Dutch insurer NN Group has pledged to invest in riskier assets and buy back shares more regularly to improve its returns, but stopped short of meeting all the demands made by activist investor Elliott.
Elliott, a $40bn investment firm led by Paul Singer, took a 3 per cent stake in NN this year and two weeks ago outlined how it thought the company could boost its performance.
Its proposals included changing the way the insurer invests its money, cutting costs. and selling off non-core businesses — moves that Elliott claimed could increase NN’s share price by 80 per cent.
In its response set out at an investor day on Wednesday, NN promised a series of measures to improve capital generation — a measure of profits — from €1.3bn to €1.5bn by 2023 and said it would spend €250m a year on share buybacks.
“The company will look very different three to four years from now,” said David Knibbe, NN’s chief executive. “By achieving these plans, we will take a big step forward.”
He added that the company had developed its strategy after consulting with “many stakeholders”.
NN shares fell 2 per cent following the announcement.
One of the biggest changes will be to NN’s investment portfolio. At the moment, about half of NN’s assets are invested in low-yielding government bonds. The company has promised to boost returns by investing in riskier assets including Dutch mortgages, equities and corporate debt.
NN said that it had evaluated the strengths and weaknesses of all of its business, but it did not commit to the non-core disposals that Elliott demanded. In particular, the activist had called on NN to sell its Japanese operation.
Mr Knibbe pushed back on that idea. “Japan is a market we know very well. We operated in a very large niche where we are market leader and we make very good returns there,” he said. “From that point of view the business is attractive . . . it is a very important growth engine.”
But he added that the door was not closed to disposals: “If we feel that a unit is not meeting our [financial and strategic] criteria, all options are on the table.”
The company did not unveil an explicit cost savings target, although Mr Knibbe said: “The focus on efficiency is never done. To be competitive, we need to be efficient.”
Andrew Baker, an analyst at Citi, said that the new target for capital generation was about 7 per cent higher than his previous estimates. “Overall, we see this as a solid set of targets,” he added.