set at €400m by 2020. The Solvency II ratio stood at 213% and the cash position at the Holding was €2,048m. A good performance in Q1 and the start to the year was clearly promising.

Resilient business model but serious governance issues

Business NN Group (NN) is the former insurance arm of ING Group. After the financial crisis of 2008, the group was obliged to separate this business from the banking one in consideration of the support from the Dutch Government. NN became a standalone-listed company in July 2014, with activities in insurance, banking and asset management. NN has a key presence in Europe, mainly in the Netherlands (leader in Pensions and Individual Life) and Belgium (fourth Life operator). Its marked shares we

Morning Note – 22 April 2024

Benefits of scale set to materialise

Frenkel Topping - Resilient with strong growth potential

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Bluefield Solar Income Fund – Fundamentals shine despite discount

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LSL Property Services (LSL LN) - Transformation & market recovery

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Henderson Far East Income - Repositioning to raise total returns

Henderson Far East Income (HFEL) has consistently delivered on its objective to provide a rising dividend. However, like many investors, HFEL’s managers overestimated the potential for a post-pandemic rebound in China. The trust’s resultant overweight to Chinese consumer and other cyclicals led to a fall in portfolio revenues and underperformance in the financial year ended 31 August 2023 (FY23). With a view to improving future returns, HFEL’s board has since indicated an increased willingness t

S&U - PBT ahead, encouraging volume trends

S&U reported FY24 PBT of £33.6m, down from £41.4m in FY23 on higher funding and regulatory costs and higher impairments in Advantage in H2. PBT was 2% ahead of our forecast as stronger revenues – up 12% to £115.4m – and better costs offset higher-than-expected impairments. Net receivables grew to a record at both Advantage and Aspen and management noted particular strength in Q4 and a good trading environment in the current year. Having absorbed a significant rise in funding cost as well as addi

Hardman & Co Insight: 2023 was an annus horribilis for Quoted UK Infrastructure and Renewable Energy

The focus of Hardman & Co Research is on the nine quoted Infrastructure Investment Companies (IICs) and on the 22 Renewable Energy Infrastructure Funds (REIFs): the stocks analysed are all members of the Association of Investment Companies (AIC). We are updating our publication of January 2023, assessing both the lacklustre share price performances during 2023 and the key issues, including interest rates, inflation and power prices. As a 31-strong group, its combined market capitalisation is no

Foresight Solar Fund - Termination of coverage

Edison Investment Research is terminating coverage on ABC Arbitrage (ABCA), paragon (PGN), Foresight Solar Fund (FSFL), Kendrion (KENDR), Lithium Power International (LPI), Triple Point Energy Transition (TENT), 4iG (4IG), e-therapeutics (ETX), Pharnext (ALPHA) and Shield Therapeutics (STX). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our web

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Regional REIT - Performing as expected ahead of refinancing

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Witan

Business as usual for WTAN’s executive team, while the board reviews investment management arrangements…

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