NN Group: Attractive Capital Return

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In early January, we decided to proceed publishing our comps study betwixt NN Group NV (OTCPK:NNGPF, OTCPK:NNGRY) and Aegon (NYSE:AEG); however, this clip pinch a penchant for nan erstwhile company. Our publication was titled Capital Generation Will Alleviate Requirement Concerns and was based connected nan pursuing 1) an expected little Solvency II requirements which will beryllium compensated by higher rate travel generation, 2) a penchant for higher dividend per stock (and tactical acquisitions) complete buyback, 3) an absorbing valuation introduction point.

Looking astatine nan property release, we couldn't beryllium much right. Last time, we besides emphasized really NN's CMD disappointed nan sell-side organization connected stock repurchase expectations. Equity investigation analysts were forecasting a €500/€550 cardinal buyback, and successful November, nan institution announced and coming confirmed a €250 cardinal buyback target (Fig 3). Regarding nan numbers, contempt nan Asset Management disposal, NN Group delivered a higher operating superior procreation that reached €812 million compared to nan €804 cardinal recorded last's twelvemonth aforesaid period. This was owed to a higher publication from its security division, arsenic good arsenic from nan Netherlands' life segment. On an aggregate level, nan company's OCG was up by 8.0% to €1.71 cardinal (Fig 1).

Here astatine nan Lab, we were forecasting little Solvency II requirements, and again, moreover if this is simply a antagonistic point, we are not surprised, and it was already taken into information successful our soul estimates. NN Group Solvency II ratio stood astatine 197% versus 213% astatine past year-end (and 196% successful HY 2022), this antagonistic improvement was supported by OCG improvement but wholly offset by dividend costs (this is simply a seasonal adjustment) and marketplace impacts (Fig 2). Last time, we said: our readers cognize that we for illustration a dividend per stock summation versus a buyback - and today, NN Group denote a last dividend of €1.79 per share, and currently, nan full DPS is group astatine €2.79 (up by 12% - Fig 3). This is successful statement pinch Mare Evidence Lab's thesis, and we positively invited this trajectory (7% DPS maturation successful nan past 3 years vs a positive 12% conscionable recorded).

NN Group operating superior procreation evolution

(Fig 1)

NN Group Solvency Ratio evolution

(Fig 2)

NN Group shareholder payout evolution

(Fig 3)

Conclusion and Valuation

NN Group confirmed its financial target antecedently disclosed connected November CMD. The company's rate position is level astatine €2.08 cardinal connected a yearly ground and provides a separator of information connected Solvency II ratio requirements. With nan afloat twelvemonth OCG, NN exceeded its €1.5 cardinal target by much than €200 cardinal and is successful statement pinch guidance denotation which forecast an OCG summation to €1.8 cardinal by 2025. We very good anticipated NN development, and truthful we are not adjusting our valuation number. We past confirmed our bargain standing astatine €58.5 (and $31 successful ADR) per share, based connected a Holding rate astatine 11.7% and a superior return of 11.9% (including dividend and existent buyback).

Holding CO rate evolution

You could besides cheque our latest publication connected Aegon: Positive Q4 Results, Confirm Buy

Editor's Note: This article discusses 1 aliases much securities that do not waste and acquisition connected a awesome U.S. exchange. Please beryllium alert of nan risks associated pinch these stocks.

Buy-side hedge professionals conducting fundamental, income oriented, agelong word study crossed sectors globally successful developed markets. Please sprout america a connection aliases time off a remark to talk ideas.DISCLOSURE: All of our articles are a matter of opinion, informed arsenic they mightiness be, and must beryllium treated arsenic such. We return nary work for your investments but wish you champion of luck.