NN Earnings: Cautionary Statements on Operating Capital Generation Spooks the Market

Nationale Nederlanden reported fair results for the first half of 2024. While the business looks like it will remain on track to meet its operating capital generation target of EUR 1.9 billion for 2025, some caution has been added over the EUR 1.5 billion OCG target for life. This depends a bit on market movements and particularly pertains to mortgage spreads. The EUR 1.6 billion 2025 free cash flow target stands. Solvency is a little low at 192%, but at the top end of the 150%-200% target. The unit-linked file settlement is on track to be completed by June 2025. The business has announced an interim dividend of EUR 1.28, which is a 14.3% increase versus the interim dividend last year. Dividends are tied to the mid-single-digit target for free cash flow growth and with the EUR 300 million annual buyback, the target is between a 7% and 8% annual dividend-per-share rise. Group profit before tax of EUR 824 million, versus our forecasts, looks a bit light. We maintain our EUR 55 fair value estimate and no moat rating.