EUR 850.00 For Business Accounts Only

Morningstar | Turnaround and Resistance at NN Group

NN Group is now a nicely structured entity. Though it operates in what we think is one of the toughest insurance markets in Europe, it has done a number of things to combat and offset this, and the valuation looks, in our opinion, far too cheap compared with the earnings of the business. Admittedly, there will be some capital release coming from the individual life closed block runoff and more naturally within the traditional book because of the declining appetite for guarantees. Despite this, however, the valuation remains highly compelling.What we have here are two challenged entities and a story that centers on turnaround and resistance. The nonlife division is in a turnaround phase, and the life provisions show some serious resistance. Of the two, the nonlife business, while small, has more potential to surprise to the upside. We think the tide is changing in this market with a particular focus on the 2021 earnings horizon.For the life insurance business, NN has adapted to survive. Where the business has witnessed spread compression, NN has started NN Bank in order to originate better fixed-rate-of-return mortgages, as well as provide a conduit for selling still largely unpopular life insurance into this market. The asset-management division, NN Investment Partners, manages fixed-rate-of-return assets for the traditional book of business and increasingly manages higher-risk asset classes for risk of policyholder business as well as the surplus, which includes real estate, for equity owners of the company. Delta Lloyd came with a poor reputation in asset management, and NN Investment Partners has not fared a lot better. But with a new chief investment officer in place who has a reputation in balanced fund asset management, as well as forward-looking structural tailwinds that will work against the Netherlands life insurance industry headwinds, we think the business has a lot of opportunity to surprise to the upside.