The latest Solvency strategy update from NN Group, as it completes on two risk transfer deals.
NN Group announces today that its subsidiary NN Life has completed two transactions to transfer the full longevity risk associated with in total approximately EUR 13 billion of pension liabilities in the Netherlands. The deals will reduce NN’s exposure to longevity risk and thereby further strengthen NN’s capital position.
The transactions cover the longevity risk of approximately 300 thousand policies and have been entered into with an insurance subsidiary of Prudential Financial, Inc. and with Swiss Re. The risk transfer will become effective as of 31 December 2023, and the reinsurance agreements will continue until the portfolio has run off. The reinsurance deals have no impact on the services and guarantees that NN provides to its policyholders.
“The capital uplift and economics from these transactions are very attractive compared to the limited impact on operating capital generation. It underscores our efforts to continually look for value creating opportunities, reduce longevity risk in the Dutch market, and actively manage our balance sheet,” said David Knibbe, CEO of NN Group.
At the end of September 2023, the unaudited Solvency II ratios for NN Group and NN Life were approximately 205% and 187%, respectively. The longevity transactions will result in an upfront capital benefit and are expected to increase the NN Group Solvency II ratio by approximately 8%-points, and NN Life’s Solvency II ratio by approximately 17%-points, based on the balance sheet and markets per the end of September 2023.
The lower risk profile resulting from the longevity transactions will lead to a limited decrease in the operating capital generation for the first five years in the range of EUR 30-35 million per year. In the following years, this negative impact will decrease over time in line with the run-off of the portfolio.
The Solvency II ratios of NN Group and NN Life are sensitive to market movements for which NN has provided sensitivities in the analyst presentation for the results for the first half of 2023. Since the 1H23 disclosure, market movements have had an adverse impact on the Solvency II ratios of NN Group and NN Life, most notably due to the widening of the mortgage margin.
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