{ "documentInfo": { "documentType": "https://xbrl.org/2021/xbrl-json", "features": { "xbrl:canonicalValues": true }, "namespaces": { "ifrs-full": "http://xbrl.ifrs.org/taxonomy/2021-03-24/ifrs-full", "iso4217": "http://www.xbrl.org/2003/iso4217", "nn-gr": "http://nn-group.com", "scheme": "http://standards.iso.org/iso/17442", "xbrl": "https://xbrl.org/2021", "xbrli": "http://www.xbrl.org/2003/instance" }, "taxonomy": [ "http://nn-group.com/nn-gr-2022-12-31.xsd" ] }, "facts": { "fact-1": { "value": "Life insurance Non-life insurance Banking \u2022 Group pensions \u2022 Individual pensions \u2022 Retail life insurance \u2022 Japan: Corporate Life (COLI) \u2022 Fire insurance \u2022 Health insurance \u2022 Individual disability and Group income \u2022 Liability insurance \u2022 Motor insurance \u2022 Property and casualty \u2022 Transport insurance \u2022 Mortgage origination and servicing for NN Group companies and third parties \u2022 Consumer savings and investment products", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-2": { "value": "5.4 Managing our risks Risks represent uncertainties that could impact achieving NN Group\u2019s strategic objectives and commitments. Strong risk management helps us monitor developments in our operating environment and act where necessary. Introduction This section covers the following topics: \u2022 Risk Control Cycle (paragraph 5.4.1) \u2022 Risk Profile, with a focus on material risks as established by NN Group\u2019s Management Board (paragraph 5.4.2) \u2022 How NN Group manages sustainability/ climate risks (paragraph 5.5) More information on how risk management responsibilities within NN Group are organised can be found in the Corporate Governance chapter on pages 105-121. Details on our financial risk profile can be found in Note 52. Risk Assessment Risk Control Risk Monitoring & Reporting Risk Strategy Risk Culture 1 These disclosures are an integral part of the Consolidated Annual Accounts, and are part of the disclosures to which the audit opinion relates. This includes pages 70-74. 5.4.1 Risk Control Cycle\u00b9 We manage any risks inherent to our business model and the environment in which we operate within NN Group\u2019s risk appetite and framework. Every employee has a role to play in identifying risks in their area of responsibility and managing them in a proactive way. It is important to know which risks we need to avoid and which we are prepared to take, and why; to be aware of large existing and emerging risks; and to ensure an adequate return for the risks assumed within the business. The following risk control cycle ensures that business units and NN Group operate within our risk appetite: 1. Set business and risk objectives, leading to a risk strategy (risk appetite, policies and standards); 2. Identify and assess the risks that need to be managed; 3. Effective mitigation of risks; 4. Continuously monitor the effectiveness of mitigating measures, including reporting on risk levels. This cycle is underpinned by a sound risk culture. The risk control cycle supports the NN Group strategy, the Business Plan (financial control cycle) and performance management (HR cycle) that enable business units and the NN Group to meet their business objectives. Risk Strategy NN Group\u2019s risk appetite is the key link between the Group\u2019s strategy, capital plan and risk management in executing the business plan. Risk Appetite Statements define qualitatively how much risk we are willing to take for each type of risk. They also describe how we want to avoid unwanted or excessive risk-taking, and aim to optimise use of capital. The statements are then translated into more detailed risk limits and tolerances, policies and standards. The specific statements are listed on the next page
Managing Strategy
Risk appetite: Moderate
We actively engage in a dialogue with
our stakeholders and manage our
products, distribution channels and
organisation, as well as key performance
and risk metrics in order to:
\u2022 Create value for all our stakeholders, and
contribute to the well-being of people and
the planet
\u2022 Respond and adapt to emerging
external challenges
\u2022 Meet our strategic targets and sustainable
growth and return objectives
Human Capital Risks
Risk appetite: Moderate
We moderately accept risks in attracting,
retaining and developing a competent
and diverse workforce to shape and build
NN Group\u2019s business
Solvency Risks
Risk appetite: Limited
We accept financial risks on our balance
sheet so we can offer financial security
through products for our customers as well
as predictable and attractive returns for our
investors. We:
\u2022 like to avoid having to raise equity capital
after a 1-in-20 year event,
\u2022 only accept risks that we understand and
can effectively manage,
\u2022 design and price our products in a
responsible manner, and
\u2022 limit exposure to non-rewarding risks
(in particular concentration, interest rate,
currency and inflation risk) or risks to
which we have already a high exposure
(in particular longevity risk)
Liquidity Risks
Risk appetite: Limited
We want to meet our payment and collateral
obligations, even when under severe liquidity
stress, while also actively pursuing illiquid
assets to back illiquid liabilities on our
balance sheet.
Sound Business Conduct
Risk appetite: Avoid
We do not accept material breaches of
applicable laws and regulations or NN Group
policies and standards.
Employee Conduct & Business Culture
Risk appetite: Avoid
We actively monitor and manage
employee conduct and foster a business
culture demonstrating that we live the
NN values.
Product Suitability
Risk appetite: Avoid
We only market products and services
that add value for our customers over
their expected lifetime, are in line with
their preferences, and can be simply
and transparently explained.
Operational Risks
Risk appetite: Moderate
We moderately accept human errors and
as such failures in processes, and therefore
manage to agreed tolerances.
IT Risks
Risk appetite: Limited
We limit losses arising from IT risks, and
therefore we ensure our IT assets are
sufficiently resilient.
Reliable Reporting
Risk appetite: Avoid
We have no appetite for material errors
in external financial and non-financial
reporting, and internal reports used for
managerial decision-making.
Business Continuity
Risk appetite: Limited
We avoid, to the extent possible and
even under severe circumstances,
sustained discontinuation of business
(people, offices, systems).
In 2022, NN Group introduced a new risk
appetite statement for Human Capital Risks,
further integrated sustainability risks into our
risk appetite framework and updated other
risk appetites in the light of changes in our
external environment.
Risk Metrics
The Risk Appetite Statements mentioned
above are implemented within the
business through the use of risk metrics,
as well as policies and standards:
\u2022 Risk limit \u2013 the maximum exposure to a
risk management is willing to accept, and
should not be breached.
\u2022 Risk tolerance \u2013 the level of exposure
to a risk at which management wants
to be actively informed \u2013 it serves as a
trigger to review the exposure regularly
and reflects an ambition level within
which management wants to act in the
medium term.
\u2022 Key Risk Indicators (KRIs) \u2013 used for
areas where we are unable to (fully)
quantify risks. KRIs measure performance,
but without necessarily setting limits
or tolerances, instead using subjective
assessment to establish if we are acting
within set risk appetites.
\u2022 Policies and standards \u2013 define
objectives and requirements to ensure
that processes and risks are managed
consistently throughout NN Group.
They are mandatory.
Metrics Strategic & Emerging risks
This is monitored through various metrics
related to the Business Plan, such as
progress on main strategic initiatives and
deviation between actual and planned
strategic targets.
Metrics Human Capital Risks
This is monitored via indicators related
to employee engagement, renumeration,
succession planning, as well as policies
and standards on renumeration, recruiting,
branding, and so forth.
Metrics (Non-)Market Risks
Relevant metrics are:
\u2022 Solvency II ratio: the ratio of Eligible
Own Funds (OF) to Solvency Capital
Requirement (SCR). NN Group aims to
capitalise the Group and its business
units adequately at all times. To ensure
adequate capitalisation, units are
managed to their commercial capital
levels (based on the Solvency II ratio or
local solvency regime) in accordance
with the risk associated with the
business activities.
\u2022 Solvency II ratio sensitivities: show how
the NN Group OF and SCR are impacted
under various scenarios as decided
by NN Group Management Board (for
example changes in interest rates or other
financial market factors).
\u2022 Cash capital position: NN Group holds
a cash capital position in the holding
company to cover stress events, and fund
holding company expenses and interest
expenses. The cash capital position is
defined as net current assets available at
the holding company .
Risk Taxonmony\u00b9 NN Group has defined and categorised the different types of risk into a risk taxonomy, our internal \u2018risk dictionary\u2019: Risk Appetite Risk Class Description Managing Strategy Emerging Risks Newly developing or changing risks that cannot yet be fully assessed or quantified, but that could in the future affect the viability of NN Group\u2019s strategy. Strategic Risks Risks arising from making poor business decisions, implementing decisions poorly, or being unable to adapt to changes in the operating environment. Human Capital Risks Human Capital Risks Risks arising from being unable to attract, retain or pay competent employees. Solvency Risks Market Risks Risks related to (the volatility of) financial and real estate markets. Counterparty Default Risks Risks related to counterparties failing to meet contractual debt obligations. Non-Market Risks Financial risks related to the products NN Group offers to customers. Liquidity Risks Liquidity Risks Risks related to being unable to settle financial obligations when due. Sound Business Conduct Employee Conduct & Business Culture Product Suitability Non-Financial Risks Risks related to people, or inadequate or failed internal processes, including IT and communications systems and external events. Operational Risks IT Risks Reliable Reporting Business Continuity 1 Sustainability risks are risks related to environmental, social and governance (ESG) factors (including climate change) that can cause material negative impact on NN Group\u2019s long-term performance, reputation, value, balance sheet or operations. ESG factors create strategic, financial and non-financial risks, in several areas of our taxonomy. Paragraph 5.4 explains in detail how we mitigate or manage these risks Own Funds at Risk limits: NN Group has implemented limits to monitor the impact of moderate stress events in business units, and is monitoring the level of capital and financial flexibility this requires at the holding level. \u2022 Interest Rate Risk limits: NN Group has implemented limits and tolerances for interest rate risk exposures at NN Group and business unit level. \u2022 Bank capitalisation: the amount of capital NN Bank is required to hold as part of the Basel III framework, expressed as a capital adequacy ratio of equity that must be held as a percentage of risk-weighted assets. \u2022 Product and underwriting limits: limits designed to manage deviations between expected and realised claims and payments, longevity risks, etc. \u2022 Policies and standards on investment management, mandates and asset allocation, responsible investments, products and underwriting. Metrics Liquidity Risks Relevant metrics are: \u2022 Required sales ratio: liquidity risks are monitored by assessing the required sales ratio between liquid assets and liquidity requirements for severe stress scenarios and different time horizons. \u2022 A minimum buffer of immediately available liquidity (cash and committed facilities) in order to be able to meet collateral calls from derivative exposures. Metrics Counterparty Default Risks Concentration Risk limits: to prevent excessive concentration risk, NN Group has concentration risk limits on corporate and sovereign issuers, asset type and country of risk. Metrics Non-financial Risks Relevant metrics are: \u2022 Annual loss tolerance and materiality: tolerances on potential yearly loss, reputation impact and financial reporting accuracy. \u2022 Restricted list: designed to prevent investments in securities that are not in line with NN Group\u2019s values and/or applicable laws and regulations, as established in NN\u2019s Responsible Investment Framework. \u2022 Various KRIs to measure whether processes are executed according to target (e.g. number of incidents, customer complaints, outage of primary systems, etc.). \u2022 Policies and standards that define objectives and requirements around compliance, IT, operations, security and business continuity . Risk Assessment Risk assessments are regularly performed throughout NN Group to identify which risks we are exposed to and how relevant they are. For financial risks, NN Group\u2019s risk models are leading in risk assessments/measurement. Risks that are harder to quantify generally require professional judgement, either through qualitative risk assessments or scenario analysis. Risk Class Risk Assessment Strategic & Emerging Risks Business planning, Strategic Risk Assessment and scenario analysis, including Own Risk and Solvency Assessment (ORSA). Human Capital Risks Internal and external benchmarking on employer attractiveness and renumeration; strategic workforce planning. Market Risks Asset Liability Management (ALM) studies, Strategic Asset Allocation (SAA) and New Asset Class Assessment (NACA). Liquidity Risks SAA, NACA. Counterparty Default Risks Assessment of maximum exposure on asset class, issuer and country basis. Non-Market Risks Product approval and review process (PARP). Non-Financial Risks Detailed risk assessments on processes and projects (including aspects of IT, financial economic crime, fraud, etc.); Systematic Integrity Risk Assessment (SIRA), looking at behavioural and integrity risks, as well as the ECF Maturity Reflection, looking at risk maturity and culture). Below we describe some of the aforementioned risk assessments in more detail. Strategic Risk Assessment (SRA) and Own Risk and Solvency Assessment (ORSA) NN Group, and each of its regulated (re) insurance subsidiaries, prepares an ORSA at least once a year, also covering the non-Solvency II entities, Japan and Turkey. Similar to an ORSA, NN Bank performs an Internal Capital Adequacy Assessment and Internal Liquidity Adequacy Assessment, conform with Basel III requirements. As part of the ORSA, a Strategic Risk Assessment is performed at least annually by the Management Board of NN Group, as well as by the management of operating units. The outcomes of the Strategic Risk Assessment are key risks, which are risks that are potentially solvency-threatening or could have a significant negative impact on the achievement of one or more of the business objectives in NN Group\u2019s strategy or business plan. The ORSA includes a forward-looking overall assessment, using scenario analysis and stress testing, of whether each entity holds sufficient capital across its business planning period to withstand the potential impact of identified key risks. Impact is mainly assessed on the Solvency II capital position, but also on liquidity or operating capital generation where relevant. NN Group also assesses the appropriateness of its Partial Internal Model, which is used to calculate the Solvency II ratio. Risk Management also prepares a separate annual report for the Management Board and the Risk Committee of the Supervisory Board on the performance and appropriateness of the Internal Model. Stress testing can also be initiated outside the ORSA, either internally or if requested by external parties such as De Nederlandsche Bank (DNB, the Dutch Central Bank) or the European Insurance and Occupational Pensions Authority (EIOPA). Strategic Asset Allocation (SAA) Regulated (re)insurance entities of NN Group execute a SAA study once every three years, in which the target allocation and bandwidth are set for each asset class. The SAA study is reviewed annually, using updates for the assumptions on return, risk and feasibility, and a review of constraints and objectives. Product approval and review process (PARP) The PARP has been developed to enable effective design, underwriting and pricing of all insurance products, and to ensure these can be managed throughout their lifetime. The process establishes requirements regarding the product risk profile features to ensure products are aligned with NN Group\u2019s strategy. The PARP takes into account customer benefits and product suitability, expected sales volumes, value-oriented pricing metrics, and relevant policies and regulations. It also includes requirements and standards for assessing risks as per the risk categories, as well as the administration and accounting aspects of the product. New Assets Class Assessment (NACA) and investment mandate process NN Group maintains a NACA for approving investments in new asset classes. NN Group establishes a global list of asset classes in which NN Group entities can invest. Investments in these asset classes are governed through investment mandates given by the insurance entities to the asset manager(s). Process Risk Assessments Process Risk Assessments are performed periodically on all (sub-) processes by the relevant process owners, with particular attention to risks in process hand-over points, where activities change between departments and/or responsible managers. Owners annually assess what the most important non-financial risks are within their process, looking for example at aspects of IT, data quality, human error, changes to systems and processes, etc .
Risk Control
Risk Control refers to activities undertaken to ensure proper mitigating measures are designed, documented and executed such that risks
are managed within defined risk limits and tolerances, as well as in line with policies and standards.
Inherent risks that are assessed as beyond the risk appetite shall be controlled to the extent they meet the relevant risk appetite statement(s).
Risk Class Risks are mitigated/controlled through:
Emerging Risks Scenario analysis and contingency/recovering planning.
Strategic Risks Adjusting the strategic targets/business model to meet the changing environment, implemented through
strategic initiatives/programmes.
Business planning, monitoring of strategic execution and scenario analysis.
Human Capital Risks Employee engagement surveys, strategic workforce planning, renumeration policies and succession planning.
Market Risks Monitoring based on limits and tolerances, hedging/use of derivatives, monitoring investment mandates.
Counterparty Default Risks Monitoring based on limits and tolerances.
Non-Market Risks Monitoring based on limits and tolerances, PARP (external) (re)insurance.
Liquidity Risks Monitoring based on limits and tolerances, cash management/treasury techniques.
Non-Financial Risks \u2022 Business and key controls and control testing.
\u2022 Incident management and external insurance.
\u2022 Risk awareness and training.
\u2022 Project risk logs and monitoring.
\u2022 Business continuity management.
Through its Preparatory Crisis Plan,
NN Group has determined a set of measures
for early detection of and potential response
to a crisis, should it occur. The aim of this
Preparatory Crisis Plan is to ensure that
tools, measures and processes are in place
that would enable NN Group to:
\u2022 Avoid going into Recovery
\u2022 Anticipate in good time any approaching
financial distress and/or potential
recovery situation
\u2022 Quickly recover to an acceptable minimum
solvency (and liquidity) level when faced
with financial distress and/or recovery
In the Risk Profile section, we describe
mitigating activities per risk type in
more detail.
Risk Monitoring & Reporting
Risk monitoring helps us assess and
evaluate developments in the risk profile.
It determines whether risks are managed
within the applicable risk appetite, related
limits and tolerances, and in line with
policies and standards. Results of the Risk
monitoring are reported regularly to the
responsible managers of departments, as
well as the management and supervisory
boards of both NN Group and its entities.
This includes information on, for example,
strategic projects, financial risk limits
and developments, control effectiveness,
control deficiencies and incidents, as
well as second-line opinions and advice.
Action is taken by management when
monitoring indicates that risks are being
inadequately controlled.
The Management Board and Supervisory
Board of NN Group receive a quarterly
Enterprise Risk Management (ERM) Report
and OF/SCR Report. The ERM Report
is designed to provide one consistent,
holistic overview of the risks for NN Group.
It compares current risk levels to our risk
appetite and aims to encourage a forward-
looking risk view. In the report, the different
business units of NN Group report back
on their risk profile in relation to their risk
appetite, including a second-line opinion
from Risk, Legal and Compliance. The OF/
SCR Report aims to give an overview of
the quarterly Solvency II capital position
and developments in OF and SCR.
This report also includes the Solvency II
ratio sensitivities.
Risk Governance\u00b9 Our risk governance follows the three lines of defence concept, which outlines the decision-making, execution and oversight responsibilities for NN Group\u2019s risk management. This structure has been embedded at both Head Office and business unit level. The three lines of defence defines three risk management levels, each with distinct roles, decision authorities, execution responsibilities, and oversight responsibilities. This concept helps to ensure that risks are managed in line with the risk appetite as approved by the Supervisory Board and cascaded throughout NN Group. First line of defence: Executive Board, Management Board, other management The first lines of defence are the CEO of NN Group and the CEOs of the Business Units, as well as their Management Board members that collectively make business decisions, with primary accountability for the performance, sales, operations, investments, compliance, and related risks. They are also responsible, both on the executive as well as process level of the organisation, for properly managing risks on a daily basis. More information on the Executive Board, Management Board and the Supervisory Board and its committees, including their risk management responsibilities, can be found earlier in this chapter. NN Group gives direction towards business units around risk taking via the Risk Policy Framework and Risk Appetite Framework. NN Group\u2019s Risk Policy Framework ensures that all risks are managed consistently and that NN Group as a whole aims to operate within the set risk appetite and related risk limits and tolerances. The policies and minimum standards focus on risk measurement, risk management and risk governance. Policies and standards have to be approved by the Management Board. Any potential waivers to NN Group policies or standards require delegated approval of the NN Group CRO or General Counsel. Business units may independently perform all activities that are consistent with the strategy of NN Group and the approved (three year) business plan (Business Plan) as long as these are consistent and compliant with the internal risk management and control frameworks, applicable laws and regulations, applicable collective agreements, NN Group\u2019s risk appetite, NN activities are not under the decision- making authority of the Management Board. Each business unit is expected to operate transparently and must provide all relevant information to the relevant Management Board members and Support Function Head(s) at Head Office. The business unit CEOs are responsible for: \u2022 Execution of the strategy and the financial performance, of business and operational activities, in their respective area, as well as the related risks, \u2022 Ensuring that the business operates in compliance with laws and regulations, NN Group policies and standards and internal controls, \u2022 Fulfilling their statutory responsibilities, \u2022 Operating a sound internal risk and control system and operating in accordance with NN Group\u2019s values, \u2022 The viability of the corresponding business unit in the long term, Regular oversight interaction between Head Office and business units takes place with respect to, amongst others, product approval, mandate approval, risk limit setting, risk reporting, ORSA, policy setting and implementation monitoring, model and assumption review and validation. These interactions cover all types of risks, both financial and non-financial risks. Ad-hoc interactions also take place when a business unit proposes a material business initiative for which any Management Board member has the right to initiate a risk review. A risk review can also be initiated to investigate a significant incident or unexpected significant adverse business performance. A risk review is an in-depth risk analysis of the object in scope concluded with a risk opinion and advice when and where relevant. Second line of defence: Key Functions Risk Management, Compliance, Actuarial and the Legal Function Risk Management Function Within the Management Board, the CRO is entrusted with the day-to-day execution of the Risk Management Function, while the Legal Function and Compliance Function fall within the responsibility of the General Counsel. The NN Group CRO steers an independent risk organisation which supports the first line in their decision-making with sufficient countervailing power to prevent excessive risk taking. The NN Group CRO is also responsible for the organisation of Group Risk at Head Office level. Each business unit has its own CRO, who reports hierarchically to the business unit CEO, and has a functional line to the NN Group CRO. The NN Group CRO must ensure that both the Management Board, including the members of the Executive Board, and the Supervisory Board are at all times informed of and understand the material risks to which NN Group is exposed. Responsibilities of the Risk Management Function include: \u2022 Setting of and monitoring compliance with NN Group\u2019s overall risk policies issued by the Risk Management Function. \u2022 Formulating NN Group\u2019s risk management strategy and ensuring that it is implemented throughout NN Group. \u2022 Supervising the operation of NN Group\u2019s risk management and business control systems. \u2022 Reporting on NN Group\u2019s risks, as well as the processes and internal controls. \u2022 Making risk management decisions with regards to matters which may have an impact on the financial results of NN Group or its reputation, without limiting the responsibility of each individual member of the Management Board in relation to risk management. \u2022 Sharing best practices across NN Group. Group Risk supports the NN Group CRO in the execution of his duties and responsibilities. To ensure solid understanding, oversight, and support to the international business units, the NN Group CRO is supported by four teams: \u2022 CRO International: performing Risk oversight activities across international entities of NN Group. \u2022 Enterprise Risk Management: supporting risk governance and frameworks, internal and external risk reporting, as well as performing risk management activities around strategic, emerging, operational and IT risks. \u2022 Risk Models & Analytics: takes care of the coordination, implementation and operation of NN Group\u2019s Partial Internal Model, as well as Model Validation. \u2022 ALM & Investment Risk Management team provides support and risk management activities in the areas of financial risks, as well as Solvency II risk modelling of market and counterparty default risks Model Validation Model Validation aims to ensure that NN Group\u2019s models are fit for their intended use and is part of the Risk Management Function. For this purpose, Model Validation carries out validations of risk and valuation models, in particular those related to Solvency II. Models are typically developed within first line teams, or within the second line risk team, separate from Model Validation. Any changes to models that have an impact larger than certain pre-set materiality thresholds require approval from either the NN Group CRO, NN Group CFO or the NN Group Management Board. Model Validation performs validation on reliability of models at different stages during their life cycle: at initiation, prior to approval, when the model has been redeveloped or modified, and on a regular basis (based on a planning discussed and agreed with the Model Development departments). The validation process covers a mix of developmental evidence assessment, process verification and outcome analysis. The validation cycle determines the maximum period between two model validations, which can be up to five years. This means that each model in scope will be independently validated at least once within the validation cycle. Model Validation can also start validating before the due date, for example following specific portfolio/market developments or regulatory changes. Materiality of a model is determined based on quantitative and qualitative criteria. Quantitative criteria relate to, amongst others, a percentage of Market Value of Liabilities/Assets, or Solvency Capital Requirement. Qualitative criteria cover model complexity, strategic importance and other factors. Models with a higher materiality are validated more frequently. Depending on materiality of the model, as well as the severity of findings resulting from a model validation, models receive a validation opinion. Models with severe findings require remediation actions by management, such as further adjustments of the model. Compliance Function and Legal Function The General Counsel steers an independent compliance and an independent legal organisation which supports the first line in their decision-making with sufficient countervailing power to prevent excessive risk taking. The General Counsel is responsible for the organisation of Group Legal at Head Office level. At the business unit level, management establishes and maintains a Legal Function and appoints a Head of Legal. The Head of Legal in principle reports hierarchically to the business unit CEO. The Heads of Legal have a functional reporting line to the General Counsel. The General Counsel must ensure that both the Management Board, including the members of the Executive Board, and the Supervisory Board are at all times informed of and understand the material legal and compliance risks to which NN Group is exposed. To effectively manage business conduct risk, NN Group has an independent Compliance Function headed by a Chief Compliance Officer who is the Key Function Holder for Compliance and who has a direct reporting line to the General Counsel and member of the Management Board. The Compliance Function is positioned independently from the business it supervises. This independent position is, amongst others, warranted by independent reporting, unrestricted access to senior management as well as structural, periodic meetings of the Chief Compliance Officer with the NN Group CEO and the chair of the Risk Committee of the Supervisory Board. NN Group is committed to upholding its reputation and integrity through compliance with applicable laws, regulations, and ethical standards in each of the markets in which the company operates. All employees are expected to adhere to these laws, regulations and ethical standards, and management is responsible for ensuring such compliance. Compliance is therefore an essential ingredient of good corporate governance. The purpose of the NN Group Compliance Function Charter is to help businesses effectively manage their compliance risks. This document is available for download on the NN Group corporate website. Within NN Group\u2019s broader risk framework, the purpose of the Compliance Function is to: \u2022 Understand and advocate rules, regulations, and laws for the effective management of risks in scope of the Compliance Function. \u2022 Proactively work with and advise the business to manage business conduct and product suitability risk throughout our products\u2019 life cycle and our business\u2019 activities to meet stakeholder expectations. \u2022 Develop and enhance tools to strengthen the three lines of defence to detect, communicate, manage and to report on business conduct risks. \u2022 Support NN Group\u2019s strategy by establishing clear roles and responsibilities to help embed good compliance practices throughout the business by using a risk-based approach to align business outcomes with NN Group\u2019s risk appetite. \u2022 Deepen the culture of compliance by partnering with the business to increase the culture of trust, accountability, transparency, and integrity in evaluating, managing and in reporting on business conduct risk. \u2022 Developing and maintaining a framework to support the first line in adhering to material laws and regulations in scope of the function as described in the Compliance Function Charter, which is aligned with NN Group\u2019s Risk & Control framework. \u2022 Monitor that management and employees act in accordance with NN Group\u2019s policies and standards as well as relevant material laws and regulation, in scope of the function. At the business unit level, management establishes and maintains a Compliance Function and appoints a Head of Compliance. The Head of Compliance in principle reports hierarchically to the business unit CEO. The Heads of Compliance have a functional reporting line to the Chief Compliance Officer .
Actuarial Function
The Actuarial Function reports hierarchically
to the NN Group CRO and has in addition
a functional reporting line to the NN Group
CFO. This is to ensure consistency with
related Finance processes. The primary
objective of the Actuarial Function is to ensure
that technical provisions (under Solvency
II and IFRS) are reliable and adequate, and
as such that NN Group is able to meet its
obligations towards policyholders and to
protect NN Group from loss or reputational
damage. The Actuarial Function operates
within the context of NN Group\u2019s broader Risk
Management System. Within this system, the
role of the Actuarial Function is to:
\u2022 Understand and advocate the rules,
regulations and laws for effective
management of the calculation process
of technical provisions, covering elements
such as data quality, assumption
setting, models and methods, as well
as underwriting and reinsurance
arrangements; proactively advise the
business to manage the risk of unreliable
and inadequate technical provisions.
\u2022 Inform management and the Supervisory
Board on its opinion on the adequacy
and the reliability of the technical
provisions, the adequacy of reinsurance
arrangements and the underwriting policy
at least on an annual basis through the
Actuarial Function Report.
\u2022 Develop and enhance tools to strengthen
the three lines of defence to detect,
communicate, manage and to report on
risks related to unreliable or inadequate
technical provisions.
\u2022 Support NN Group\u2019s strategy by
establishing clear roles and responsibilities
to help embed good (actuarial) practices
throughout the organisation by using
a risk-based approach aligned with
NN Group\u2019s risk appetite.
\u2022 Strengthen the culture of professional risk
management by challenging management
and experts to increase the culture of trust,
accountability, transparency, and integrity
in evaluating, managing of and reporting
on risks to unreliable or inadequate
technical provisions.
\u2022 Provide a second line opinion when first
line business initiatives can materially
impact the risk profile of a business unit
or NN Group and/or provide additional
assurance for presented key first line risk-
related information.
Third line of defence:
Corporate Audit Services
Corporate Audit Services NN Group
(CAS), the internal audit department
within NN Group, is an independent
assurance function and its responsibilities
are established by the Executive Board,
pre-discussed with the Audit Committee
of the Supervisory Board and approved
by the Supervisory Board. CAS provides
independent assurance on the effectiveness
of NN Group\u2019s business and support
processes, including governance, quality
of risk management and quality of
internal controls.
CAS keeps in close contact with home
and local supervisors and regulators as
well as with the external auditor via regular
meetings in which current (audit) issues are
discussed, as well as internal and external
developments and their impact on NN Group
and CAS. CAS also provides information
like risk assessments and relevant (audit)
reports. The General Manager and staff of
CAS are authorised to:
\u2022 Obtain without delay, from General
Managers within NN Group, information
on any significant incident concerning
NN Group\u2019s operations including but
not limited to security, reputation
and/or compliance with regulations
and procedures.
\u2022 Obtain without delay, from responsible
managers within NN Group, a copy of all
letters and reports received from external
review agencies (e.g. external auditor,
supervisors, regulators and other agencies
providing assurance-related services).
\u2022 Have free, full, unrestricted and unfettered
access, at any time deemed appropriate,
to all NN Group departments, offices,
activities, books, accounts, records,
files, information. CAS must respect
the confidentiality of (personal)
information acquired.
\u2022 Require all NN Group staff and business
management to supply such information
and explanations, as may be needed for
the performance of assessments, within a
reasonable period of time.
\u2022 Allocate resources, set frequencies, select
subjects, determine scope of work and
apply appropriate techniques required to
accomplish the CAS\u2019s objectives.
\u2022 Obtain the necessary assistance of
personnel in various departments/offices
of NN Group where CAS performs audits,
as well as other specialised/professional
services where considered necessary from
within or outside NN Group. CAS should
exercise its authority with the minimum
possible disruption to the day-to-day
activities of the area being assessed.
\u2022 In compliance with the Code, the
Executive Board is responsible for the
role and functioning of CAS, supervised
by the Supervisory Board, supported by
the Audit Committee of the Supervisory
Board. The General Manager of CAS is
accountable to the NN Group CEO and
functionally (independent) to the chair of
the Audit Committee of the Supervisory
Board. On a day-to-day basis the
General Manager of CAS reports to the
NN Group CEO.
System of governance evaluation in 2022
In 2022, various elements of NN Group\u2019s
System of Governance have been reviewed
and \u2013 where appropriate \u2013 improvements
have been implemented. In addition, a
System of Governance review, as required
under Solvency II, has been initiated by the
Management Board and will be completed in
2023. The review is based, amongst others,
on self-assessments by each Key Function
on its compliance with requirements and
on its operational effectiveness, as well as
on a self-assessment by each business unit
on the effectiveness of their local System
of Risk Management and Internal Control
(challenged by the Risk Management and
Compliance Key Functions).
Corporate Governance Statement
This chapter, including parts of this Annual
Report incorporated by reference, together
with the separate publication \u2018Application
of the Dutch Corporate Governance Code
by NN Group\u2019, dated 8 March 2023, which
is available on the NN Group website,
also serves as the corporate governance
statement referred to in section 2a of the
Decree contents of the management report
(Besluit inhoud bestuursverslag) .
1 These disclosures are an integral part of the Consolidated Annual Accounts, and are part of the disclosures to which the audit opinion relates. This includes pages 118-121
52 Risk management
This note explains details with regard to the risk profile of NN Group. For certain disclosures in the sections \u2018Managing our risks\u2019 and
\u2018Corporate Governance\u2019 in chapters 5 and 6 of this Annual Report it is indicated in a footnote that those disclosures are an integral part of the
Consolidated Annual Accounts and are part of the disclosures to which the audit opinion relates.
Topics described in this section include:
\u2022 Partial Internal Model (PIM) (including assumptions and limitations)
\u2022 Solvency Capital Requirement of NN Group
\u2022 Risk profile, risk mitigation of and risk measurement of the main types of risks: Market risk, Counterparty default risk, Liquidity risk and Non-
market risk
1. Partial Internal Model (PIM)
The Solvency Capital Requirement (SCR) is calculated based on the actual NN Group risk exposure. Under Solvency II, the SCR is the capital
required to ensure that the (re)insurance company will be able to meet its obligations over the next 12 months with a probability of at least
99.5%. The risk-based framework for calculating Solvency Capital Requirements at NN Group is a combination of an Internal Model (IM) and
Standard Formula (SF) components, the so-called Partial Internal Model (PIM). The major Dutch insurance entities use an internal model for
modelling SCR for the Market, Counterparty default, Business and Insurance risks. The determined SCR is used for both local reporting and
group consolidation purposes. For the EU-based international insurance businesses and smaller insurance undertakings in the Netherlands,
NN Group uses the Solvency II Standard Formula to calculate the SCR for local reporting and for Group consolidation. The capital
requirement for Operational risk is based on the Standard Formula approach across the Group.
The non-insurance businesses (e.g. Pension Funds, NN Bank) and international insurance undertakings not based in the EU (e.g. Japan,
Turkey) are consolidated in the group SCR based on the local applicable (sectoral) capital requirements. The Solvency II concept of
Equivalence is granted to capital frameworks that are deemed to have similarity with the Solvency II framework and/or principles and as
such can be relied-upon to assess capital requirements, at NN Group this applies to Japan. The total group SCR is obtained from the Internal
Model and Standard Formula capital requirements using EIOPA\u2019s integration technique 3.
52 Risk management continued The choice for a Partial Internal Model is based on the conviction that an Internal Model in general better reflects the risk profile of the major Dutch insurance entities and has additional benefits for risk management purposes, whilst the Standard Formula adequately captures the risk profile of the international businesses and smaller Dutch entities: \u2022 An Internal Model approach can better reflect the specific assets and therefore the Market risk in the portfolio of Dutch businesses e.g., sovereign and other credit spread risks. \u2022 The approach used for most significant Non-market risks within the Life businesses such as longevity (trend uncertainty) and expense risk (closed block treatment) and within the Non-Life business can be better tailored to NN Group\u2019s specific portfolio characteristics. Diversifications effects inherent to the business model can be captured in a more adequate way. \u2022 Variable Annuity risks in a portfolio of NN Re are not adequately addressed by the Standard Formula, while the Internal Model captures the integrated Market risks and hedging programmes more accurately. \u2022 The granularity of the PIM and close alignment of the modelling techniques and parameters to NN\u2019s risk management approach also means that it can support a wide range of business decisions. 2. Assumptions and limitations 2.1 Risk-free rate and Volatility Adjustment (VOLA): The assumptions used to determine the risk-free curve are important, as this curve is used for discounting future cashflows and to calculate market value of liabilities. For liabilities, NN Group uses the methodology prescribed by EIOPA for the risk-free rate including the Credit Risk Adjustment (CRA) and the Ultimate Forwards Rate (UFR). Where appropriate, the risk-free rate is adjusted with the VOLA for the calculation of Own Funds. 2.2 Valuation assumptions \u2013 replicating portfolios: For SCR calculations, NN Group uses replicating portfolio techniques to represent the insurance product-related cash flows, options and guarantees by means of standard financial instruments. The replications are used to determine and revalue insurance liabilities under a large number of Monte Carlo scenarios. 2.3 Diversification and correlation assumptions: As for any integrated financial services provider offering a variety of products across different business segments and geographic regions, and investing into wide range of assets, diversification is key to NN Group\u2019s business model. The resulting diversification reflects the fact that not all potential worst-case losses are likely to materialise at the same time. The Internal Model takes diversification effects into account when aggregating required capitals for different risk types as well as at Group level. Diversification benefits result from diversification across regions, Business Units and risk categories. Where possible, correlation parameters are derived through statistical analysis based on historical data. In case historical data or other portfolio-specific observations are insufficient or not available, correlations are set by expert judgement via an established, well-defined and controlled process. Similar to other risk models, correlations and expert judgements are also monitored for appropriateness given availability of more recent data, and are subject to regular development, validation and regulatory oversight. Based on these correlations, industry- standard aggregation approaches such as Gaussian copula and VaR\u2013CoVaR approach are used to determine the dependency structure of quantifiable risks. 2.4 Model limitations NN Group\u2019s Partial Internal Model (PIM) resulted from managing a balancing between (1) an easy-to-communicate methodology and (2) efficient calculations with appropriate accuracy and granularity in the underlying risks. Despite several limitations stemming from this, the PIM is considered to be adequate to assess NN Group\u2019s risk profile and to determine Solvency Capital Requirements. As a result of the granular modelling approach and the wide variety of NN Group\u2019s assets and liabilities, the PIM is more complex than the Standard Formula. Inherent model limitations of the PIM are related to the calibration of 1-in-200-year stress event for a full spectrum of Market and Non-market risks, which are based on making use of limited historical data. Limitations also relate to the overall aim of determining forward-looking distributions of risk factors under stress based on historical data as well as the use of modelling assumptions and expert judgements. Risks that cannot be directly modelled in the same way as Market risk or Insurance risk, for example Strategic, Reputational and Model risks, and also Emerging risks are managed through qualitative risk assessments. In addition, and as part of the ORSA, NN Group holistically assesses its risk exposure to both quantifiable and non-quantifiable risks in order to also outline the mitigating actions as required . 52 Risk management continued The components of NN Group\u2019s PIM for Market and Counterparty default risk and the models for risk aggregation and replication have been developed centrally by Group Risk, and thus carry an Inherent risk that the developed models include aspects which might be less appropriate for individual entities. On a regular basis the Business Units perform \u2018Fit For Local Use\u2019 assessments. Models also undergo regular reviews and monitoring, under agreed governance, and in addition, model validations are performed by independent model validation department. Such reviews could result in additional monitoring and/or locally calculated and further centrally processed adjustments. The Risk Management Function informs the Management Board and Supervisory Board on an annual basis on the performance of the Internal Model. 3. Solvency II 2020 review EIOPA\u2019s Opinion on the Solvency II review to the European Commission (EC) was published on 17 December 2020. The Opinion consists of a proposed package of measures and will be used as input for the European Commission to draft a legislative proposal which will be discussed with the European Council and European Parliament in the coming years. On 22 September 2021, the European Commission published as part of the Solvency II 2020 Review the proposed Level I texts (Directive) and insights in the upcoming Level II (Delegated Acts) regulations. Since this proposal mainly contains details on the Solvency II Directive, full detailed specifications of Delegated Acts are not yet clear. Furthermore, this EC proposal forms the basis for the upcoming political process, which can take several quarters and can lead to further changes in the proposals. The EC advice is on many items broadly in line with the earlier EIOPA proposal published in December 2020. However, some noteworthy changes in the EC advice can be summarised as follows: \u2022 Interest rate curve: The implementation of the alternative extrapolation methodology used for the valuation of (long) insurance cash-flows will lead to a higher valuation of liabilities. The phasing-in of this negative impact will follow a simpler phasing-in mechanism and the initial impact on the Solvency II ratio is expected to be smaller compared to the original EIOPA proposals. \u2022 Risk margin: The EC proposes to lower the cost-of-capital rate from 6% to 5%. Furthermore, it is proposed to remove the floor in the so called \u2018lambda approach\u2019 that was part of the EIOPA advice. These changes will lower the valuation of the risk margin. The exact details will be part of the Level II regulations, but the EC already included in its communication that these changes are considered. \u2022 VOLA and Enhanced Prudency Principle: The entity specific liquidity haircut for volatility adjustment is not included in the proposals of the EC. This will increase the effectiveness of the VOLA compared to the EIOPA advice and it impacts the Enhanced Prudency Principle. The resulting updated legislation is currently expected to be implemented at the earliest in 2026. 4. Solvency Capital Requirement 4.1 Solvency II ratio of NN Group The following table shows the NN Group Solvency II ratio as at 31 December 2022 and 31 December 2021, respectively. Solvency II ratio of NN Group 2022 2021 Eligible Own Funds 17,822 20,927 Solvency Capital Requirement 9,040 9,840 NN Group Solvency II ratio (Eligible Own Funds/SCR) 197% 213% The Solvency Capital Requirement is based on NN Group\u2019s Partial Internal Model. This comprises Internal Model calculation for all risks, except for Operational risk for NN Life, NN Non-life, NN Re and the main holding companies owned by NN Group N.V. and Standard Formula calculation for ABN AMRO Life and ABN AMRO Non-life, NN Insurance Services and the European international insurance entities of NN Group. SCR for Operational risk is calculated using the Standard Formula for all Solvency II entities. The capital requirements of non- Solvency II entities, in particular NN Life Japan, Pension Funds, and NN Bank were calculated using local sectoral rules.
52 Risk management continued
4.2 Solvency Capital Requirement
The following table shows the NN Group Solvency Capital Requirement as at 31 December 2022 and 31 December 2021, respectively.
Solvency Capital Requirements
2022 2021
Market risk 6,724 7,397
Counterparty default risk 163 200
Non-market risk 5,070 5,903
Total BSCR (before diversification) 11,957 13,500
Diversification -3,065 -3,603
Total BSCR (after diversification) 8,892 9,897
Operational risk 560 711
LACDT -1,867 -2,225
TCLI 116
Voluntary Prudency Margin 116
Other -24 7
Solvency II entities SCR 7,677 8,506
Non-Solvency II entities 1,363 1,334
Total SCR 9,040 9,840
The Solvency II total Basic Solvency Capital Requirements (total BSCR after diversification) includes both the PIM businesses\u2019 BSCR and the
Standard Formula businesses\u2019 BSCR. This figure also reflects the diversification benefits between the Business Units using Internal Model
and a Standard Formula.
The general developments of the Basic SCR:
\u2022 Lower Market risk SCR (mainly due to higher volatility in the financial markets, which led to a decrease in the main standalone market risks,
and decrease in the equity portfolio)
\u2022 Lower Counterparty default risk SCR (mainly driven by mortgage portfolio changes at NN Belgium)
\u2022 Lower Non-market risk SCR (mainly driven by a sharp increase in interest rates partially offset by higher inflation rates and a decrease in the
Ultimate Forward Rate)
\u2022 Decrease in diversification (mainly reflecting higher interest rates and lower equity exposure)
The breakdown of the Market and Non-market risk SCR in specific risk types and explanations for the most important changes in the risk
profile and Basic Solvency Capital Requirement over the year 2022 are presented in the next sections.
SCR for Operational risk decreased mainly due to lower levels of technical provisions driven by higher interest rates. The offsetting effect of
Loss Absorbing Capacity of Deferred Taxes (LACDT) decreased mainly due to a lower effective tax rate. We refer to Chapter \u2219 Managing
our risks for more details on how we manage non-financial/operational risks.
Prior to the approval by DNB of inclusion of the former VIVAT Non-life portfolio into the PIM scope, NN Non-life calculated the SCR for
the merged entity using the NN Group PIM including a Transitional Capital Lock-In (TCLI). The TCLI at the end of 2021 was EUR 116 million
reflecting the impact of reporting the former VIVAT Non-life business on the Solvency II Standard Formula versus the NN Group PIM.
Following the approval by DNB in 2Q 2022, the TCLI was released both for NN Group and NN Non-Life.
In addition, following discussions between DNB and NN Group on various aspects of the Internal Model, NN Group agreed with DNB to
assume a Voluntary Prudency Margin (VPM) as of 2Q 2022. The level of the VPM is set at EUR 116 million.
In the above table, \u2018Other\u2019 includes loss-absorbing capacity of technical provisions (LACTP) and capital for non-modelled Solvency II entities.
Solvency Capital Requirement for non-Solvency II entities includes mainly NN Life Japan, Pension Funds, and NN Bank. The capital
requirements for the non-Solvency II entities increased mainly due to the increase in the target capital for NN Bank partially offset by the
divestment of NN Investment Partners in April 2022 .
52 Risk management continued
4.3 Solvency II ratio sensitivities
Along with the Solvency II Capital Requirement, NN Group regularly calculates the sensitivities of the Solvency II ratio under various
scenarios, by assessing the changes for both Eligible Own Funds and SCR. The Solvency II ratio sensitivities are primarily designed to support
the NN Group Management Board and the Risk Management functions in having a forward-looking view on the risks to solvency of the
company, and to analyse the impacts of market or other events. The sensitivities are selected to reflect plausible, realistic scenarios that
could materialise within the foreseeable future and are not calibrated on a pre-defined confidence interval or time horizon.
The effect on the Solvency II ratio is calculated based on applying an instantaneous stress on the balance sheet, and on ceteris paribus
basis. For all insurance entities including NN Life Japan, the after stress Own Funds are calculated for each of the sensitivity scenarios; the
SCR impacts are recalculated for BSCR and Operational risk SCR. LACDT is recalculated keeping the LACDT percentage fixed. \u2018Other\u2019 SCR
components including the LACTP are kept constant.
The Solvency II sensitivities are disclosed for the main Market risks in the below sections.
Main types of risks
In the next sections the main risks associated with NN Group\u2019s business are discussed. Each risk type is analysed through the risk profile, risk
mitigation and risk measurement. For Market and Non-market risks more detailed quantification of risk exposures are provided.
5. Market risk
Market risk comprises the risks related to the impact of changes in various financial markets indicators on NN Group\u2019s balance sheet.
Market risks are taken in pursuit of returns for the benefit of customers and shareholders. Accordingly, risk and return consideration and
optimisation are paramount for both policyholder and shareholder. In general, Market risks are managed through a well-diversified portfolio
under a number of relevant policies within clearly defined and monitored limits. NN Group reduces downside risk through various hedging
programmes, in particular risks for which NN Group has no or only a limited appetite, such as Interest rate, Inflation, and Foreign exchange
risks. NN Group also integrates Environmental, Social, and Governance (ESG) factors in the investment decision-making framework (see
section Facts and Figures). Impact from in particular, climate change may become more relevant over time for so-called transitional risk,
where the value of NN Group\u2019s asset investments may be impacted. This potential impact is currently in the process of being assessed.
In managing our assets, we apply the prudent person principle, which means that we only invest in assets and instruments whose risks we
properly identify, measure, monitor, manage, control and report and take into account in the assessment of our overall solvency needs.
Market risk capital requirements
2022 2021
Interest rate risk 440 1,455
Equity risk 2,436 3,474
Credit spread risk 3,332 4,725
Real estate risk 2,098 2,124
Foreign exchange risk 620 730
Inflation risk 270 135
Basis risk 58 74
Diversification market risk -2,530 -5,320
Market risk 6,724 7,397
In 2022, the Market risk SCR decreased from EUR 7,397 million to EUR 6,724 million, mainly driven by lower equity markets as well as the sale
of equities and reduction of the NN Group equity book exposure. The decrease of standalone Interest rate risk SCR and Spread risk SCR due
to lower asset valuation driven by higher interest rates is largely offset by lower diversification after aggregation with other Market risk SCR\u2019s.
Diversification within Market risk decreased as Real estate risk SCR became more dominant, as a result of decreased Interest rate risk SCR,
Credit spread risk SCR and Equity risk SCR.
The table below sets out NN Group\u2019s market value of assets for each asset class as at the end of 2022 and 2021. The values in these tables
may differ from those included in the consolidated IFRS balance sheet as derivatives are excluded from this overview and furthermore due to
classification and valuation differences to reflect a risk management view .
52 Risk management continued Investment assets Market value % of total Market value % of total 2022 2022 2021 2021 Fixed income 139,893 83% 163,876 83% Government bonds and loans 42,276 25% 63,126 32% Financial bonds and loans 8,125 5% 10,063 5% Corporate bonds and loans 23,065 14% 26,838 13% Asset-backed securities 3,225 2% 3,850 2% Mortgages 1 62,066 36% 58,499 30% Other retail loans 1,136 1% 1,500 1% Non-fixed income 20,698 12% 22,512 11% Common & preferred stock 2 3,654 2% 5,830 3% Private equity 182 0% 1,215 1% Real estate 3 12,887 8% 12,492 6% Mutual funds (money market funds excluded) 4 3,975 2% 2,975 1% Money market instruments (money market funds included) 5 9,295 5% 11,455 6% Total investments 169,886 100% 197,843 100% 1 Mortgages are on amortised cost value. The mortgage value on the consolidated IFRS balance sheet differs from the value in the current table due to the acquisition premium of mortgages and the inclusion of mortgages underlying the mortgage structure vehicles. 2 All preference shares are included in \u2018common & preferred stock\u2019, even when preference shares are modelled as bonds. 3 The real estate values exclude the real estate forward commitments, since NN Group has no price risk related to them. 4 Fixed income mutual funds are included in mutual funds. 5 Money market mutual funds and commercial papers are included in the Money market instruments. Total investment assets have decreased from EUR 197,843 million at the end of 2021 to EUR 169,886 million at the end of 2022. The decrease is mainly due to a lower NN Group valuation of the fixed income investments subsequent to higher yield curves. Main developments in the NN Group risk profile in 2022 reflect the strategy of NN Group to maintain a relatively conservative investment portfolio to ensure a resilient balance sheet: exposures in high yielding corporate bonds and mortgage loans are currently close to target. 5.1 Interest rate risk Interest rate risk is defined as the possibility of decrease in the Solvency II Own Funds due to adverse changes in the level or shape of the risk-free interest rate curve used for discounting assets and liabilities cash flows. Exposure to Interest rate risk arises from asset or liability positions that are sensitive to changes in this risk-free interest rate curve. 5.1.1 Risk profile The Interest rate risk SCR of NN Group decreased from EUR 1,455 million in 2021 to EUR 440 million in 2022. The decrease is mainly driven by the sharp increase in the interest rates and changes in the shape of the interest rate curve. In addition, widening of spreads for assets and mortgages led to lower asset valuation and further decrease in the Interest rate risk SCR. This was partly offset by an increase of the VOLA by 16bps, from 3bps to 19bps at the end of 2022. The decrease of Interest rate risk SCR is the main driver of the decrease of the diversification across Market risks. 5.1.2 Risk mitigation The Interest rate SCR indicates to what extent assets and liabilities are matched on a Solvency II basis. The majority of NN Group liability cash flows are predictable and stable, since exposure to policyholder behaviour and profit-sharing mechanisms is very limited. To manage Interest rate risk, NN Group applies cash flow matching on economic basis. Until year 30, where markets for fixed income instruments are sufficiently deep and liquid, best estimate liability cash flows (excluding risk margin) are closely matched with government bonds, corporate bonds, mortgages and loans. Cash flows after 30 years are partially hedged on a duration basis with long-term government bonds and interest rate swaps, due to price and illiquidity of markets. NN Group has implemented limits and tolerances for Interest rate risk exposures at NN Group level as well as for relevant Business Units. We continuously monitor and work on mitigating solutions for our new business and products, such as a development of defined contribution pension products in the Netherlands and a shift towards protection products in our markets in general.
52 Risk management continued
5.1.3 Risk measurement
For the purpose of discounting EUR-denominated asset cash flows, NN Group uses market swap curves to value assets. For the asset cash
flows denominated in other currencies, the relevant swap or government curve is used for that specific currency.
For the purpose of discounting the EUR-denominated liability cash flows NN Group uses a swap curve less Credit Risk Adjustment (CRA)
plus VOLA in line with definitions under the Solvency II. For the liability cash flows denominated in other currencies, the relevant swap or
government curve is used where this curve is also lowered by the Credit Risk Adjustment and adding the VOLA specific for each currency.
In line with Solvency II regulations, NN Group extrapolates the EUR swap curve starting from the Last Liquid Point (LLP) onwards to the
Ultimate Forward Rate for each relevant currency in its portfolio. The LLP used for EUR is 20 years. As such, the sensitivity of SCR for Interest
rate risk primarily depends on the level of cash flow matching between assets and liabilities up to the 20-year point, and the difference
between the swap curve and the curve extrapolated to the UFR for longer cash flows.
The sensitivity of the Solvency II ratio to changes in interest rates is monitored on a quarterly basis. The table below presents the Eligible Own
Funds, SCR, and Solvency II ratio sensitivities to various changes in interest rates.
Solvency II Ratio sensitivities for interest rate comprise the following set of shocks, each of them is calculated independently as a standalone
scenario: a parallel up and a parallel down shifts of the discount curve, and a steepening scenario for the interest rates used to discount
asset cash flows after the LLP.
Solvency II ratio sensitivities: Interest rate risk at 31 December 2022
2022
Own Funds
impact SCR impact
Solvency II ratio
impact
Interest rate: Parallel shock +50 bps -219 -145 1%
Interest rate: Parallel shock -50 bps 290 224 -2%
Interest rate: 10 bps steepening between 20y-30y -242 39 -4%
Solvency II ratio sensitivities: Interest rate risk at 31 December 2021
2021
Own Funds
impact SCR impact
Solvency II ratio
impact
Interest rate: Parallel shock +50 bps -624 -101 -4%
Interest rate: Parallel shock -50 bps 803 153 5%
Interest rate: 10 bps steepening between 20y-30y -580 96 -8%
Changes in the Solvency II ratio sensitivities to interest rates are primarily driven by increased interest rates in combination with the changes
in the Interest rate risk profile.
Under the parallel shock scenarios, the base risk-free interest rate curves for each currency are shocked by +/-50 bps for all tenors up until
the LLP. The other components of the basic risk-free interest rate curve \u2013 namely UFR, Credit Risk Adjustment, VOLA and extrapolation
technique towards UFR remain unchanged. The asset interest rate curves are shocked with the parallel shocks for all tenors.
In the interest rate steepening scenario, the EUR asset valuation curve is shocked after the LLP (the LLP for EUR is set at 20 years under
Solvency II). The steepening is applied for interest rate curve tenors between 20 and 30 years (a linear increase from 0 to 10 bps of 1bp per
tenor). After the 30 years point, the shift in the interest rate curve remains constant at 10bps. As the EIOPA risk-free curve is extrapolated
after the LLP, the steepening sensitivity only affects the asset discount curve.
5.2 Equity risk
Equity risk is defined as the possibility of decrease Solvency II Own Funds due to adverse changes in the level of equity market prices.
Exposure to Equity risk arises from direct or indirect asset or liability positions, including equity derivatives such as futures and options, that
are sensitive to equity prices.
5.2.1 Risk profile
The table below sets out the market value of NN Group\u2019s equity assets as at the 31 December 2022 and 2021, respectively .
52 Risk management continued
Equity assets
2022 2021
Common & preferred stock 3,654 5,830
Private equity 182 1,215
Mutual funds (money market funds are excluded, fixed income mutual funds are included) 3,975 2,975
Total 7,811 10,020
NN Group is mostly exposed to public listed equity but also invests in private equity funds and equity exposures through mutual funds.
The direct equity exposure is spread mainly across the Netherlands (32% in 2022 compared with 25% in 2021) and remaining exposure in
other countries, predominantly in core EU countries (52% in 2022 compared with 54% in 2021, including The Netherlands). Note that mutual
funds are classified as equity in the table above but include predominantly fixed income funds. In case economic conditions deteriorate,
investments into equities might lose value. About 34% of NN Group\u2019s common equities are invested in defensive sectors, which are less
sensitive to economic downturn. 2023 estimates for equity values have already been priced; more downward revisions might be expected if
economic growth forecasts decline. Valuations gains are not expected before end of 2023.
As shown in the \u2018Market risk capital requirements\u2019 table above, the Equity risk SCR of NN Group decreased from EUR 3,474 million in 2021 to
EUR 2,436 million in 2022 mainly driven by lower equity markets as well as the sale of equities.
5.2.2 Risk mitigation
Exposure to equities provides additional diversification and upside return potential in the asset portfolio of an insurance company with long-
term illiquid liabilities. The Concentration risk on individual issuers is mitigated by having issuer risk limits in place in investment mandates as
well as at NN Group level. There is no natural hedge for Equity risk on the liability side of the balance sheet. NN Group has the possibility to
protect the downside risk of the equity portfolio by selling equity or buying put options.
5.2.3 Risk measurement
The sensitivity of the Solvency II ratio to changes in the value of equity is monitored on a quarterly basis. This scenario estimates the impact
of an instantaneous shock of -25% applied to the value of direct equity and equity mutual funds. Derivatives like equity options or equity
forwards which have equity as underlying are also revalued using the same shock applied to the underlying equities or equity indices.
The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in equity prices at 31 December
2022 and 2021.
Solvency II ratio sensitivities: Equity risk
Own Funds impact SCR impact Solvency II ratio impact
2022 2021 2022 2021 2022 2021
Equity Downward shock -25% -1,464 -1,840 -326 -489 -9% -9%
5.3 Credit spread risk
Credit spread risk is defined as the possibility of a decrease in Solvency II Own Funds due to adverse movements in the credit spreads
of fixed income assets. The credit spread widening (or narrowing) reflects market supply and demand, rating migration of the issuer and
changes in expectation of default. Changes in liquidity and other risk premiums that are relevant to specific assets can play a role in the value
changes as well.
In the calculation of the SCR for the Partial Internal Model entities, NN Group assumes no change to the VOLA on the liability side of the
balance sheet after a shock-event, but instead reflects the illiquidity of liabilities in the asset shocks to ensure appropriate Solvency Capital
Requirements. This approach ensures appropriate risk incentives and is approved by DNB. NN Group also shocks all government bonds and
its mortgage portfolio in the calculation of Credit spread risk capital requirements for the Partial Internal Model entities.
The main asset classes in scope of the Credit spread risk module for Partial Internal Model entities are government and corporate bonds,
mortgages and loans.
For the calculation of the SCR for Credit spread risk of the Standard Formula insurance entities, the main asset classes in scope are
corporate bonds and loans .
52 Risk management continued 5.3.1 Risk profile As shown in the \u2018Market risk capital requirements\u2019 table, the Credit spread risk SCR of NN Group decreased from EUR 4,725 million in 2021 to EUR 3,332 million in 2022. This decrease is mainly driven by a sharp increase in interest rates, widening of asset and mortgage spreads, an increase of mortgage cash flow duration due to lower prepayment rates, and refinement of the Credit spread SCR modelling. The government securities market value delta can mostly be explained by valuation changes (60%). Transactions and redemptions count for 40% of the decrease. The corporate securities market value delta is explained by valuation (50%) and transactions (50%). The table below shows the market value of NN Group\u2019s fixed-income bonds which are subject to Credit spread risk SCR by type of issuer as at 31 December 2022 and 31 December 2021, respectively. Fixed-income bonds and loans by type of issuer Market value Percentage 2022 2021 2022 2021 Sovereign 42,275 63,126 55% 61% Manufacturing 6,432 8,022 8% 8% Finance and Insurance 8,125 10,063 11% 9% Asset-backed securities 3,225 3,850 4% 4% Utilities 2,463 2,928 3% 3% Transportation and Warehousing 2,261 2,947 3% 3% Information 1,841 2,365 3% 2% Real Estate and Rental and Leasing 2,146 2,070 2% 2% Other 7,923 8,506 11% 8% Total 76,691 103,877 100% 100%
52 Risk management continued
Market value government bond and loans exposures (2022)
The table below sets out the market value of NN Group\u2019s assets invested in government bonds and loans by country and maturity.
Market value of government bond and loans in 2022 by number of years to maturity
4
2022 Rating
1
Domestic
exposure
2
0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+
Total
2022
Japan A+ 100% 790 460 468 727 1,909 2,190 1,626 676 8,846
France AA 0% 76 25 28 123 253 1,886 676 2,926 5,993
Germany AAA 0% 49 326 18 187 1,301 2,043 344 207 4,475
Belgium AA- 25% 31 5 11 71 453 1,951 949 609 4,080
Netherlands AAA 99% 551 142 16 418 2,427 47 9 3,610
Austria AA+ 0% 6 171 512 3 307 582 1,030 2,611
Spain A- 27% 74 104 65 600 1,140 463 60 2,506
United States AAA 0% 1 223 1,498 1,722
Multilateral
3
AAA 0% 18 63 5 156 275 772 315 21 1,625
Finland AA+ 0% 7 146 3 65 611 170 1,002
Italy BBB 0% 71 16 14 131 467 229 40 27 995
Other
5
\u2013 Above Investment Grade 275 294 300 560 1,467 616 526 45 4,083
Other
5
\u2013 Below Investment Grade 137 43 64 146 171 145 22 728
Total 2,011 1,477 1,301 2,697 7,382 14,540 7,258 5,610 42,276
1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds.
2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands.
3 Includes EIB, ECB, EFSF, EU and ESM.
4 Based on legal maturity date.
5 Investment Grade reflects a rating of BBB- or higher; Below Investment Grade reflects a rating below BBB-.
Market value government bond and loans exposures (2021)
Market value of government bond and loans in 2021 by number of years to maturity
4
2021 Rating
1
Domestic
exposure
2
0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021
France AA 0% 47 68 52 129 212 3,881 750 5,290 10,429
Japan A+ 98% 644 461 503 889 1,919 2,571 1,682 737 9,406
Belgium AA- 35% 401 243 37 173 790 3,723 1,218 950 7,535
Germany AAA 0% 30 95 488 140 1,977 3,030 733 396 6,889
Netherlands AAA 99% 45 618 210 404 2,339 2,034 13 5,663
Austria AA+ 0% 171 11 190 517 737 1,303 1,048 2,012 5,989
Spain A- 26% 24 15 136 155 420 1,999 648 59 3,456
Multilateral
3
AAA 0% 194 48 135 175 202 969 732 15 2,470
United States AAA 0% 1 1 282 2,085 2,369
Italy BBB 0% 43 101 35 50 745 283 11 1,268
Finland AA+ 0% 5 3 166 82 981 1,237
Other
5
\u2013 Above Investment Grade 551 180 258 899 2,029 1,139 462 20 5,538
Other
5
\u2013 Below Investment Grade 107 119 141 144 208 139 19 877
Total 2,263 1,962 1,975 3,648 9,725 21,658 12,403 9,492 63,126
1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds.
2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands.
3 Includes EIB, ECB, EFSF, EU and ESM.
4 Based on legal maturity date.
5 Investment Grade reflects a rating of BBB or higher; Below Investment Grade reflects a rating below BBB.
52% (or EUR 22 billion) of NN Group total sovereign debt exposure is invested in AAA and AA rated eurozone countries in 2022 as compared
to 60% in 2021. Of the EUR 22 billion core eurozone government bonds and loans held by NN Group, 76% will mature after year 10 and 35%
after year 20 in 2022 while those for 2021 were EUR 38 billion, 78% and 40% respectively. With regard to Central and Eastern Europe, the
government bond exposures are mainly domestically held. In the Partial Internal Model, all government bonds contribute to Credit spread risk,
including those rated AAA. The tables below show the market value of non-government fixed-income securities (excluding mortgages and
derivatives) by rating and maturity .
52 Risk management continued Market value non-government bond securities and loans (2022) Market value of non-government bond securities and loans in 2022 by number of years to maturity 2022 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2022 AAA 150 231 307 424 279 996 1,070 1,597 5,054 AA 267 115 190 587 449 271 174 128 2,181 A 1,095 1,104 1,294 2,174 3,055 1,051 718 498 10,989 BBB 1,288 2,053 1,176 2,338 2,903 1,481 693 84 12,016 BB 317 192 417 660 937 21 49 2,593 B and below 57 118 198 449 234 12 1,068 No rating available 208 72 5 116 81 3 29 514 Total 3,382 3,885 3,587 6,748 7,938 3,832 2,707 2,336 34,415 Market value non-government bond securities and loans (2021) Market value of non-government bond securities and loans in 2021 by number of years to maturity 2021 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021 AAA 153 201 257 597 352 1,017 1,365 2,097 6,039 AA 507 358 139 540 663 569 241 173 3,190 A 1,270 1,543 1,210 2,691 3,468 1,204 810 614 12,810 BBB 1,204 1,650 2,113 2,602 3,260 1,781 1,050 118 13,778 BB 271 242 282 777 1,253 51 31 30 2,937 B and below 126 262 219 661 500 21 1,789 No rating available 138 3 4 63 208 Total 3,669 4,259 4,220 7,868 9,500 4,643 3,497 3,095 40,751 The table below shows NN Group\u2019s holdings of loans and other debt securities as at 31 December 2022 and 31 December 2021, respectively. Market value all loans and other debt securities (per credit rating) 2022 2021 AAA 16,054 22,479 AA 17,675 30,545 A 23,430 27,772 BBB 14,547 17,181 BB 3,217 3,868 B and below 1,254 1,824 No rating available 377 70 Mortgages 1 62,066 58,499 Other Retail Loans 1,273 1,638 Total 139,893 163,876 1 Mortgages refer to all mortgages using the same criteria and is aligned with the Mortgages figure in Investment assets above. 5.3.2 Mortgages The required capital for mortgages within entities under the Partial Internal Model is calculated in the credit spread risk module while the required capital for mortgages within entities under Standard Formula is calculated in the counterparty default risk module. The credit spread risk module within the Partial Internal Model captures the behaviour of Own Funds when the valuation of mortgages changes with market mortgage rates, while the counterparty default risk module within Standard Formula captures the behaviour of Own Funds as a result of unexpected loss or default of mortgages. The Loan-to-Value (LTV) for residential mortgages (which is based on the net average loan to property indexed value) at NN Life, the Banking business, NN Non-life and NN Belgium stood at 53%, 53%, 59% and 54% respectively at the end of 2022 while those were 59%, 57%, 65% and 60% respectively at the end of December 2021. The average LTV for NN Group portfolio is 54% 2022 (59% in 2021). The migration towards lower LTV bucket is due to the house price increase in 2022 (11.9%) 52 Risk management continued The inherent credit risk of mortgages is backed primarily by means of the underlying property, but also through the inclusion of mortgages guaranteed by the Nationale Hypotheek Garantie (NHG) and other secondary covers like savings, investments and life insurance policies. Mortgages with NHG accounted for 24%, 31%, 18% and 28% at NN Life, the Banking business, NN Non-life, and NN Belgium respectively at the end of 2022 and 26%, 32%, 20% and 28% at NN Life, the Banking business, NN Non-life and NN Belgium respectively at the end of 2021. The relative NHG coverage is decreasing in the portfolios mostly due to the high house prices, so overall less mortgages are eligible for NHG coverage. Loan-to-Value on mortgage loans 1 2022 2021 NHG 27% 28% LTV <= 80% 69% 65% LTV 80%-90% 3% 5% LTV 90%-100% 1% 1% LTV > 100% 0% 1% Total NN Group 100% 100% 1 Risk figures and parameters do not include third party originated mortgages and collateralised mortgages although they are on the balance sheet of NN Group. The mortgage portfolio is under regular review to ensure troubled assets are identified early and managed properly. The loan is categorised as a non-performing loan (NPL) if the loan is 90 days past due, or the client was in default the previous month, and the minimum holding period (MHP) is active or the loan is classified as Unlikely To Pay (UTP) by the problem loans department. The main criterion for lifting the default status will be that no arrears greater than EUR 250 occurred during the Minimum Holding Period (MHP). For defaulted clients that are classified as \u2018distressed restructuring\u2019, the MHP is 12 months. For all other defaulted clients, the MHP is 3 months. The impact of the recent geopolitical developments and increasing inflation are limited on the creditworthiness of the portfolio. Combined with low levels of unemployment, the outstanding non-performing loans decreased in 2022. Provisions decreased due to sharply increasing house prices between 2021-Q3 and 2022-Q3 (+11.9%) (Q4 figures are unavailable per 2022 year-end, hence Q3 figures are used and based on CBS) and a decrease in non-performing loans. This decrease is partly offset by a EUR 2.2 million management overlay related to high levels of inflation and sharply increasing mortgage interest rates. The net exposure decreased after deduction of capped collaterals and guarantees because of an increase in the house price. The NHG guarantee value slightly increased because calculation of the guarantee value was aligned with the NHG terms. Credit quality: NN Group mortgage portfolio, outstanding 1,2,5 Life business Banking business Other 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Performing mortgage loans that are not past due 26,316 25,285 21,117 20,322 5,255 5,304 52,688 50,911 Performing mortgage loans that are past due 111 128 127 161 18 24 256 313 Non-performing mortgage Loans 4 85 77 99 104 13 12 197 193 Total 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417 Provisions for performing mortgage loans 1 2 2 2 1 1 4 5 Provisions for non-performing mortgage loans 4 5 1 1 5 6 Total 4 5 7 3 3 1 1 9 11 1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million). 2 Amounts are excluding partial transfer of mortgages and DRMF. 3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities. 4 The non-performing loans include \u2018unlikely to pay\u2019 mortgage loans, which may not be past due. 5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits 52 Risk management continued Collateral on mortgage loans 1,5 Life business Banking business Other 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Carrying value 2 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417 Indexed value of real estate 58,286 49,536 47,885 41,478 10,717 9,685 116,888 100,699 Savings held 6 1,144 985 1,462 1,408 76 75 2,682 2,468 NHG guarantee value 4 5,600 5,480 5,518 5,328 1,117 1,113 12,235 11,921 Total cover value + including NHG guarantee capped at carrying value 26,500 25,474 21,335 20,576 5,285 5,337 53,120 51,387 Net exposure 12 16 8 11 1 3 21 30 1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million) . 2 Amounts are excluding partial transfer of mortgages and DRMF. 3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities. 4 The NHG guarantee value follows an annuity scheme and is corrected for the 10% own risk (on the granted NHG claim). 5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits. 6 Savings held includes life policies. 5.3.3 Risk mitigation Our mortgages are subject to strict underwriting criteria and are well collateralised. NN Group has Concentration risk limits for individual issuers which depend on the credit quality of the issuer. These limits ensure that large risk concentrations are avoided. In order to diversify the Credit spread risk further, NN Group has increased its investments in non-listed assets. 5.3.4 Risk measurement The sensitivity of the Solvency II ratio to changes in credit spreads is monitored on a quarterly basis. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivities to various changes in credit spreads. Solvency II ratio sensitivities: Credit spread risk at 31 December 2022 2022 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -343 43 -5% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -417 64 -6% Credit spread: Parallel shock spreads corporates +50 bps 291 -111 6% Credit spread: Parallel shock spreads mortgages +50 bps -880 22 -10% Solvency II ratio sensitivities: Credit spread risk at 31 December 2021 2021 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -628 89 -8% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -938 120 -12% Credit spread: Parallel shock spreads corporates +50 bps 697 -209 12% Credit spread: Parallel shock spreads mortgages +50 bps -1,075 31 -12% Solvency II ratio sensitivities to credit spreads decreased primarily due to increased interest rates resulting in lower asset exposure. For the mortgage spreads sensitivity this was partially offset by increase in the mortgage exposure. NN Group has exposure to government, corporate and financial debt and is exposed to spread changes for these instruments. Furthermore, the VOLA in the valuation of liabilities introduces an offset to the valuation changes on the asset side (except for the mortgages). The Solvency II sensitivities for spread changes cover four possible scenarios \u2013 spread widening for AAA rated government bonds, spread widening for non-AAA rated government bonds, spread widening for corporates and spread widening for mortgages. For all scenarios, a parallel widening of the respective spread curves of +50bps is assumed. There is a corresponding translation of the spread widening on asset valuations on the VOLA according to EIOPA\u2019s reference portfolio in each of the scenarios. Government bond shocks are applied to the following asset classes: government bonds and loans, government-linked instruments (sub- sovereigns and supranational). Corporate spread shocks are applied to the following asset classes: corporate bonds (financials and non-financials), covered bonds, subordinated bonds, asset-backed securities and loans. Mortgages are subject to spread shocks in a separate scenario . 52 Risk management continued NN Group\u2019s sensitivity to credit spread changes is mainly driven by the difference between NN\u2019s investment portfolio and the EIOPA reference portfolio. The reference portfolio represents the weights of an average European insurers\u2019 portfolio to different fixed income assets and is used to determine the level of the VOLA to be applied for the valuation of liabilities. Asset spread changes impact the level of the VOLA and therefore also the valuation of liabilities, and thus provide an offset to asset valuation changes. NN Group is exposed to widening in government bond spreads due to a higher exposure to well rated government debt compared with the reference portfolio. At the same time, the exposure to widening of credit spreads on corporate bonds has a positive impact on the ratio due to a lower exposure of NN Group to these asset classes compared with the reference portfolio. Mortgages spread widening has a negative impact on the Solvency II ratio, as mortgages are not part of the reference portfolio. 5.4 Real estate risk Real estate risk is defined as the possibility of decrease in Solvency II Own Funds due to adverse changes in the value of real estate. Exposure to Real estate risk arises mainly from holding direct real estate properties or positions in real estate mutual funds. With the long- term nature of the liabilities of NN Group, illiquid assets such as real estate play an important role in the asset allocation. 5.4.1 Risk profile NN Group\u2019s real estate exposure (excluding forward commitments) increased mainly due to new investments, from EUR 12,492 million at the end of 2021 to EUR 12,887 million at the end of 2022. The real estate exposure is mainly present in the portfolios of NN Life, NN Non-life and NN Belgium Life. NN Group has various categories of real estate: investments in real estate funds and joint-ventures, real estate directly owned and investments in buildings occupied by NN Group. Several of the real estate funds, in which NN Group participates, include leverage and therefore the actual real estate exposure is larger than NN Group\u2019s value of participation in real estate funds. The real estate portfolio is held for the long-term and is illiquid. Furthermore, there are no hedge instruments available in the market to effectively reduce the impact of market volatility. Rental income is increasing with inflation and occupancy rates in 2022 are close to 100%. Indexation of prices has kept up with inflation in a large portion of our portfolio. Real estate valuations, because of the evidencing that is required, have a lag to market developments and tend to show prolonged negative movement in case of economic downturn. As such, continued pressure on real estate valuations is expected in 2023. The table below sets out NN Group\u2019s real estate exposure per region as at 31 December 2022 and 2021, respectively. Real estate assets per region 2022 2021 Western Europe 58% 60% Southern Europe 18% 17% Nordics 8% 7% Central and Eastern Europe 5% 5% UK and Ireland 11% 11% Other 0% 0% Total 100% 100% Real estate exposure is mainly concentrated in Western Europe. Main underlying types are residential real estate (38%) and industrial real estate (30%). Retail and office real estate represents respectively 17% and 10% of NN total real estate exposure. As shown in the \u2018Market risk capital requirements\u2019 table, the Real estate risk SCR of NN Group decreased from EUR 2,124 million in 2021 to EUR 2,098 million in 2022 primarily due to modelling refinements partially offset by an increase in the real estate exposure. 5.4.2 Risk mitigation Exposure to real estate provides for additional diversification for the asset portfolio. The Concentration risk on individual assets is limited under the relevant investment mandates. Real estate portfolio is also well diversified across European countries and sectors. 5.4.3 Risk measurement The sensitivity of the Solvency II ratio to changes in the value of real estate is monitored on a quarterly basis. This scenario estimates the impact of an instantaneous shock of -10% to the value of direct real estate exposures and real estate within mutual funds.
52 Risk management continued
The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in the value of real estate at
31 December 2022 and 2021.
Solvency II ratio sensitivities: Real estate risk
Own Funds impact SCR impact Solvency II ratio impact
2022 2021 2022 2021 2022 2021
Real estate Downward shock -10% -1,057 -921 -78 -58 -10% -8%
Solvency II ratio sensitivity to changes in the value of real estate increased due to an increase in proportion of real estate investments in the
total portfolio.
5.5 Foreign exchange risk
Foreign exchange (FX) risk measures the impact of losses related to changes in currency exchange rates.
5.5.1 Risk profile
FX transaction risk can occur on a local entity level, while FX translation risk can occur when non-Euro entities are consolidated at the level
of NN Group and show a risk in regard to NN Group\u2019s reporting currency, the Euro.
The SCR for Foreign exchange risk decreased from EUR 730 million in 2021 to EUR 620 million in 2022. This is mainly due to a decrease in
equity markets and widening of the asset spread for the non-EUR denominated bonds which decreased the valuation.
5.5.2 Risk mitigation
The FX risk at the local entity level is mitigated by limiting investment to the non-local currency assets or by hedging through FX forwards and
cross currency swaps.
5.6 Inflation risk
Inflation risk is defined as the risk of adverse changes in inflation that result into a decrease in Solvency II Own Funds. Inflation risk is
calculated for the Dutch entities applying the Partial Internal Model for the SCR calculation.
5.6.1 Risk profile
The SCR for Inflation risk increased to EUR 270 million from EUR 135 million at the end of 2021. The increase is primarily driven by an increase
in the expected inflation rates. Inflation risk is limited and hedged to a large extent with inflation-linked swaps or bonds, which are exposed
to lower inflation rates. Furthermore, with the long-term nature of the liabilities, the effect of the short-term inflation changes on NN Group
remains limited.
5.6.2 Risk mitigation
The Inflation risk is managed through the use of inflation swaps and investments in inflation bonds. In particular, the exposure to inflation
linked liabilities is limited and hedged.
5.7 Basis risk
The SCR Basis risk is defined as a risk that the underlying asset or liability behaves differently than the underlying hedge instrument, which
results in the loss in the Solvency II balance sheet.
5.7.1 Risk profile
The SCR for Basis risk decreased from EUR 74 million in 2021 to EUR 58 million in 2022, mostly due to a decrease in the hedge equity
exposure within the separate account business in the Netherlands.
5.7.2 Risk mitigation
The Basis risk is mitigated by fund mapping of the underlying funds to risk factors, and also by constant monitoring of the fund performance
compared to the benchmark.
5.8 Concentration risk
For the Standard Formula entities there is an additional SCR for Concentration risk calculated under Standard Formula, which is defined as
the risk of loss in the Basic Own Funds as a result of the default of an issuer in which NN Group has a concentrated investment position.
5.8.1 Risk profile
The SCR for Concentration risk remained at nil in 2022.
52 Risk management continued 5.8.2 Risk mitigation This Concentration risk is mitigated by Concentration risk limits aiming to have a well-diversified portfolio with Credit risk concentrations in any particular issuer within the NN Group risk appetite. 5.9 Market risks within separate account businesses The separate account businesses are those in which the policyholder bears the majority of the Market and Credit risk. NN Group\u2019s earnings from the separate account businesses are primarily driven by fee income. However, in the case of variable annuities and the guaranteed separate account pension business in the Netherlands, NN Group retains risk associated with the guarantees provided to its policyholders. Businesses in this separate account category are (i) the group pension business in the Netherlands for which guarantees are provided and (ii) other separate account business, primarily the unit-linked business and variable annuities (VA). 5.9.1 Separate account guaranteed group pension business in NN Life Risk profile In the Dutch separate account guaranteed group pension portfolio, investments are held in separate accounts on behalf of the sponsor employer who concluded their contract with a Business Unit of NN Group. Regardless of actual returns on these investments, pension benefits for the beneficiaries are guaranteed under the contract. The value of the provided guarantee is sensitive to interest rates, movements in the underlying funds and the volatility of those funds. The Assets under management for NN Life\u2019s portfolio decreased from EUR 2.9 billion as at 31 December 2021 to EUR 2.4 billion as at 31 December 2022 mainly driven by higher interest rate. In general, the materiality of the separate account business within NN Group has reduced in the past few years due to the run-off of the portfolio. Risk mitigation NN Group currently hedges the value of the guarantees it provided under group pension contracts in the Netherlands. For the purpose of hedging, the exposure under such guarantees is discounted at the swap curve without the extrapolation to the UFR. The hedge programme includes interest rate swaps and equity futures. Upon contract renewal, NN Group offers policyholders defined contribution products with investments in portfolios that NN Group can more easily hedge, thus reducing the risk to NN Group. 5.9.2 Other separate account businesses Risk profile The other separate account business primarily consists of unit-linked insurance policies and variable annuity (VA) portfolios. Unit-linked insurance policies provide policyholders with selected fund returns combined with an insurance cover. The Investment risk is borne by the policyholder, although there are some unit-linked products where NN Group has provided guarantees on the performance of specific underlying funds. Unit-linked products without guarantees do not expose NN Group to Market risk, except to the extent that the present value of future fees is affected by market movements of the underlying policyholder funds. The variable annuities in the Japan Closed Block VA and VA Europe business consist of guaranteed minimum accumulation benefit products, guaranteed minimum death benefit products and guaranteed minimum withdrawal benefit products. Risk mitigation The Market risks of the unit-linked and other separate account business are managed by the design of the product. Currently, NN Group does not hedge the Market risks related to the present value of future fee income derived from this business (with the exception of the Japan Closed Block VA). For the Japan Closed Block VA business and European VA business NN Group has hedging programmes in place targeting Equity, Interest rate, Credit spread, and FX risk as well as Volatility risk. Risk measurement NN Group determines Eligible Own Funds for the Market and Credit risks of the separate account business through modelling the risks of the fee income and the guarantees including the impact of the hedge programmes. 6 Counterparty default risk Counterparty default risk is the risk of loss due to default or deterioration in the credit standing of the counterparties and debtors (including reinsurers) of NN Group. The SCR for Counterparty default risk is primarily based on the issuer\u2019s probability of default (PD) and the loss-given- default (LGD) of each individual position taking into account diversification across these positions. The Counterparty default risk module also covers any Credit risk exposures which are not covered in the Credit spread risk sub-module . 52 Risk management continued 6.1 Risk profile As shown in the \u2018Solvency Capital Requirements\u2019 table above, the Counterparty default risk SCR of NN Group decreased from EUR 200 million at the end of 2021 to EUR 163 million at the end of 2022, driven primarily by the lower market value of the mortgage portfolio in NN Belgium. In the Partial Internal Model the mortgages do not get the capital charge under the Counterparty default risk and are under Credit spread risk SCR sub module for these Business Units. 6.2 Risk mitigation NN Group uses different Credit risk mitigation techniques. For over the counter derivatives, the exchange of collateral under the International Swaps and Derivatives Associations contracts accompanied with Credit Support Annexes is an important example of risk mitigation. Other forms of Credit risk mitigation include reinsurance collateral exchange. For cash and money market funds, limits per counterparty are put in place. 6.3 Risk measurement The Counterparty default risk (CDR) module comprises two sub-modules: \u2022 CDR Type I: applicable to exposures which might not be diversified and where the counterparty is likely to be (externally) rated, e.g., reinsurance contracts, derivatives and money market exposures. The underlying model is the Ter Berg model (which was also the basis for Standard Formula calibration under Solvency II). \u2022 CDR Type II: applicable to exposures that are usually (well) diversified and where the counterparty is likely to be unrated, like retail loans, but also other forms of term lending not covered in Type I The capital charges for CDR Type I and CDR Type II exposures are calculated separately and subsequently aggregated . 7 Liquidity risk Liquidity risk is the risk that one of NN Group\u2019s entities does not have sufficient liquid assets to meet its financial obligations when they become due and payable, at reasonable cost and in a timely manner. Liquidity in this context is the availability of funds, or certainty that funds will be available without significant losses, to honour all commitments when due. NN Group manages Liquidity risk via a Liquidity risk framework: ensuring that \u2013 even after shock \u2013 NN Group\u2019s businesses can meet immediate obligations. Liquidity stress events can be caused by a market-wide event or an idiosyncratic NN Group specific event. These events can be short-term or long-term and can both occur on a local, regional or global scale. Subsidiaries that trade derivatives are responsible for maintaining sufficient liquidity levels to meet their collateral requirements. For this purpose, liquidity buffers are set to ensure sufficient liquidity is available in an adverse scenario and to ensure the liquidity thresholds are being met. 7.1 Risk profile Liquidity risk covers three areas of attention. Operational liquidity risk is the risk that funds are unavailable to meet financial obligations when due. Market liquidity risk, is the risk that an asset cannot be sold on short-term without significant losses. Funding risk is the risk related to not being able to refinance maturing debt instruments and may lead to higher funding costs. The connection between Market and Operational liquidity risk stems from the fact that when payments are due and not enough cash is available, investment positions need to be converted into cash. If market liquidity is low or an adverse market movement took place in this situation, this could lead to a loss. In 2022, liquidity risk has increased due to the rise in interest rates, leading to additional collateral requirements on NN Group\u2019s interest rate derivatives portfolio. In case of a significant increase of interest rates, NN Group is exposed to the risk of having to sell assets which contribute to capital generation or to the hedging of liability cash flows. NN Group has a robust liquidity risk management framework in place to manage this risk. A minimum buffer of immediately available liquidity (cash and committed facilities) is maintained. Repos, Group cash capital and the Revolving Credit Facility at Group can further support the liquidity position if needed
52 Risk management continued
7.2 Risk mitigation
NN Group aims to match day-to-day cash in- and outflows and at the same time wants to be able to have sufficient cash in case of a
liquidity stress event. NN Group holds a minimum buffer of cash which is immediately available in order to be able to meet collateral calls
from derivatives exposures in the case of significant market movements. Furthermore, NN Group has a wide range of options to generate
additional liquidity if necessary, amongst which committed repo facilities which are available at all times and a revolving credit facility
NN Group Liquidity Management Principles defines three levels of Liquidity Management:
\u2022 Short-term liquidity (including operational liquidity) management covers the day-to-day cash requirements under normal business conditions
\u2022 Long-term liquidity management considers business conditions, in which Market liquidity risk materialises
\u2022 Stress liquidity management looks at the company\u2019s ability to respond to a potential crisis situation
7.3 Risk measurement
NN Group Liquidity Risk Management Standard measures Liquidity risk in a stress event through the gap between liquidity needs and
liquidity sources compared to available liquid assets for sale. This is calculated for different time horizons and different levels of availability of
liquidity sources. Liquidity risk is not part of NN Group\u2019s Partial Internal Model.
8 Non-market risk
Within the SCR Partial Internal Model a differentiation is made for the classification of Non-market risks for different NN Group entities
depending on the model applied.
For the Business Units applying Partial Internal Model, Non-market risks are split between:
\u2022 Insurance risk: is the risk related to the events insured by NN Group and comprise Actuarial and Underwriting risks such as Mortality risk
(including Longevity), Morbidity risk, and Property & Casualty risk which result from the pricing and acceptance of insurance contracts
\u2022 Business risk: is the risk related to the management and development of the insurance portfolio but exclude risks directly connected to
insured events. Business risk includes Expense risk, Persistency risk, and Premium re-rating risk. Business risks can occur because of internal,
industry, regulatory/political or wider market factors. Persistency risk is the risk that policyholders use options available in the insurance
contracts in a way that is different from that expected by NN Group. Depending on the terms and conditions of the insurance policy, and
the laws and regulations applicable to the policy, policyholders could have the option to surrender, change premiums, change investment
fund selections, extend their contracts, take out policy loans, and make choices about how to continue their annuity and pension savings
contracts after the accumulation phase, or even change contract details. Policyholder behaviour therefore affects the profitability of the
insurance contracts. Changes in tax laws and regulations can affect policyholder behaviour, particularly when the tax treatment of their
products affects the attractiveness of these products for customers
52 Risk management continued
For the Business Units applying Standard Formula, Non-market risks are split between:
\u2022 Life risk: the life portfolio is mainly attributed to the individual and group business in the international entities of NN Group (mainly Belgium,
Spain Life, Poland) and ABN AMRO Life. This risk comprises the Mortality, Longevity, Disability-morbidity, Expense, Lapse, and Life
catastrophe risks
\u2022 Health risk: this covers the Similar to Life Techniques (SLT) Health portfolio risk (comprising mortality, longevity, disability-morbidity, expense
and lapse risks), the Non-SLT (NSLT) Health portfolio risk (comprising premium and reserve risk and lapse risk), and the Health Catastrophe
risk. Within NN Group, the health risk stems from morbidity riders in Belgium, Czech, Poland, Slovakia, Romania, from the yearly renewable
health insurance portfolio of Greece
\u2022 Non-life risk: this covers non-life portfolio mainly contributed by ABN AMRO Non-life and NN Insurance Services. This risk covers the
Premiums and reserve risk, Non-life catastrophe risk, and Lapse risk
As a result of the Covid-19 pandemic, we have observed higher mortality in our Group Pension portfolios, leading to extra release of technical
provisions for these life insurance books. For Non-life disability insurance contracts there are both direct effects from insureds being affected
by Covid-19 as well as indirect effects from longer disability as treatment is postponed. For specific portfolios this may lead to increased
claims; however, the observed and expected financial impact for NN Group is not significant.
8.1 Risk profile
The table below presents the Non-market risk SCR composition at the end of 2022 and at the end of 2021, respectively. The main changes in
the risk profile are explained in the subsequent section of this document.
Non-market risk capital requirements
2022 2021
Insurance risk (IM entities) 3,069 4,326
Business risk (IM entities) 1,698 1,536
Life risk (SF entities) 1,162 957
Health risk (SF entities) 263 236
Non-life risk (SF entities) 121 113
Diversification non-market risk -1,243 -1,265
Non-market risk 5,070 5,903
The Non-market risk SCR decreased from EUR 5,903 million in 2021 to EUR 5,070 million in 2022. The decrease is predominantly driven by
sharp increase in the interest rates resulting in a lower Insurance risk SCR primarily driven by lower mortality risk (due to effect of higher
interest rates on longevity). This was partially compensated by an increase in the Life risk, mostly Mass Lapse risk, due to increased interest
rates, for the Standard Formula entities .
52 Risk management continued
8.2 Risk mitigation
Proper pricing, underwriting, claims management and diversification are the main risk mitigating actions for insurance risks.
NN Group Insurance risks are diversified between Business Units. By expanding insurance liabilities to cover multiple geographies, product
benefits, lengths of contract and both Life and Non-life risk, NN Group reduces the likelihood that a single risk event will have a material
impact on NN Group\u2019s financial condition. Risks not sufficiently mitigated by diversification are managed through concentration and
exposure limits and through reinsurance: retention limits for Non-life insurance risks are set by line of business for catastrophic events and
individual risk.
Furthermore, management of the insurance risks is done by ensuring that the terms and conditions of the insurance policies that NN Group
underwrites are correctly aligned with the intended policyholder benefits to mitigate the risk that unintended benefits are covered. This is
achieved through NN Group\u2019s underwriting standards, product design requirements, and product approval and review processes \u2013 as
referred to under Risk Management Policies, Standards and Processes.
8.3 Insurance Risk
Insurance risk is the risk that the future insurance claims and other contractual benefits cannot be covered by premiums, policy fees
and/or investment income or that insurance liabilities are not sufficient because claims and benefits might differ from the assumptions used
in determining the best estimate liability. Insurance risk manifests itself in the life as well as in the non-life portfolio of NN Group.
8.3.1 Risk profile
The table below presents the Partial Internal Model insurance risk SCR for the Dutch NN insurance entities of NN Group (namely NN Life, NN
Non-life and NN Re) as at 31 December 2022 and 31 December 2021, respectively.
Insurance risk capital requirements
2022 2021
Mortality (including longevity) risk 2,728 4,149
Morbidity risk 904 818
Property & Casualty risk 827 669
Diversification insurance risk -1,390 -1,310
Insurance risk (IM entities) 3,069 4,326
Decrease in the Insurance risk SCR is mostly driven by a decrease in Mortality risk due to sharp increase in the interest rates. This is partly
offset by the increase in Morbidity risk SCR due to the switch to the long contract boundary, and the increase in Property & Casualty risk
SCR due to regular model and assumption updates.
Mortality risk occurs when claims are higher due to higher mortality experience (for instance in relation to term insurance). Longevity risk is
the risk that technical provisions to cover insurance obligations will not be sufficient due to higher than expected life expectancies arising
from mortality improvements such as better living conditions, improved health care, and medical breakthroughs. While NN Group is exposed
to both Longevity and Mortality risks, these risks do not fully offset one another as the impact of the Longevity risks in the pension business
in the Netherlands is significantly larger than the Mortality risk in the other businesses, which is partially due to the size of the business.
Changes in mortality tables impact the future expected benefits to be paid and the present value of these future impacts is reflected directly
in measures like Own Funds.
Morbidity risk is borne primarily by the health insurance portfolio which pays out a fixed amount benefit, reimburses losses (e.g. in the case of
loss of income), or pays for expenses of medical treatment related to certain illness or disability events. The main exposures to Morbidity risks
within NN Group are the disability insurance policies underwritten in Netherlands Non-life.
The Non-life portfolio includes Property & Casualty (P&C) products covering risks such as fire damage, car accidents, personal and
professional liability, windstorms, hail, and third-party liabilities. The P&C risk is primarily underwritten by Netherlands Non-life and
catastrophic losses are partially reinsured to external reinsurers through NN Re .
52 Risk management continued 8.3.2 Risk mitigation Insurance risk is mitigated through diversification between NN Group Business Units, between Mortality and Longevity risks within NN Group Business Units, appropriate pricing, underwriting and claims management policies, and risk transfer via reinsurance and index-based hedges, which are used to reduce the Own Funds volatility. The risks that are not sufficiently mitigated by diversification are managed through concentration and exposure limits and through reinsurance: \u2022 Retention limits for Life insurance risks are set per insured life and significant mortality events affecting multiple lives such as pandemics \u2022 Retention is used to manage risk levels (such as non-life reinsurance and morbidity reinsurance in the COLI business in Japan Life) \u2022 Retention limits for Non-life insurance risks are set by line of business for catastrophic events and individual risks For NN Non-Life natural catastrophic events are a major risk. One of the main natural catastrophe threatening the Netherlands is storms causing severe wind damage. NN Non-Life purchased a reinsurance contract offering protection against severe storms and other natural perils. In addition, reinsurance contracts per risk group are in place, covering NN Non-Life against large one-off events such as fires. Reinsurance creates Credit risk which is managed in line with the Reinsurance Standard of NN Group. 8.4 Business risk Business risk include risks related to the management and development of the Insurance risk, Persistency risk, and Expense risks. These risks occur because of internal, industry, regulatory/political, or wider market factors. 8.4.1 Risk profile The table below presents the Partial Internal Model business risk SCR for the Dutch NN insurance entities of NN Group as at 31 December 2022 and 31 December 2021, respectively. Business risk capital requirements 2022 2021 Persistency risk 698 408 Premium risk 9 12 Expense risk 1,388 1,387 Diversification business risk -397 -271 Business risk (IM entities) 1,698 1,536 The Persistency risk SCR increased from EUR 408 million in 2021 to EUR 698 million in 2022 primarily due to model improvements and assumption changes at NN Non-Life. The main contributors to Persistency risk are NN Non-Life and NN Czech business and the Corporate Owned Life Insurance (COLI) business in Japan Life (both reinsured by NN RE). The risk that policyholders maintain their contracts longer than NN Group has assumed is specific to the variable annuity business when guarantees are higher than the value of the underlying policyholder funds, the pension business in the Netherlands, and the older, higher interest rate guaranteed savings business in Europe. The risk that policyholders hold their contracts for a shorter period than NN Group has assumed relates to the life business in Japan and the unit-linked businesses in Central and Eastern Europe. Within NN Group NN Re reinsures parts of the life business in Japan and Central and Eastern Europe. The SCR for Expense risk remained stable at EUR 1,388 million in 2022 (vs EUR 1,387 million in 2021). The decrease due to increase in the interest rates was offset by an increase in inflation rates and refinements in the expense inflation modelling. This risk relates primarily to the variable part of NN Group\u2019s expenses and is the risk that future actual expenses exceed the expenses assumed. Total administrative expenses for NN Group for 2022 were EUR 2,210 million compared with EUR 2,280 million in 2021. Parts of these expenses are variable, depending on the size of the business and sales volumes, and parts are fixed and cannot immediately be adjusted to reflect changes in the size of the business. Expense risk of NN Group mainly comprises the Expense level and Expense inflation risks in NN Life. A significant portion of it is incurred in the closed block operations of Netherlands Life, where NN Group is also exposed to the risk that the expenses will not decrease in line with the gradual decrease of the in-force book, leading to a per policy expense increase. Furthermore, Expense risk is also driven by the Group pension business in the Netherlands which includes long-term best estimate expense assumptions, discounted over a long period of time
52 Risk management continued
8.4.2 Risk mitigation
Persistency and Premium risks are managed through the product development, product approval and review processes and by ensuring
that appropriate advice is given to the customer, not only at the point of sale but also during the lifetime of the product. The policyholder
behaviour experience of in-force policies is assessed at least annually.
As part of its strategy, NN Group has put several programmes in place to improve the customer experience. These programmes improve
the match between customer needs and the benefits and options provided by NN Group\u2019s products. Over time, NN Group\u2019s understanding
and anticipation of the choice policyholders are likely to make, will improve, thereby decreasing the risk of a mismatch between actual and
assumed policyholder behaviour.
Ongoing initiatives are in place to manage Expense risk throughout NN Group, especially in the Netherlands where company targets are
in place to reduce expenses, thus, lowering Expense risk going forward. These initiatives seek to reduce expenses through the number of
underlying contracts in place. This is particularly relevant for the Dutch individual life closed-block business that can only reduce in number
of contracts. Besides the already described mitigating actions, proper pricing, underwriting, claims management, and diversification are also
risk mitigating actions for business risk.
8.5 Life risk
Life risk includes risks arising from the underwriting of life insurances of the Business Units applying Standard Formula and is split into
Mortality risk, Longevity risk, Disability/Morbidity risk, Persistency risk, Expense risk, Revision risk, and Catastrophic risk. These risks refer
to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the
conduct of business.
8.5.1 Risk profile
Life risk capital requirements
2022 2021
Mortality risk 126 142
Longevity risk 84 103
Morbidity risk 11 11
Expense risk 372 435
Lapse risk 836 546
Catastrophe risk 132 113
Diversification life risk -399 -393
Life risk (SF entities) 1,162 957
As shown in the table above, the Life risk SCR for the SF Business Units increased from EUR 957 million in 2021 to EUR 1,162 million in
2022 mainly due to increase in the interest rates.
8.5.2 Risk mitigation
The majority of Life risk is comprised of Lapse, Expense and Mortality risks (in Standard Formula entities) mainly from the international NN
Group entities (Belgium, Poland, Spain) as well as ABN AMRO Life.
The NN Group Standard Formula entities manage the Expense risk through detailed budgeting and monitoring the costs using activity-
based costing.
Lapse risk management serves an important objective for NN Group entities. When deviations from assumed lapse rates are observed over
a prolonged period of time, a product review and further management actions are taken to address the underlying reasons.
8.6 Health risk
Health risk arises from issuing health insurance contracts, which is divided in Similar to Life Techniques (SLT) risk, Non-Similar to Life
Techniques (NSLT) risk and Catastrophe risk. SLT risk is associated to health obligations pursued on a similar technical basis to that of life
insurance, while NSLT risk applies to health obligations not pursued on a similar technical basis to that of life insurance. These risks refer
to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the
conduct of business .
52 Risk management continued 8.6.1 Risk profile Health risk capital requirements 2022 2021 SLT 245 220 NSLT 20 20 Catastrophe risk 25 19 Diversification health risk -27 -23 Health risk (SF entities) 263 236 As shown in the table above, the Health risk SCR of the Business Units applying Standard Formula increased from EUR 236 million in 2021 to EUR 263 million in 2022. The increase is mainly explained by the acquisition of MetLife Greece and MetLife Poland. The additional physical impact of climate change on the regular Health Catastrophe risk is not quantified yet but is expected to be limited because of the shorter time horizon of 1 year used to define the Solvency Capital Requirements and the mitigating effect of the current external reinsurance programme. NN Group will perform ongoing risk assessments to assess the physical impact of climate change on various Health products qualitatively and quantitively based on the latest IPCC Scenarios and taking into account various time horizons. 8.6.2 Risk mitigation The majority of Health risk originates from international NN Group entities (Belgium, Poland, Slovakia and Romania). They mitigate the risks by strict acceptance policies and stringent claims-handling procedures. An acceptance policy and internal control processes are developed for each product line maintained by those entities. 8.7 Non-life risk Non-life risk involves risks arising from the underwriting of non-life insurance, which includes Premium and Reserve risk, Persistency risk and Catastrophic risk. These risks refer to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the conduct of business. 8.7.1 Risk profile Non-life risk capital requirements 2022 2021 Premium and reserve risk 96 99 Lapse risk 21 18 Catastrophe risk 50 33 Diversification non-life risk -46 -37 Non-life risk (SF entities) 121 113 As shown in the table above, the Non-life risk SCR of the Business Units applying Standard Formula was relatively stable between 2021 (EUR 113 million) and 2022 (EUR 121 million). The additional (physical) impact of climate change on the regular Non-life Catastrophe risk is not quantified yet but is expected to be limited because of the shorter time horizon of one year used to define the Solvency Capital Requirements and the mitigating effect of the current external reinsurance programme. NN Group performs qualitative and quantitative risk assessments to assess the physical impact of climate change on various non-life product lines based on the latest IPCC Scenarios and taking into account various time horizons. We refer to paragraph Sustainability and climate change risk management in the section Managing our risks. 8.7.2 Risk mitigation Non-life risk is mitigated through appropriate pricing and underwriting policies and through risk transfer via reinsurance. Most of the Non-life risk comes from ABN AMRO Non-life and NN Insurance Services, and they manage the risk using various reinsurance contracts. Within our non-life business, Weather-related risks are managed through the use of Catastrophe risk modelling in underwriting and risk assessment. We use external vendor models to estimate the impact and damage caused by large natural catastrophes such as windstorms, considered to be the main natural peril for the NN Group portfolio. Reinsurance covers are placed with strongly capitalised external reinsurers. Natural catastrophic losses can become more severe and more frequent because of climate change. Although most of our non-life business is annually renewable, to accurately price our business it is essential that we monitor and understand linkages between natural disasters and climate change. NN Group therefore liaises with our external vendors and participates in industry initiatives to improve our knowledge, data and models to better prepare for changing weather patterns .", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-3": { "value": "5.4 Managing our risks Risks represent uncertainties that could impact achieving NN Group\u2019s strategic objectives and commitments. Strong risk management helps us monitor developments in our operating environment and act where necessary. Introduction This section covers the following topics: \u2022 Risk Control Cycle (paragraph 5.4.1) \u2022 Risk Profile, with a focus on material risks as established by NN Group\u2019s Management Board (paragraph 5.4.2) \u2022 How NN Group manages sustainability/ climate risks (paragraph 5.5) More information on how risk management responsibilities within NN Group are organised can be found in the Corporate Governance chapter on pages 105-121. Details on our financial risk profile can be found in Note 52. Risk Assessment Risk Control Risk Monitoring & Reporting Risk Strategy Risk Culture 1 These disclosures are an integral part of the Consolidated Annual Accounts, and are part of the disclosures to which the audit opinion relates. This includes pages 70-74. 5.4.1 Risk Control Cycle\u00b9 We manage any risks inherent to our business model and the environment in which we operate within NN Group\u2019s risk appetite and framework. Every employee has a role to play in identifying risks in their area of responsibility and managing them in a proactive way. It is important to know which risks we need to avoid and which we are prepared to take, and why; to be aware of large existing and emerging risks; and to ensure an adequate return for the risks assumed within the business. The following risk control cycle ensures that business units and NN Group operate within our risk appetite: 1. Set business and risk objectives, leading to a risk strategy (risk appetite, policies and standards); 2. Identify and assess the risks that need to be managed; 3. Effective mitigation of risks; 4. Continuously monitor the effectiveness of mitigating measures, including reporting on risk levels. This cycle is underpinned by a sound risk culture. The risk control cycle supports the NN Group strategy, the Business Plan (financial control cycle) and performance management (HR cycle) that enable business units and the NN Group to meet their business objectives. Risk Strategy NN Group\u2019s risk appetite is the key link between the Group\u2019s strategy, capital plan and risk management in executing the business plan. Risk Appetite Statements define qualitatively how much risk we are willing to take for each type of risk. They also describe how we want to avoid unwanted or excessive risk-taking, and aim to optimise use of capital. The statements are then translated into more detailed risk limits and tolerances, policies and standards. The specific statements are listed on the next page. Managing Strategy Risk appetite: Moderate We actively engage in a dialogue with our stakeholders and manage our products, distribution channels and organisation, as well as key performance and risk metrics in order to: \u2022 Create value for all our stakeholders, and contribute to the well-being of people and the planet \u2022 Respond and adapt to emerging external challenges \u2022 Meet our strategic targets and sustainable growth and return objectives Human Capital Risks Risk appetite: Moderate We moderately accept risks in attracting, retaining and developing a competent and diverse workforce to shape and build NN Group\u2019s business Solvency Risks Risk appetite: Limited We accept financial risks on our balance sheet so we can offer financial security through products for our customers as well as predictable and attractive returns for our investors. We: \u2022 like to avoid having to raise equity capital after a 1-in-20 year event, \u2022 only accept risks that we understand and can effectively manage, \u2022 design and price our products in a responsible manner, and \u2022 limit exposure to non-rewarding risks (in particular concentration, interest rate, currency and inflation risk) or risks to which we have already a high exposure (in particular longevity risk) Liquidity Risks Risk appetite: Limited We want to meet our payment and collateral obligations, even when under severe liquidity stress, while also actively pursuing illiquid assets to back illiquid liabilities on our balance sheet. Sound Business Conduct Risk appetite: Avoid We do not accept material breaches of applicable laws and regulations or NN Group policies and standards. Employee Conduct & Business Culture Risk appetite: Avoid We actively monitor and manage employee conduct and foster a business culture demonstrating that we live the NN values. Product Suitability Risk appetite: Avoid We only market products and services that add value for our customers over their expected lifetime, are in line with their preferences, and can be simply and transparently explained. Operational Risks Risk appetite: Moderate We moderately accept human errors and as such failures in processes, and therefore manage to agreed tolerances. IT Risks Risk appetite: Limited We limit losses arising from IT risks, and therefore we ensure our IT assets are sufficiently resilient. Reliable Reporting Risk appetite: Avoid We have no appetite for material errors in external financial and non-financial reporting, and internal reports used for managerial decision-making. Business Continuity Risk appetite: Limited We avoid, to the extent possible and even under severe circumstances, sustained discontinuation of business (people, offices, systems). In 2022, NN Group introduced a new risk appetite statement for Human Capital Risks, further integrated sustainability risks into our risk appetite framework and updated other risk appetites in the light of changes in our external environment. Risk Metrics The Risk Appetite Statements mentioned above are implemented within the business through the use of risk metrics, as well as policies and standards: \u2022 Risk limit \u2013 the maximum exposure to a risk management is willing to accept, and should not be breached. \u2022 Risk tolerance \u2013 the level of exposure to a risk at which management wants to be actively informed \u2013 it serves as a trigger to review the exposure regularly and reflects an ambition level within which management wants to act in the medium term. \u2022 Key Risk Indicators (KRIs) \u2013 used for areas where we are unable to (fully) quantify risks. KRIs measure performance, but without necessarily setting limits or tolerances, instead using subjective assessment to establish if we are acting within set risk appetites. \u2022 Policies and standards \u2013 define objectives and requirements to ensure that processes and risks are managed consistently throughout NN Group. They are mandatory. Metrics Strategic & Emerging risks This is monitored through various metrics related to the Business Plan, such as progress on main strategic initiatives and deviation between actual and planned strategic targets. Metrics Human Capital Risks This is monitored via indicators related to employee engagement, renumeration, succession planning, as well as policies and standards on renumeration, recruiting, branding, and so forth. Metrics (Non-)Market Risks Relevant metrics are: \u2022 Solvency II ratio: the ratio of Eligible Own Funds (OF) to Solvency Capital Requirement (SCR). NN Group aims to capitalise the Group and its business units adequately at all times. To ensure adequate capitalisation, units are managed to their commercial capital levels (based on the Solvency II ratio or local solvency regime) in accordance with the risk associated with the business activities. \u2022 Solvency II ratio sensitivities: show how the NN Group OF and SCR are impacted under various scenarios as decided by NN Group Management Board (for example changes in interest rates or other financial market factors). \u2022 Cash capital position: NN Group holds a cash capital position in the holding company to cover stress events, and fund holding company expenses and interest expenses. The cash capital position is defined as net current assets available at the holding company Risk Taxonmony\u00b9 NN Group has defined and categorised the different types of risk into a risk taxonomy, our internal \u2018risk dictionary\u2019: Risk Appetite Risk Class Description Managing Strategy Emerging Risks Newly developing or changing risks that cannot yet be fully assessed or quantified, but that could in the future affect the viability of NN Group\u2019s strategy. Strategic Risks Risks arising from making poor business decisions, implementing decisions poorly, or being unable to adapt to changes in the operating environment. Human Capital Risks Human Capital Risks Risks arising from being unable to attract, retain or pay competent employees. Solvency Risks Market Risks Risks related to (the volatility of) financial and real estate markets. Counterparty Default Risks Risks related to counterparties failing to meet contractual debt obligations. Non-Market Risks Financial risks related to the products NN Group offers to customers. Liquidity Risks Liquidity Risks Risks related to being unable to settle financial obligations when due. Sound Business Conduct Employee Conduct & Business Culture Product Suitability Non-Financial Risks Risks related to people, or inadequate or failed internal processes, including IT and communications systems and external events. Operational Risks IT Risks Reliable Reporting Business Continuity 1 Sustainability risks are risks related to environmental, social and governance (ESG) factors (including climate change) that can cause material negative impact on NN Group\u2019s long-term performance, reputation, value, balance sheet or operations. ESG factors create strategic, financial and non-financial risks, in several areas of our taxonomy. Paragraph 5.4 explains in detail how we mitigate or manage these risks Own Funds at Risk limits: NN Group has implemented limits to monitor the impact of moderate stress events in business units, and is monitoring the level of capital and financial flexibility this requires at the holding level. \u2022 Interest Rate Risk limits: NN Group has implemented limits and tolerances for interest rate risk exposures at NN Group and business unit level. \u2022 Bank capitalisation: the amount of capital NN Bank is required to hold as part of the Basel III framework, expressed as a capital adequacy ratio of equity that must be held as a percentage of risk-weighted assets. \u2022 Product and underwriting limits: limits designed to manage deviations between expected and realised claims and payments, longevity risks, etc. \u2022 Policies and standards on investment management, mandates and asset allocation, responsible investments, products and underwriting. Metrics Liquidity Risks Relevant metrics are: \u2022 Required sales ratio: liquidity risks are monitored by assessing the required sales ratio between liquid assets and liquidity requirements for severe stress scenarios and different time horizons. \u2022 A minimum buffer of immediately available liquidity (cash and committed facilities) in order to be able to meet collateral calls from derivative exposures. Metrics Counterparty Default Risks Concentration Risk limits: to prevent excessive concentration risk, NN Group has concentration risk limits on corporate and sovereign issuers, asset type and country of risk. Metrics Non-financial Risks Relevant metrics are: \u2022 Annual loss tolerance and materiality: tolerances on potential yearly loss, reputation impact and financial reporting accuracy. \u2022 Restricted list: designed to prevent investments in securities that are not in line with NN Group\u2019s values and/or applicable laws and regulations, as established in NN\u2019s Responsible Investment Framework. \u2022 Various KRIs to measure whether processes are executed according to target (e.g. number of incidents, customer complaints, outage of primary systems, etc.). \u2022 Policies and standards that define objectives and requirements around compliance, IT, operations, security and business continuity Risk Assessment Risk assessments are regularly performed throughout NN Group to identify which risks we are exposed to and how relevant they are. For financial risks, NN Group\u2019s risk models are leading in risk assessments/measurement. Risks that are harder to quantify generally require professional judgement, either through qualitative risk assessments or scenario analysis. Risk Class Risk Assessment Strategic & Emerging Risks Business planning, Strategic Risk Assessment and scenario analysis, including Own Risk and Solvency Assessment (ORSA). Human Capital Risks Internal and external benchmarking on employer attractiveness and renumeration; strategic workforce planning. Market Risks Asset Liability Management (ALM) studies, Strategic Asset Allocation (SAA) and New Asset Class Assessment (NACA). Liquidity Risks SAA, NACA. Counterparty Default Risks Assessment of maximum exposure on asset class, issuer and country basis. Non-Market Risks Product approval and review process (PARP). Non-Financial Risks Detailed risk assessments on processes and projects (including aspects of IT, financial economic crime, fraud, etc.); Systematic Integrity Risk Assessment (SIRA), looking at behavioural and integrity risks, as well as the ECF Maturity Reflection, looking at risk maturity and culture). Below we describe some of the aforementioned risk assessments in more detail. Strategic Risk Assessment (SRA) and Own Risk and Solvency Assessment (ORSA) NN Group, and each of its regulated (re) insurance subsidiaries, prepares an ORSA at least once a year, also covering the non-Solvency II entities, Japan and Turkey. Similar to an ORSA, NN Bank performs an Internal Capital Adequacy Assessment and Internal Liquidity Adequacy Assessment, conform with Basel III requirements. As part of the ORSA, a Strategic Risk Assessment is performed at least annually by the Management Board of NN Group, as well as by the management of operating units. The outcomes of the Strategic Risk Assessment are key risks, which are risks that are potentially solvency-threatening or could have a significant negative impact on the achievement of one or more of the business objectives in NN Group\u2019s strategy or business plan. The ORSA includes a forward-looking overall assessment, using scenario analysis and stress testing, of whether each entity holds sufficient capital across its business planning period to withstand the potential impact of identified key risks. Impact is mainly assessed on the Solvency II capital position, but also on liquidity or operating capital generation where relevant. NN Group also assesses the appropriateness of its Partial Internal Model, which is used to calculate the Solvency II ratio. Risk Management also prepares a separate annual report for the Management Board and the Risk Committee of the Supervisory Board on the performance and appropriateness of the Internal Model. Stress testing can also be initiated outside the ORSA, either internally or if requested by external parties such as De Nederlandsche Bank (DNB, the Dutch Central Bank) or the European Insurance and Occupational Pensions Authority (EIOPA). Strategic Asset Allocation (SAA) Regulated (re)insurance entities of NN Group execute a SAA study once every three years, in which the target allocation and bandwidth are set for each asset class. The SAA study is reviewed annually, using updates for the assumptions on return, risk and feasibility, and a review of constraints and objectives. Product approval and review process (PARP) The PARP has been developed to enable effective design, underwriting and pricing of all insurance products, and to ensure these can be managed throughout their lifetime. The process establishes requirements regarding the product risk profile features to ensure products are aligned with NN Group\u2019s strategy. The PARP takes into account customer benefits and product suitability, expected sales volumes, value-oriented pricing metrics, and relevant policies and regulations. It also includes requirements and standards for assessing risks as per the risk categories, as well as the administration and accounting aspects of the product. New Assets Class Assessment (NACA) and investment mandate process NN Group maintains a NACA for approving investments in new asset classes. NN Group establishes a global list of asset classes in which NN Group entities can invest. Investments in these asset classes are governed through investment mandates given by the insurance entities to the asset manager(s). Process Risk Assessments Process Risk Assessments are performed periodically on all (sub-) processes by the relevant process owners, with particular attention to risks in process hand-over points, where activities change between departments and/or responsible managers. Owners annually assess what the most important non-financial risks are within their process, looking for example at aspects of IT, data quality, human error, changes to systems and processes, etc Risk Control Risk Control refers to activities undertaken to ensure proper mitigating measures are designed, documented and executed such that risks are managed within defined risk limits and tolerances, as well as in line with policies and standards. Inherent risks that are assessed as beyond the risk appetite shall be controlled to the extent they meet the relevant risk appetite statement(s). Risk Class Risks are mitigated/controlled through: Emerging Risks Scenario analysis and contingency/recovering planning. Strategic Risks Adjusting the strategic targets/business model to meet the changing environment, implemented through strategic initiatives/programmes. Business planning, monitoring of strategic execution and scenario analysis. Human Capital Risks Employee engagement surveys, strategic workforce planning, renumeration policies and succession planning. Market Risks Monitoring based on limits and tolerances, hedging/use of derivatives, monitoring investment mandates. Counterparty Default Risks Monitoring based on limits and tolerances. Non-Market Risks Monitoring based on limits and tolerances, PARP (external) (re)insurance. Liquidity Risks Monitoring based on limits and tolerances, cash management/treasury techniques. Non-Financial Risks \u2022 Business and key controls and control testing. \u2022 Incident management and external insurance. \u2022 Risk awareness and training. \u2022 Project risk logs and monitoring. \u2022 Business continuity management. Through its Preparatory Crisis Plan, NN Group has determined a set of measures for early detection of and potential response to a crisis, should it occur. The aim of this Preparatory Crisis Plan is to ensure that tools, measures and processes are in place that would enable NN Group to: \u2022 Avoid going into Recovery \u2022 Anticipate in good time any approaching financial distress and/or potential recovery situation \u2022 Quickly recover to an acceptable minimum solvency (and liquidity) level when faced with financial distress and/or recovery In the Risk Profile section, we describe mitigating activities per risk type in more detail. Risk Monitoring & Reporting Risk monitoring helps us assess and evaluate developments in the risk profile. It determines whether risks are managed within the applicable risk appetite, related limits and tolerances, and in line with policies and standards. Results of the Risk monitoring are reported regularly to the responsible managers of departments, as well as the management and supervisory boards of both NN Group and its entities. This includes information on, for example, strategic projects, financial risk limits and developments, control effectiveness, control deficiencies and incidents, as well as second-line opinions and advice. Action is taken by management when monitoring indicates that risks are being inadequately controlled. The Management Board and Supervisory Board of NN Group receive a quarterly Enterprise Risk Management (ERM) Report and OF/SCR Report. The ERM Report is designed to provide one consistent, holistic overview of the risks for NN Group. It compares current risk levels to our risk appetite and aims to encourage a forward- looking risk view. In the report, the different business units of NN Group report back on their risk profile in relation to their risk appetite, including a second-line opinion from Risk, Legal and Compliance. The OF/ SCR Report aims to give an overview of the quarterly Solvency II capital position and developments in OF and SCR. This report also includes the Solvency II ratio sensitivities.
6.3.3 Risk Governance\u00b9
Our risk governance follows the three
lines of defence concept, which outlines
the decision-making, execution and
oversight responsibilities for NN Group\u2019s
risk management. This structure has
been embedded at both Head Office and
business unit level.
The three lines of defence defines
three risk management levels, each
with distinct roles, decision authorities,
execution responsibilities, and oversight
responsibilities. This concept helps to ensure
that risks are managed in line with the risk
appetite as approved by the Supervisory
Board and cascaded throughout NN Group.
First line of defence: Executive Board,
Management Board, other management
The first lines of defence are the CEO of
NN Group and the CEOs of the Business
Units, as well as their Management Board
members that collectively make business
decisions, with primary accountability for the
performance, sales, operations, investments,
compliance, and related risks. They are
also responsible, both on the executive as
well as process level of the organisation, for
properly managing risks on a daily basis.
More information on the Executive Board,
Management Board and the Supervisory
Board and its committees, including their risk
management responsibilities, can be found
earlier in this chapter.
NN Group gives direction towards business units around risk taking via the Risk Policy Framework and Risk Appetite Framework. NN Group\u2019s Risk Policy Framework ensures that all risks are managed consistently and that NN Group as a whole aims to operate within the set risk appetite and related risk limits and tolerances. The policies and minimum standards focus on risk measurement, risk management and risk governance. Policies and standards have to be approved by the Management Board. Any potential waivers to NN Group policies or standards require delegated approval of the NN Group CRO or General Counsel. Business units may independently perform all activities that are consistent with the strategy of NN Group and the approved (three year) business plan (Business Plan) as long as these are consistent and compliant with the internal risk management and control frameworks, applicable laws and regulations, applicable collective agreements, NN Group\u2019s risk appetite, NN activities are not under the decision- making authority of the Management Board. Each business unit is expected to operate transparently and must provide all relevant information to the relevant Management Board members and Support Function Head(s) at Head Office. The business unit CEOs are responsible for: \u2022 Execution of the strategy and the financial performance, of business and operational activities, in their respective area, as well as the related risks, \u2022 Ensuring that the business operates in compliance with laws and regulations, NN Group policies and standards and internal controls, \u2022 Fulfilling their statutory responsibilities, \u2022 Operating a sound internal risk and control system and operating in accordance with NN Group\u2019s values, \u2022 The viability of the corresponding business unit in the long term, Regular oversight interaction between Head Office and business units takes place with respect to, amongst others, product approval, mandate approval, risk limit setting, risk reporting, ORSA, policy setting and implementation monitoring, model and assumption review and validation. These interactions cover all types of risks, both financial and non-financial risks. Ad-hoc interactions also take place when a business unit proposes a material business initiative for which any Management Board member has the right to initiate a risk review. A risk review can also be initiated to investigate a significant incident or unexpected significant adverse business performance. A risk review is an in-depth risk analysis of the object in scope concluded with a risk opinion and advice when and where relevant. Second line of defence: Key Functions Risk Management, Compliance, Actuarial and the Legal Function Risk Management Function Within the Management Board, the CRO is entrusted with the day-to-day execution of the Risk Management Function, while the Legal Function and Compliance Function fall within the responsibility of the General Counsel. The NN Group CRO steers an independent risk organisation which supports the first line in their decision-making with sufficient countervailing power to prevent excessive risk taking. The NN Group CRO is also responsible for the organisation of Group Risk at Head Office level. Each business unit has its own CRO, who reports hierarchically to the business unit CEO, and has a functional line to the NN Group CRO. The NN Group CRO must ensure that both the Management Board, including the members of the Executive Board, and the Supervisory Board are at all times informed of and understand the material risks to which NN Group is exposed. Responsibilities of the Risk Management Function include: \u2022 Setting of and monitoring compliance with NN Group\u2019s overall risk policies issued by the Risk Management Function. \u2022 Formulating NN Group\u2019s risk management strategy and ensuring that it is implemented throughout NN Group. \u2022 Supervising the operation of NN Group\u2019s risk management and business control systems. \u2022 Reporting on NN Group\u2019s risks, as well as the processes and internal controls. \u2022 Making risk management decisions with regards to matters which may have an impact on the financial results of NN Group or its reputation, without limiting the responsibility of each individual member of the Management Board in relation to risk management. \u2022 Sharing best practices across NN Group. Group Risk supports the NN Group CRO in the execution of his duties and responsibilities. To ensure solid understanding, oversight, and support to the international business units, the NN Group CRO is supported by four teams: \u2022 CRO International: performing Risk oversight activities across international entities of NN Group. \u2022 Enterprise Risk Management: supporting risk governance and frameworks, internal and external risk reporting, as well as performing risk management activities around strategic, emerging, operational and IT risks. \u2022 Risk Models & Analytics: takes care of the coordination, implementation and operation of NN Group\u2019s Partial Internal Model, as well as Model Validation. \u2022 ALM & Investment Risk Management team provides support and risk management activities in the areas of financial risks, as well as Solvency II risk modelling of market and counterparty default risks . Model Validation Model Validation aims to ensure that NN Group\u2019s models are fit for their intended use and is part of the Risk Management Function. For this purpose, Model Validation carries out validations of risk and valuation models, in particular those related to Solvency II. Models are typically developed within first line teams, or within the second line risk team, separate from Model Validation. Any changes to models that have an impact larger than certain pre-set materiality thresholds require approval from either the NN Group CRO, NN Group CFO or the NN Group Management Board. Model Validation performs validation on reliability of models at different stages during their life cycle: at initiation, prior to approval, when the model has been redeveloped or modified, and on a regular basis (based on a planning discussed and agreed with the Model Development departments). The validation process covers a mix of developmental evidence assessment, process verification and outcome analysis. The validation cycle determines the maximum period between two model validations, which can be up to five years. This means that each model in scope will be independently validated at least once within the validation cycle. Model Validation can also start validating before the due date, for example following specific portfolio/market developments or regulatory changes. Materiality of a model is determined based on quantitative and qualitative criteria. Quantitative criteria relate to, amongst others, a percentage of Market Value of Liabilities/Assets, or Solvency Capital Requirement. Qualitative criteria cover model complexity, strategic importance and other factors. Models with a higher materiality are validated more frequently. Depending on materiality of the model, as well as the severity of findings resulting from a model validation, models receive a validation opinion. Models with severe findings require remediation actions by management, such as further adjustments of the model. Compliance Function and Legal Function The General Counsel steers an independent compliance and an independent legal organisation which supports the first line in their decision-making with sufficient countervailing power to prevent excessive risk taking. The General Counsel is responsible for the organisation of Group Legal at Head Office level. At the business unit level, management establishes and maintains a Legal Function and appoints a Head of Legal. The Head of Legal in principle reports hierarchically to the business unit CEO. The Heads of Legal have a functional reporting line to the General Counsel. The General Counsel must ensure that both the Management Board, including the members of the Executive Board, and the Supervisory Board are at all times informed of and understand the material legal and compliance risks to which NN Group is exposed. To effectively manage business conduct risk, NN Group has an independent Compliance Function headed by a Chief Compliance Officer who is the Key Function Holder for Compliance and who has a direct reporting line to the General Counsel and member of the Management Board. The Compliance Function is positioned independently from the business it supervises. This independent position is, amongst others, warranted by independent reporting, unrestricted access to senior management as well as structural, periodic meetings of the Chief Compliance Officer with the NN Group CEO and the chair of the Risk Committee of the Supervisory Board. NN Group is committed to upholding its reputation and integrity through compliance with applicable laws, regulations, and ethical standards in each of the markets in which the company operates. All employees are expected to adhere to these laws, regulations and ethical standards, and management is responsible for ensuring such compliance. Compliance is therefore an essential ingredient of good corporate governance. The purpose of the NN Group Compliance Function Charter is to help businesses effectively manage their compliance risks. This document is available for download on the NN Group corporate website. Within NN Group\u2019s broader risk framework, the purpose of the Compliance Function is to: \u2022 Understand and advocate rules, regulations, and laws for the effective management of risks in scope of the Compliance Function. \u2022 Proactively work with and advise the business to manage business conduct and product suitability risk throughout our products\u2019 life cycle and our business\u2019 activities to meet stakeholder expectations. \u2022 Develop and enhance tools to strengthen the three lines of defence to detect, communicate, manage and to report on business conduct risks. \u2022 Support NN Group\u2019s strategy by establishing clear roles and responsibilities to help embed good compliance practices throughout the business by using a risk-based approach to align business outcomes with NN Group\u2019s risk appetite. \u2022 Deepen the culture of compliance by partnering with the business to increase the culture of trust, accountability, transparency, and integrity in evaluating, managing and in reporting on business conduct risk. \u2022 Developing and maintaining a framework to support the first line in adhering to material laws and regulations in scope of the function as described in the Compliance Function Charter, which is aligned with NN Group\u2019s Risk & Control framework. \u2022 Monitor that management and employees act in accordance with NN Group\u2019s policies and standards as well as relevant material laws and regulation, in scope of the function. At the business unit level, management establishes and maintains a Compliance Function and appoints a Head of Compliance. The Head of Compliance in principle reports hierarchically to the business unit CEO. The Heads of Compliance have a functional reporting line to the Chief Compliance Officer Actuarial Function The Actuarial Function reports hierarchically to the NN Group CRO and has in addition a functional reporting line to the NN Group CFO. This is to ensure consistency with related Finance processes. The primary objective of the Actuarial Function is to ensure that technical provisions (under Solvency II and IFRS) are reliable and adequate, and as such that NN Group is able to meet its obligations towards policyholders and to protect NN Group from loss or reputational damage. The Actuarial Function operates within the context of NN Group\u2019s broader Risk Management System. Within this system, the role of the Actuarial Function is to: \u2022 Understand and advocate the rules, regulations and laws for effective management of the calculation process of technical provisions, covering elements such as data quality, assumption setting, models and methods, as well as underwriting and reinsurance arrangements; proactively advise the business to manage the risk of unreliable and inadequate technical provisions. \u2022 Inform management and the Supervisory Board on its opinion on the adequacy and the reliability of the technical provisions, the adequacy of reinsurance arrangements and the underwriting policy at least on an annual basis through the Actuarial Function Report. \u2022 Develop and enhance tools to strengthen the three lines of defence to detect, communicate, manage and to report on risks related to unreliable or inadequate technical provisions. \u2022 Support NN Group\u2019s strategy by establishing clear roles and responsibilities to help embed good (actuarial) practices throughout the organisation by using a risk-based approach aligned with NN Group\u2019s risk appetite. \u2022 Strengthen the culture of professional risk management by challenging management and experts to increase the culture of trust, accountability, transparency, and integrity in evaluating, managing of and reporting on risks to unreliable or inadequate technical provisions. \u2022 Provide a second line opinion when first line business initiatives can materially impact the risk profile of a business unit or NN Group and/or provide additional assurance for presented key first line risk- related information. Third line of defence: Corporate Audit Services Corporate Audit Services NN Group (CAS), the internal audit department within NN Group, is an independent assurance function and its responsibilities are established by the Executive Board, pre-discussed with the Audit Committee of the Supervisory Board and approved by the Supervisory Board. CAS provides independent assurance on the effectiveness of NN Group\u2019s business and support processes, including governance, quality of risk management and quality of internal controls. CAS keeps in close contact with home and local supervisors and regulators as well as with the external auditor via regular meetings in which current (audit) issues are discussed, as well as internal and external developments and their impact on NN Group and CAS. CAS also provides information like risk assessments and relevant (audit) reports. The General Manager and staff of CAS are authorised to: \u2022 Obtain without delay, from General Managers within NN Group, information on any significant incident concerning NN Group\u2019s operations including but not limited to security, reputation and/or compliance with regulations and procedures. \u2022 Obtain without delay, from responsible managers within NN Group, a copy of all letters and reports received from external review agencies (e.g. external auditor, supervisors, regulators and other agencies providing assurance-related services). \u2022 Have free, full, unrestricted and unfettered access, at any time deemed appropriate, to all NN Group departments, offices, activities, books, accounts, records, files, information. CAS must respect the confidentiality of (personal) information acquired. \u2022 Require all NN Group staff and business management to supply such information and explanations, as may be needed for the performance of assessments, within a reasonable period of time. \u2022 Allocate resources, set frequencies, select subjects, determine scope of work and apply appropriate techniques required to accomplish the CAS\u2019s objectives. \u2022 Obtain the necessary assistance of personnel in various departments/offices of NN Group where CAS performs audits, as well as other specialised/professional services where considered necessary from within or outside NN Group. CAS should exercise its authority with the minimum possible disruption to the day-to-day activities of the area being assessed. \u2022 In compliance with the Code, the Executive Board is responsible for the role and functioning of CAS, supervised by the Supervisory Board, supported by the Audit Committee of the Supervisory Board. The General Manager of CAS is accountable to the NN Group CEO and functionally (independent) to the chair of the Audit Committee of the Supervisory Board. On a day-to-day basis the General Manager of CAS reports to the NN Group CEO. System of governance evaluation in 2022 In 2022, various elements of NN Group\u2019s System of Governance have been reviewed and \u2013 where appropriate \u2013 improvements have been implemented. In addition, a System of Governance review, as required under Solvency II, has been initiated by the Management Board and will be completed in 2023. The review is based, amongst others, on self-assessments by each Key Function on its compliance with requirements and on its operational effectiveness, as well as on a self-assessment by each business unit on the effectiveness of their local System of Risk Management and Internal Control (challenged by the Risk Management and Compliance Key Functions). Corporate Governance Statement This chapter, including parts of this Annual Report incorporated by reference, together with the separate publication \u2018Application of the Dutch Corporate Governance Code by NN Group\u2019, dated 8 March 2023, which is available on the NN Group website, also serves as the corporate governance statement referred to in section 2a of the Decree contents of the management report (Besluit inhoud bestuursverslag) 1 These disclosures are an integral part of the Consolidated Annual Accounts, and are part of the disclosures to which the audit opinion relates. This includes pages 118-121.1 Accounting policies Basis of preparation NN Group N.V. (NN Group) is a public limited liability company (naamloze vennootschap) incorporated under Dutch law. NN Group has its official seat in Amsterdam, the Netherlands and its office address in The Hague, the Netherlands. NN Group is recorded in the Commercial Register no. 52387534. The principal activities of NN Group are described in the section \u2018About NN\u2019. Amounts in the annual accounts are in millions of euros, unless stated otherwise. NN Group prepares its Consolidated annual accounts in accordance with International Financial Reporting Standards as endorsed by the European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code. In the Consolidated annual accounts, the term IFRS-EU is used to refer to these standards, including the decisions NN Group made with regard to the options available under IFRS-EU. IFRS-EU provides a number of options in accounting policies. The key areas, in which IFRS-EU allows accounting policy choices and the related NN Group accounting policy, are summarised as follows: \u2022 Under IFRS 4, an insurer may continue to apply its existing pre-IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts. NN Group operates in different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group for example applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance liabilities. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policy under IFRS-EU. \u2022 NN Group\u2019s accounting policy for real estate investments is fair value, with changes in the fair value reflected immediately in the Consolidated profit and loss account. \u2022 NN Group\u2019s accounting policy for property in own use is fair value, with changes in the fair value reflected, after tax, in the \u2018Revaluation reserve\u2019 in \u2018Other comprehensive income\u2019 (equity). A net negative revaluation on individual properties is reflected immediately in the Consolidated profit and loss account. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. NN Group\u2019s accounting policies under IFRS-EU and its decision on the options available are included below. Except for the options included above, the principles are IFRS-EU and do not include other significant accounting policy choices made by NN Group. The accounting policies that are most significant to NN Group are included in the section \u2018Critical accounting policies and significant judgements\u2019. The preparation of the Consolidated annual accounts requires the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates . Upcoming changes in IFRS-EU Upcoming changes in IFRS-EU that are the most relevant for NN Group relate to IFRS 9 \u2018Financial Instruments\u2019 and IFRS 17 \u2018Insurance Contracts\u2019. IFRS 9 \u2018Financial Instruments\u2019 IFRS 9 \u2018Financial Instruments\u2019 was issued in 2014. IFRS 9 replaces most of IAS 39 \u2018Financial Instruments: Recognition and Measurement\u2019 and includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. Main features of IFRS 9 The classification and measurement of financial assets under IFRS 9 depends on NN Group\u2019s business model and the instrument\u2019s contractual cash flow characteristics. This results in financial assets being recognised at amortised cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 is similar to IAS 39, although changes in classification occur. For equity securities accounted for at fair value through other comprehensive income, realised gains and losses are no longer recognised in the profit and loss account but reclassified within equity and impairments are also no longer recognised. The classification and measurement of financial liabilities remains unchanged. The recognition and measurement of impairment under IFRS 9 is intended to be more forward-looking than under IAS 39. The impairment requirements of IFRS 9 apply to all financial assets measured at amortised cost and at fair value through other comprehensive income, except for equity securities. Initially, a provision is required for expected credit losses resulting from default events that are expected within the next twelve months. In the event of a significant increase in credit risk, a provision is required for expected credit losses resulting from all possible default events over the expected life of the financial assets .
1 Accounting policies continued
The hedge accounting requirements of IFRS 9 aim to simplify hedge accounting. IFRS 9 includes the option to continue applying IAS 39 for
hedge accounting.
Effective date of IFRS 9 and comparative information
IFRS 9 is effective as of 2018. However, for entities with activities that are predominantly connected with insurance, amongst which NN Group
qualifies, there is a temporary exemption to align the effective date with that of IFRS 17, i.e. 1 January 2023. NN Group applies this temporary
exemption. Usage of this exemption requires certain additional disclosures on whether financial assets that remain accounted for under
IAS 39 meet the definition of \u2018solely payments of principal and interest on the principal amount outstanding\u2019 in IFRS 9 as well as additional
information on the credit rating of such assets and whether such assets are \u2018low credit risk\u2019. In this context, \u2018low credit risk\u2019 is equivalent to
\u2018investment grade\u2019 as defined by ratings agencies (generally a rating of BBB- or better). These additional disclosures are included in Note 36
\u2018Fair value of financial assets and liabilities\u2019 and in Note 52 \u2018Risk management\u2019 in the 2022 Annual Accounts of NN Group. Certain subsidiaries
within NN Group (mainly NN Bank) do not qualify for the temporary exemption. Therefore, the financial information of these entities is
based on IFRS 9 in the statutory IFRS reporting of these entities, but not in the consolidated financial reporting of NN Group. The impact of
applying IFRS 9 for these entities is not significant to NN Group. NN Group does not have associates or joint ventures for which IFRS 9 has a
significant impact. IFRS 9 includes an option to restate the comparative information for the financial year 2022, except for assets that have
been disposed of in 2022. IFRS 17 includes an option to apply a \u2018classification overlay approach\u2019 for assets of entities of which the activities
are predominantly connected with insurance, amongst which NN Group qualifies. Based on this overlay approach in IFRS 17, also the
comparative information for assets that are or will be disposed of in 2022 may be restated. NN Group intends to apply both options, which
is expected to result in comparative information for 2022 as if IFRS 9 had always been applied. As a result, the transition date for IFRS 9 for
NN Group is 1 January 2022.
NN Group\u2019s implementation of IFRS 9
For classification and measurement, NN Group intends to align the accounting for financial assets under IFRS 9 as much as possible to
the accounting for insurance liabilities under IFRS 17. As a result, NN Group accounts for financial assets of the insurance operations at fair
value through other comprehensive income (equity) where allowed under IFRS 9. This mainly impacts the accounting for (mortgage) loans
in the insurance operations (currently accounted for at amortised cost). Accounting for (mortgage) loans in the banking operations remains
unchanged at amortised cost. Measurement of investments in equity securities will remain unchanged at fair value through OCI, but realised
gains and losses and impairments will no longer be recognised in the profit and loss account.
For hedge accounting, NN Group continues applying the hedge accounting requirements in IAS 39.
IFRS 17 \u2018Insurance Contracts\u2019
IFRS 17 \u2018Insurance Contracts\u2019 was issued in 2017 and revised in 2020. IFRS 17 covers the recognition and measurement, presentation and
disclosure of insurance contracts and replaces the current IFRS 4. IFRS 17 fundamentally changes the accounting for insurance liabilities and
deferred acquisition costs (DAC) for all insurance companies, including NN Group and its subsidiaries. IFRS 17 is endorsed in the EU and is
effective as of 1 January 2023.
Main features of IFRS 17
The main features of IFRS 17 are:
\u2022 Measurement of the insurance liabilities in the balance sheet at current fulfilment value, being the sum of the present value of estimated
future cash flows and a risk adjustment.
\u2022 Remeasurement of the current fulfilment value every reporting period using current assumptions and discount rates.
\u2022 A Contractual Service Margin (CSM ) is recognised in the balance sheet, which is equal to the unearned expected profit in a group of
insurance contracts at issue date and which is subsequently recognised in the profit and loss account over the remaining duration of the
group of contracts. Losses on onerous contracts are recognised immediately in the profit and loss account.
\u2022 Insurance contracts are aggregated per CSM group under IFRS 17. A CSM group consists of contracts within the same portfolio, the same
profitability bucket and issued in the same annual period. Contracts are in the same portfolio if these are managed together and have similar
risks. NN Group uses three profitability buckets: onerous contracts, contracts that have no possibility of becoming onerous and remaining
contracts. Contract issued in the same annual period are referred to as an annual cohort.
\u2022 Certain changes in the insurance liability are adjusted against the CSM and thereby recognised in the profit and loss account over the
remaining duration of the group of contracts .
1 Accounting policies continued
\u2022 The effect of changes in discount rates is, depending on the choice made per portfolio of insurance contracts, recognised either in the profit
and loss account or in Other Comprehensive Income (OCI) in equity. When recognised in OCI, the effect of these changes is recognised in
the profit and loss account over the duration of the portfolio.
\u2022 The presentation of the balance sheet, profit and loss account, other primary statements and the disclosures in the notes will change
fundamentally. The profit and loss account will have a margin-type of presentation (with insurance result, investment result and other result).
Premium income will no longer be used to determine revenue under the General Measurement Model and the Variable Fee Approach.
\u2022 IFRS 17 is implemented retrospectively with amendment of comparative figures.
Key measurement differences between IFRS 17 and NN Group\u2019s current IFRS accounting
The main differences for measuring the insurance liability between the requirements in IFRS 17 and the currently applicable IFRS 4 relate to
the following:
\u2022 IFRS 17 requires insurance liabilities to be measured using current best estimate assumptions and current market data for all actuarial and
financial assumptions. IFRS 4 allows the use of locked-in assumptions that are set at issue of the policies, in combination with a reserve
adequacy test at current assumptions.
\u2022 The insurance liability under IFRS 17 includes an explicit risk adjustment for non-financial risk and an explicit contractual service margin,
representing the unamortised part of the updated profit margin. These elements are not explicitly recognised under IFRS 4.
\u2022 IFRS 17 allows certain changes in assumptions to be absorbed in the contractual service margin or in other comprehensive income in equity.
Under IFRS 4, changes in assumptions are, to the extent relevant, recognised in the profit and loss account.
\u2022 In applying IFRS 4, directly attributable acquisition costs (Deferred Acquisition Costs, DAC) and the Value Of Business Acquired (VOBA)
are recognised as assets which are amortised in the profit and loss account over time. In applying IFRS 17, DAC and VOBA are (implicitly)
accounted for as part of the insurance liability.
\u2022 Deferred interest credited to policyholders is no longer separately accounted for but is (implicitly) part of the insurance liability under IFRS 17.
Key measurement differences between IFRS 17 and Solvency II
Both IFRS 17 and Solvency II require insurance liabilities to be measured on the basis of the net present value of the best estimate of future
expected cash flows and an explicit allowance for non-financial risk. There are however significant differences in the following areas:
\u2022 In Solvency II, the initial margin in the premium over the insurance liability is recognised immediately in Own Funds. In IFRS 17, such initial
margin (when positive) is recognised as contractual service margin (CSM) in the insurance liability and amortised and adjusted over time.
\u2022 In Solvency II the discount rate is prescribed by the prudential regulator, whereas the discount rate under IFRS 17 is set by NN Group taking
into account the specific characteristics of NN Group\u2019s portfolios.
\u2022 In Solvency II the cost of capital rate and the level of diversification in determining the risk adjustment is prescribed by the regulator, whereas
under IFRS 17 these are set by NN Group taking into account the specific characteristics of NN Group\u2019s portfolios.
\u2022 There are differences in the best estimate of future cash flows, for example, caused by different requirements for contract boundaries in
Solvency II and IFRS 17.
NN Group\u2019s implementation of IFRS 17
IFRS 17 allows certain accounting policy choices and requires judgement in setting certain assumptions. The most important choices and
assumptions that are relevant to NN Group are set out below.
\u2022 NN Group applies each of the three accounting models in IFRS 17. The General Measurement Model (GMM) is the default model and is
applied to traditional life insurance portfolios. The Variable Fee Approach (VFA) is applied to most unit-linked portfolios, except for unit linked
acquired in a business combination for which the guarantees were in the money at the acquisition date. The Premium Allocation Approach
(PAA) is applied to the P&C contracts in Netherlands Non-life with a coverage period of 12 months or less.
\u2022 NN Group determines per portfolio of insurance contracts whether changes in financial assumptions are reflected in other comprehensive
income (the \u2018OCI option\u2019) or directly in the profit and loss account. For contracts accounted for under the GMM and PAA, in principle the
OCI option is used, unless accounting for the impact of changes in financial assumptions directly in the profit and loss account resolves
accounting mismatches or is otherwise preferred. For contracts accounted for under the VFA, the OCI option is, in principle, not applied.
\u2022 For the level of aggregation, under the EU-endorsed version of IFRS 17 (IFRS-EU), certain specific insurance contracts may be aggregated
on the level of a profitability group within a portfolio and do not need to be further disaggregated by the year in which these contracts were
issued (\u2018annual cohorts\u2019). NN Group does not currently apply this IFRS-EU exemption.
\u2022 Estimates of future cash flows reflect mortality rate assumptions that are derived from recent credible national mortality tables published
by relevant actuarial or statistical bodies; where needed, these tables are adjusted so as to reflect NN Group\u2019s experience of its own
portfolio. Lapse rates are set by major product line based on NN Group\u2019s own experience. Estimates of future cash flows include NN Group\u2019s
projection of future expenses to the extent that these relate to the fulfilment of contracts.
\u2022 Discount rates to discount the expected future fulfilment cash flows are determined using a liquid risk free curve to which an illiquidity
premium is added. For the Euro currency, the most prominent currency within the group, the risk-free curve is based on the swap rate and
includes a last liquid point (LLP) of 30 years and a long-term forward rate (LTFR) of 3.35%. The illiquidity premium is derived from NN Group\u2019s
own asset portfolio, where the asset yield is adjusted for expected and unexpected credit losses.
1 Accounting policies continued \u2022 The risk adjustment for non-financial risk is determined using the Cost of Capital methodology based on the Solvency II internal model or standard formula, depending on the entity within the Group. The risk adjustment reflects diversification with market risks within the entity and diversification with other entities within NN Group (\u2018Group diversification\u2019). The Cost of Capital rate represents NN Group\u2019s view on the compensation required for bearing risk; the rate used at 1 January 2022 in the fulfilment value of insurance liabilities was 4%. \u2022 NN Group uses each of the transition approaches in IFRS 17. In the modified retrospective transition approach, NN Group uses mainly the modifications for historical cash flows and the historical release of the risk adjustment. The modified retrospective approach is applied for certain portfolios in the Insurance Europe segment. In the fair value transition approach, the contractual service margin is determined by reference to the fair value of insurance liabilities. Fair value is determined similar to fulfilment value, except that no group diversification is reflected in the risk adjustment, the cost of capital rate in the risk adjustment is set at 6% and expenses also include non-directly attributable expenses. The fair value transition approach is applied to most portfolios in Netherlands Life. Impact of IFRS 9 and IFRS 17 on NN Group NN Group implements IFRS 17 together with IFRS 9. The implementation of IFRS 9 and IFRS 17 will result in significant changes to NN Group\u2019s accounting policies and may have a significant impact on total equity, net result, presentation and disclosures. Total equity under IFRS 9 and IFRS 17 was significantly lower at the 1 January 2022 transition date as a result of the measurement of insurance liabilities at current assumptions (including a current discount rate). The table below provides a reconciliation between total equity at 31 December 2021 in the current balance sheet to total equity in the preliminary balance sheet at 1 January 2022 (the \u2018Transition date\u2019) after implementation of IFRS 9 and IFRS 17. The impact is preliminary and reflects the status at the date of these Annual Accounts. The final impact may deviate from the below and will be included in the 2023 Annual Accounts. Impact of IFRS 9 and IFRS 17 on Total equity 31 December 2021/1 January 2022 Share capital and premium Revaluation reserves Other reserves Minority interest Undated subordinated notes Total equity Total equity as reported at 31 December 2021 12,613 14,422 5,853 266 1,764 34,918 Impact (net of tax) of IFRS 9: - Loans to Fair value through OCI 2,607 38 2,645 - Available-for-sale to Fair value through profit or loss -680 680 - Impairments -511 489 -22 Impact (net of tax) of IFRS 17: - Remeasurement of (re)insurance liabilities -4,658 -9,229 -13,887 Impact (net of tax) on minority interest -22 -22 Preliminary Total equity at 1 January 2022 12,613 11,180 -2,169 244 1,764 23,632 The decrease in equity at the transition date mainly reflects the remeasurement of insurance liabilities to current discount rates and other current assumptions. Under the IFRS accounting policies applied by NN Group to date, only the revaluation of assets is recognised in equity, whilst the offsetting effect of revaluation on insurance liabilities is not recognised. Under IFRS 9 and IFRS 17 the revaluation on both assets and liabilities will be recognised in equity. Shareholders\u2019 equity under IFRS 9 and IFRS 17 at the 1 January 2022 transition date was significantly lower as a result of the measurement of insurance liabilities at current assumptions. However, with the increase of market interest rates during 2022, the reported shareholders\u2019 equity under current IFRS decreased from EUR 32,888 million at 31 December 2021 to EUR 16,005 million at 31 December 2022, and, therefore, the difference with shareholders\u2019 equity under IFRS 9 and IFRS 17 largely reversed in 2022. The table below provides a reconciliation between the carrying amounts at 31 December 2021 in the current balance sheet to the amounts in the preliminary balance sheet at 1 January 2022 after implementation of IFRS 9 and IFRS 17
1 Accounting policies continued
Further details on Insurance contracts under IFRS 17 are presented below:
Insurance contract by component
Insurance contracts (IFRS 17) by component 1 January 2022
Premium Allocation Approach (PAA) 2,872
General Measurement Model and Variable Fee Approach:
- Estimates of the present value of future cash flows 170,499
- Risk Adjustment 2,857
- Contractual Service Margin (CSM)
- determined retrospectively 1,098
- determined under the modified retrospective approach 1,194
- determined under the fair value approach 3,935
Total Insurance contracts 182,455
Insurance contracts, presented as assets 125
Insurance contracts, presented as liabilities 182,580
Total Insurance contracts 182,455
Approximately 90% of the Total insurance contracts was determined using the fair value transition approach.
NN Group intends to continue using Operating result as an Alternative Performance Measure. The definition of Operating result will be
amended to reflect the impact of IFRS 9 and IFRS 17. NN Group also intends to continue using the financial leverage ratio. The current
leverage ratio is based on equity excluding the revaluation on (only) assets; NN Group also intends to amend the leverage ratio by including
net revaluations and CSM.
The implementation of IFRS 9 and IFRS 17 will not impact NN Group\u2019s Own Funds and the Solvency Capital Requirement under Solvency II,
nor its Operating Capital Generation (OCG).
Changes in presentation
The presentation of, and certain terms used in, the Consolidated balance sheet, Consolidated profit and loss account, Consolidated
statement of cash flows, Consolidated statement of changes in equity and the notes was changed to provide additional and more relevant
information or (for changes in comparative information) to better align with the current period presentation. The impact of these changes is
explained in the respective notes when significant.
Critical accounting policies and significant judgements
NN Group has identified the accounting policies that are most critical to its business operations and to the understanding of its results.
These critical accounting policies are those which involve the most complex or subjective judgements and assumptions and relate to
insurance contracts, acquisition accounting, deferred acquisition costs, the determination of the fair value of real estate and financial
assets and liabilities and impairments. In each case, the determination of these items is fundamental to the financial condition and results
of operations and requires management to make complex judgements based on information and financial data that may change in future
periods. As a result, determinations regarding these items necessarily involve the use of assumptions and subjective judgements as to future
events and are subject to change, as the use of different assumptions or data could produce significantly different results. All valuation
techniques used are subject to internal review and approval. For further details on the application of these accounting policies, reference is
made to the applicable notes to the Consolidated annual accounts and the information below.
Reference is made to Note 52 \u2018Risk management\u2019 for a sensitivity analysis of certain assumptions as mentioned below .
1 Accounting policies continued Acquisition accounting, goodwill and other intangible assets NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors, including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known. Insurance liabilities and deferred acquisition costs (DAC) The determination of insurance liabilities and DAC is an inherently uncertain process, involving assumptions about factors such as social, economic and demographic trends, inflation, investment returns, policyholder behaviour, court decisions, changes in laws and other factors and, in the life insurance business, assumptions concerning mortality and morbidity trends. Specifically, assumptions that could have a significant impact on financial results include interest rates, mortality, morbidity, property and casualty claims, investment yields on equity and real estate and foreign currency exchange rates. Insurance liabilities also include the impact of minimum guarantees which are contained within certain products. This impact is dependent upon the difference between the potential minimum benefits payable and the total account balance, expected mortality and surrender rates. The determination of the potential minimum benefits payable also involves the use of assumptions about factors such as inflation, investment returns, policyholder behaviour, mortality and morbidity trends and other factors. The use of different assumptions could have a significant effect on insurance liabilities, DAC and underwriting expenditure. Changes in assumptions may lead to changes in insurance liabilities over time. The adequacy of the insurance liabilities, net of DAC, is evaluated each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability with current best estimate actuarial assumptions. The use of different assumptions in this test could lead to a different outcome. Fair value of real estate Real estate investments are reported at fair value. The fair value of real estate investments is based on regular appraisals by external, qualified valuers. The fair value is established using valuation methods such as comparable market transactions, capitalisation of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that appropriately reflect the risk characteristics of real estate investments 1 Accounting policies continued Reference is made to Note 37 \u2018Fair value of non-financial assets\u2019 for more disclosure on fair value of real estate investments at the balance sheet date. The use of different assumptions and techniques could produce significantly different valuations. Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date. Impairments All debt and equity securities and loans (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred. Evaluation for impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may be unlikely to pay amounts when due. Equity securities are impaired when management believes that, based on a significant or prolonged decline of the fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities. Generally, 25% and six months are used as triggers. Upon impairment of available-for-sale debt and equity securities, the full difference between the (acquisition) cost and fair value is removed from equity and recognised in net result. Impairments on debt securities may be reversed if there is a decrease in the amount of the impairment which can be objectively related to an observable event after the impairment. Impairments on equity securities cannot be reversed. The identification of impairments is an inherently uncertain process involving various assumptions and factors, including financial condition of the counterparty, expected future cash flows, statistical loss data, discount rates, observable market prices, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known. General accounting policies Consolidation NN Group comprises NN Group N.V. and all its subsidiaries. The Consolidated annual accounts of NN Group comprise the accounts of NN Group N.V. and all entities over which NN Group has control. NN Group has control over an entity when NN Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assessment of control is based on the substance of the relationship between NN Group and the entity and considers existing and potential voting rights that are substantive. For a right to be substantive, the holder must have the practical ability to exercise that right. For interests in investment entities, the existence of control is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the \u2018power\u2019) and assume all risks and benefits of these investments (i.e. the policyholder assumes the variable returns 1 Accounting policies continued The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the date control is obtained until the date control is lost. Minority interests are initially measured at their proportionate share of the subsidiaries\u2019 identifiable net assets at the date of acquisition. On disposal, the difference between the sales proceeds, net of directly attributable transaction costs, and the net assets is included in net result. A subsidiary which NN Group has agreed to sell but is still legally owned by NN Group may still be controlled by NN Group at the balance sheet date and, therefore, still be included in the consolidation. Such a subsidiary may be presented as held for sale if certain conditions are met. All intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Where necessary, the accounting policies used by subsidiaries are changed to ensure consistency with NN Group policies. In general, the reporting dates of subsidiaries are the same as the reporting date of NN Group N.V. A list of principal subsidiaries is included in Note 34 \u2018Principal subsidiaries and geographical information\u2019 . Foreign currency translation Functional and presentation currency Items included in the annual accounts of each NN Group entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is NN Group\u2019s functional and presentation currency . Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. Exchange rate differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except when deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges. Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported as part of the \u2018Fair value gain or loss\u2019. Exchange rate differences on non-monetary items measured at fair value through other comprehensive income (equity) are included in the \u2018Revaluation reserve\u2019 in equity. Exchange rate differences in the profit and loss account are generally included in \u2018Foreign currency results and net trading income\u2019. Exchange rate differences relating to the disposal of available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in \u2018Investment income\u2019. As mentioned below in Group companies, on disposal of group companies, any exchange rate difference deferred in equity is recognised in the profit and loss account in \u2018Result on disposals of group companies\u2019. Group companies The results and financial positions of all group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: \u2022 Assets and liabilities included in each balance sheet are translated at the closing rate at the date of that balance sheet \u2022 Income and expenses included in each profit and loss account are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) \u2022 All resulting exchange rate differences are recognised in a separate component of equity in \u2018Currency translation reserve\u2019 On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a foreign operation and of borrowings and other instruments designated as hedges of such investments are taken to shareholders\u2019 equity. When a foreign operation is sold the corresponding exchange rate differences are recognised in the profit and loss account as part of the gain or loss on sale. Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet date. Recognition and derecognition of financial instruments Financial assets and liabilities are generally (de)recognised at trade date, which is the date on which NN Group commits to purchase or sell the asset. Loans and receivables are recognised at settlement date, which is the date on which NN Group receives or delivers the asset 1 Accounting policies continued Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where NN Group has transferred substantially all risks and rewards of ownership. If NN Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset. Realised gains and losses on investments are determined as the difference between the sales proceeds and (amortised) cost. For equity securities, the cost is determined using a weighted average per portfolio. For debt securities, the cost is determined by specific identification (generally FIFO) . Fair value of financial assets and liabilities The fair values of financial instruments are based on unadjusted quoted market prices at the balance sheet date where available. The quoted market price used for financial assets held by NN Group is the current bid price; the quoted market price used for financial liabilities is the current offer price. The fair values of financial instruments that are not traded in an active market are determined using valuation techniques, based on market conditions existing at each balance sheet date. An active market for the financial instrument is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Assessing whether a market is active requires judgement, considering factors specific to the financial instrument. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for the basis of determination of the fair value of financial instruments. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when NN Group has a current legally enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability at the same time. Impairments of financial assets NN Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but before the balance sheet date, (a \u2018loss event\u2019) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the specific case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities; generally, 25% and six months are used as triggers. In certain circumstances NN Group may grant borrowers postponement and/or reduction of loan principal and/or interest payments for a temporary period of time to maximise collection opportunities and, if possible, avoid default, foreclosure or repossession. When such postponement and/or reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to as \u2018forbearance\u2019. In general, forbearance represents an impairment trigger under IFRS-EU. In such cases, the net present value of the postponement and/or reduction of loan principal and/or interest payments is taken into account in the determination of the appropriate level of loan loss provisioning as described below. If the forbearance results in a substantial modification of the terms of the loan, the original loan is derecognised and a new loan is recognised at its fair value at the modification date. In determining the impairment loss, expected future cash flows are estimated on the basis of the contractual cash flows of the assets in the portfolio. NN Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and then individually or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss on an asset carried at amortised cost has occurred, the amount of the loss is measured as the difference between the asset\u2019s carrying value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset\u2019s original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account (loan loss provisions) and the amount of the loss is recognised in the profit and loss account in \u2018Investment income\u2019. If the asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. When a loan is uncollectable, it is written off against the related loan loss provision. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined 1 Accounting policies continued If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor\u2019s credit rating), the previously recognised impairment loss is reversed by adjusting the provision. The amount of the reversal is recognised in the profit and loss account. If there is objective evidence that an impairment loss on available-for-sale debt and equity investments has occurred, the cumulative loss \u2013 measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in net result \u2013 is removed from equity and recognised in the profit and loss account. Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent period, the impairment loss on a loan or a debt instrument classified as available-for-sale reverses, which can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the profit and loss account. Maximum credit risk exposure The maximum credit risk exposure for items on the balance sheet is generally the carrying value for the relevant financial assets. For the off- balance sheet items, the maximum credit exposure is the maximum amount that could be required to be paid. Reference is made to Note 44 \u2018Contingent liabilities and commitments\u2019 for these off-balance sheet items. Collateral received is not taken into account when determining the maximum credit risk exposure. The manner in which NN Group manages credit risk and determines credit risk exposures is explained in Note 52 \u2018Risk management\u2019. Leases The leases entered into by NN Group as a lessee are primarily operating leases. At inception of a contract, NN Group assesses whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The net present value of operating lease commitments is recognised on the balance sheet as a \u2018right of use asset\u2019 under Property and equipment or Real estate investments and a lease liability is recognised under Other liabilities. NN Group does not recognise a right of use asset and a lease liability for short-term leases that have a lease term of 12 months or less and for leases of low value assets. The lease payments associated with these leases are recognised as an expense. Taxation Income tax on the result for the year comprises current and deferred tax. Income tax is generally recognised in the profit and loss account, but is recognised directly in equity if the tax relates to items that are recognised directly in equity. Current tax consists of the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Deferred tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the balance sheet. Deferred tax is determined using tax rates (and laws) applicable in the jurisdictions in which NN Group is liable to taxation, that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses carried forward where it is probable that future taxable profits will be available against which the temporary differences can be used. Unrecognised deferred tax assets are reassessed periodically and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by NN Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is probable that future taxable profits will be available against which these losses can be used. Offsetting deferred tax assets with deferred tax liabilities is allowed as long as there is a legally enforceable right to offset current tax assets against current tax liabilities together with the intention to do so and the deferred taxes relate to income taxes levied by the same taxation authority on the same entity or on the same fiscal unity 1 Accounting policies continued The difference between the net cash flow in accordance with the statement of cash flows and the change in \u2018Cash and cash equivalents\u2019 in the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash flow and the balance sheet change in \u2018Cash and cash equivalents\u2019. Cash flows arising from the issue of mortgage loans held in the banking operations are recognised under Net cash flows from operating activities, whereas cash flows related to mortgage loans held as investment in the insurance operations are recognised under Net cash flow from investing activities. Cash flows on collateral related to derivatives (presented in the balance sheet in Other assets and Other liabilities) is presented in the Consolidated statement of cash flows as part of Net cash flow from operating activities, consistent with the cash flows of the related derivatives. Accounting policies for specific items Financial assets and liabilities at fair value through profit or loss (Notes 4 and 20) A financial asset or liability is classified as at fair value through profit or loss if it is acquired principally for the purpose of selling in the short- term or if designated by management as such. Management will make this designation only if this eliminates a measurement inconsistency or if the related assets and liabilities are managed on a fair value basis. Transaction costs on initial recognition are expensed as incurred. Interest income from debt securities and loans and receivables classified as at fair value through profit or loss is recognised in the profit and loss account using the effective interest method. Dividend income from equity instruments classified as at fair value through profit or loss is recognised in the profit and loss account when the dividend has been declared. Investments for risk of policyholders Investments for risk of policyholders are investments against insurance liabilities for which all changes in the fair value of invested assets are offset by similar changes in insurance liabilities. Investments for risk of policyholders are recognised at fair value; changes in fair value are recognised in the profit and loss account. Derivatives and hedge accounting Derivatives are recognised at fair value. Derivatives are presented as assets when the fair value is positive and as liabilities when the fair value is negative. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. NN Group designates certain derivatives as hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for derivatives designated in this way provided certain criteria are met. At the inception of the hedge transaction NN Group documents the relationship between hedging instruments and hedged items, its risk management objectives, together with the methods selected to assess hedge effectiveness. In addition, NN Group documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of the hedged items. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging deposits and under-hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income (equity) in \u2018Cash flow hedge reserve\u2019. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recycled to the profit and loss account in the periods in which the hedged item affects Net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously reported in equity is transferred immediately to the profit and loss account 1 Accounting policies continued Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the profit and loss account over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non- interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the profit and loss account only when the hedged item is derecognised. Net investment hedges Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income (equity) and the gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Gains and losses in equity are included in the profit and loss account when the foreign operation is disposed. Non-trading derivatives that do not qualify for hedge accounting Derivatives that are used by NN Group as part of its risk management strategies, that do not qualify for hedge accounting under NN Group\u2019s accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to \u2018Valuation results on non-trading derivatives\u2019 in the profit and loss account. Certain derivatives embedded in other contracts are measured as separate derivatives if: \u2022 Their economic characteristics and risks are not closely related to those of the host contract \u2022 The host contract is not carried at fair value through profit or loss \u2022 A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative (unless the embedded derivative meets the definition of an insurance contract) These embedded derivatives are measured at fair value with changes in fair value recognised in the profit and loss account. An assessment is carried out when NN Group first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of the contract that significantly modifies the expected cash flows. Available-for-sale investments (Note 5) Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and redemption value is amortised. Interest income is recognised using the effective interest method. Available-for-sale financial assets are subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019. Dividend income from equity instruments classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019 when the dividend has been declared. Unrealised gains and losses arising from changes in the fair value are recognised in other comprehensive income (equity). On disposal, the related accumulated fair value adjustments are included in the profit and loss account as \u2018Investment income\u2019. For impairments of available- for-sale financial assets reference is made to the section \u2018Impairments of financial assets\u2019. Loans (Note 6) Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs. Subsequently, they are carried at amortised cost using the effective interest method less any impairment losses. Interest income from loans is recognised in the profit and loss account in \u2018Investment income\u2019 using the effective interest method. Associates and joint ventures (Note 7) Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to, one or more of the following: \u2022 Representation on the board of directors \u2022 Participation in the policy-making process \u2022 Interchange of managerial personnel Joint ventures are all entities in which NN Group has joint control
1 Accounting policies continued
Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method
of accounting. Subsequently, NN Group\u2019s share of profits or losses is recognised in the profit and loss account and its share of changes in
reserves is recognised in other comprehensive income (equity).
The cumulative changes are adjusted against the carrying value of the investment. When NN Group\u2019s share of losses in an associate or joint
venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate or joint venture.
Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of
NN Group\u2019s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the
policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group.
For interests in investment entities the existence of significant influence is determined taking into account both NN Group\u2019s financial interests
for own risk and its role as asset manager.
Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity
funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real
estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments
in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials
and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of
the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for
similar entities quoted in an active market. Valuations of private equity investments are mainly based on an \u2018adjusted multiple of earnings\u2019
methodology on the following basis:
\u2022 Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and,
in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest,
tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from
management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable
estimate of maintainable earnings.
\u2022 Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies
in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth
rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies.
\u2022 Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and
NN Group\u2019s investment rights in the deal structure.
Real estate investments (Note 8)
Real estate investments under construction are included in \u2018Real estate investments\u2019. Real estate investments are held for long-term
rental yields and are not occupied by NN Group. Real estate investments are initially measured at cost, including transaction cost and
are subsequently measured at fair value. Changes in the carrying value resulting from revaluations are recognised in the profit and loss
account. On disposal the difference between the sales proceeds and carrying value is recognised in the profit and loss account. The fair
value of real estate investments is based on regular appraisals by independent qualified valuers. For each reporting period every property
is valued by an external valuer. Market transactions and disposals made by NN Group are monitored as part of the validation procedures to
test the valuations. Valuations performed earlier in the year are updated if necessary to reflect the situation at the year-end. All real estate
investments are appraised externally at least annually.
The fair value represents the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer
and willing seller in an at-arm\u2019s-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and
without compulsion. The fair value is based on appraisals using valuation methods such as comparable market transactions, capitalisation
of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or
sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based
on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new
leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that reflect
appropriately the risk characteristics of real estate. The valuation of real estate investments takes (expected) vacancies into account.
Occupancy rates differ significantly from investment to investment. For real estate investments held through (minority shares in) real estate
investment funds, the valuations are performed under the responsibility of the funds\u2019 asset manager.
1 Accounting policies continued Subsequent expenditures are recognised as part of the asset\u2019s carrying value only when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of an item can be measured reliably. All other repairs and maintenance costs are recognised immediately in the profit and loss account. Borrowing costs on real estate investments under construction are capitalised until completion. Property and equipment (Note 9) Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying value are recognised in other comprehensive income (equity). Decreases in the carrying value that offset previous increases of the same asset are charged against other comprehensive income (equity); all other decreases are recognised in the profit and loss account. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised in the profit and loss account. Depreciation is recognised based on the fair value and the estimated useful life (in general 20\u201350 years). On disposal, the related revaluation reserve in equity is transferred within equity to \u2018Retained earnings\u2019. The fair value of land and buildings is based on regular appraisals by independent, qualified valuers or internally, similar to appraisals of real estate investments. All significant holdings of land and buildings are appraised at least annually. Subsequent expenditure is included in the asset\u2019s carrying value when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of the item can be measured reliably. Equipment is stated at cost less accumulated depreciation and any impairment losses. The estimated useful lives are generally as follows: two to five years for data processing equipment and four to ten years for fixtures and fittings. Expenditure incurred on maintenance and repairs is recognised in the profit and loss account as incurred. Expenditure incurred on major improvements is capitalised and depreciated. The difference between the proceeds on disposal and net carrying value is recognised in the profit and loss account in \u2018Other income\u2019. Methods of depreciation and amortisation Items of property and equipment are depreciated, intangible assets with finite useful lives are amortised. The carrying values of the assets are depreciated/amortised on a straight-line basis over the estimated useful lives. Methods of depreciation and amortisation, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Intangible assets (Note 10) Goodwill NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets given, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. Negative goodwill is recognised immediately in the profit and loss account as income. The results of the operations of the acquired companies are included in the profit and loss account from the date control is obtained. Where a business combination is achieved in stages, NN Group\u2019s previously held interests in the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the date NN Group obtains control) and the resulting gain or loss, if any, is recognised in the profit and loss account. Amounts arising from interests in the acquiree before the acquisition date that have previously been recognised in other comprehensive income (equity) are reclassified to the profit and loss account, where such treatment would be appropriate if that interest were disposed of. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. Until 2009, before IFRS 3 \u2018Business Combinations\u2019 was revised, the accounting of previously held interests in the assets and liabilities of the acquired entity were not remeasured at the acquisition date and the acquisition-related costs were considered to be part of the total consideration. Goodwill is only capitalised on acquisitions after the implementation date of IFRS-EU (1 January 2004). Accounting for acquisitions before that date has not been restated; goodwill and internally generated intangibles on these acquisitions were recognised directly in shareholders\u2019 equity. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition 1 Accounting policies continued Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Computer software Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. The expected useful life of computer software will generally not exceed three years. Amortisation is included in \u2018Other operating expenses\u2019. Value of business acquired (VOBA) VOBA is an asset that represents the present value of estimated net cash flows embedded in the insurance contracts of an acquired company, which exists at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and their carrying value. VOBA is amortised in a similar manner to the amortisation of the deferred acquisition costs as described in the section \u2018Deferred acquisition costs\u2019. Other intangible assets Other intangible assets include brand names, client relationships and distribution channels. These assets are stated at cost less amortisation and any impairment losses. The expected useful life is between 2 and 17 years. Impairment Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset. Deferred acquisition costs (Note 11) Deferred acquisition costs (DAC) represent costs of acquiring insurance and investment contracts that are deferred and amortised. The deferred costs, all of which vary with (and are primarily related to) the production of new and renewal business, consist principally of commissions, certain underwriting and contract issuance expenses and certain agency expenses. For traditional life insurance contracts, certain types of flexible life insurance contracts and non-life contracts, DAC is amortised over the premium payment period in proportion to the premium revenue recognised. For other types of flexible life insurance contracts DAC is amortised over the lives of the policies in relation to the emergence of estimated profits. Amortisation is adjusted when estimates of current or future profits, to be realised from a group of products, are revised. DAC amortisation is included in the Underwriting expenditure in the profit and loss account. DAC is evaluated for recoverability at issue. Subsequently it is tested on a regular basis together with the life insurance liabilities. The test for recoverability is described in the section \u2018Insurance and investment contracts, reinsurance contracts\u2019. For certain products DAC is adjusted for the impact of unrealised results on allocated investments through equity. Assets and liabilities held for sale (Note 12) Assets and liabilities of a business are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable, the business is available for immediate sale in its present condition and management is committed to the sale, which is expected to occur within one year from the date of classification as held for sale. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet . 1 Accounting policies continued Subordinated debt, debt securities issued and other borrowed funds (Notes 15, 16 and 17) Subordinated debt, debt securities issued and other borrowed funds are recognised initially at their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between proceeds, net of transaction costs and the redemption value is recognised in the profit and loss account over the period of the borrowings using the effective interest method. If NN Group purchases its own debt, it is derecognised from the balance sheet and the difference between the carrying value of the liability and the consideration paid is recognised in the profit and loss account. Financial liabilities include only instruments of which the terms and conditions represent a contractual obligation to pay interest and/or principal. Instruments that are similar in substance, but of which the terms and conditions do not include a contractual obligation to pay interest and principal, are classified as equity. Insurance and investment contracts, reinsurance contracts (Note 18) Insurance liabilities are established in accordance with IFRS 4 \u2018Insurance Contracts\u2019. Under IFRS 4, an insurer may continue its existing pre- IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS-EU in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts under IFRS-EU. NN Group operates in many different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance contracts. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policies under IFRS-EU. In addition, for certain specific products or components thereof, NN Group applies the option in IFRS 4 to measure (components of) insurance liabilities using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees embedded in insurance contracts in Japan. Insurance contracts Insurance policies which bear significant insurance risk and/or contain discretionary participation features (including investment contracts with discretionary participation features) are presented as insurance contracts. Insurance liabilities represent estimates of future pay-outs that will be required for life and non-life insurance claims, including expenses relating to such claims. For some insurance contracts the measurement reflects current market assumptions. Unless indicated otherwise below, changes in the insurance liabilities are recognised in the profit and loss account. Life insurance liabilities The life insurance liabilities are generally calculated on the basis of a prudent prospective actuarial method. Specific methodologies may differ between business units as they may reflect local regulatory requirements and local practices for specific product features in the local markets. Insurance liabilities on traditional life policies are calculated using various assumptions, including assumptions on mortality, morbidity, expenses, investment returns and surrenders. Assumptions for insurance liabilities for traditional life insurance contracts, including traditional whole-life and term-life insurance contracts, are based on best estimate assumptions including margins for adverse deviations. Generally, these assumptions are set initially at the policy issue date and remain constant throughout the life of the policy. For the insurance liabilities that were taken over in the Delta Lloyd acquisition, these assumptions are set as at the date of acquisition, 1 April 2017. Insurance liabilities for universal life, variable life and annuity contracts, unit-linked contracts, etc. are generally set equal to the balance that accrues to the benefit of the policyholders. Certain contracts contain minimum (interest) guarantees on the amounts payable upon death and/or maturity. The insurance liabilities include the impact of these minimum (interest) guarantees, taking into account the difference between the potential minimum benefit payable and the total account balance, expected mortality and surrender rates. Unamortised interest rate rebates on periodic and single premium contracts are deducted from the life insurance contract liabilities. Interest rate rebates granted during the year are amortised in conformity with the anticipated recovery pattern and are recognised in the profit and loss account 1 Accounting policies continued Liabilities for unearned premiums and unexpired insurance risks The liabilities are calculated in proportion to the unexpired periods of risk. For insurance policies covering a risk increasing during the term of the policy at premium rates independent of age, this risk is taken into account when determining the liability. Further liabilities are formed to cover claims under unexpired insurance contracts, which may exceed the unearned premiums and the premiums due in respect of these contracts. Claims liabilities Claims liabilities are calculated either on a case-by-case basis or by approximation on the basis of experience. Liabilities have also been recognised for claims incurred but not reported (IBNR) and for future claims handling expenses. IBNR liabilities are set to recognise the estimated cost of losses that have occurred but which have not yet been notified to NN Group. The adequacy of the claims liabilities is evaluated each year using standard actuarial techniques. Deferred interest credited to policyholders For insurance contracts and investment contracts with discretionary participation features, \u2018Deferred interest credited to policyholders\u2019 is recognised for the full amount of the unrealised revaluations on allocated investments. Upon realisation, the \u2018Deferred interest credited to policyholders\u2019 regarding unrealised revaluations is reversed and a deferred profit sharing amount is recognised for the share of realised results on allocated investments that is expected to be shared with policyholders. The amount of deferred profit sharing is reduced by the actual allocation to individual policyholders. The change in the amount of \u2018Deferred interest credited to policyholders\u2019 on unrealised revaluations (net of tax) is recognised in the \u2018Revaluation reserve\u2019 in other comprehensive income (equity). Liabilities for life insurance for risk of policyholders Liabilities for life insurance for risk of policyholders are generally shown at the balance sheet value of the related investments. Reinsurance contracts Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of insurance contracts are accounted for in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations, NN Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are recognised for receivables on reinsurance contracts which are deemed uncollectable. Both reinsurance premiums and reinsurance recoveries are included in \u2018Underwriting expenditure\u2019 in the profit and loss account. Adequacy test The adequacy of the insurance liabilities is evaluated at each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability (gross of reinsurance and net of DAC and VOBA) to a liability based on current best estimate actuarial assumptions. The assumed investment returns are a combination of the run-off of current portfolio yields on existing assets and reinvestment rates in relation to maturing assets and anticipated new premiums, as a result, (part of) the revaluation reserve in shareholders equity is taken into account in assessing the adequacy of insurance liabilities. If, for any business unit, the established insurance liability is lower than the liability based on current best estimate actuarial assumptions the shortfall is recognised immediately in the profit and loss account. If the insurance liabilities are determined to be more than adequate no reduction in the insurance liabilities is recognised. Investment contracts Insurance policies without discretionary participation features which do not bear significant insurance risk are presented as Investment contracts. Investment contract liabilities are determined at amortised cost, using the effective interest method (including certain initial acquisition expenses), or at fair value. Other liabilities (Note 21) Provisions Other liabilities include reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions include employee termination benefits when NN Group is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Provisions are discounted when the effect of the time value of money is significant, using a before tax discount rate. The determination of provisions is an inherently uncertain process involving estimates regarding amounts and timing of cash flows 1 Accounting policies continued Gross premium income (Note 22) Premiums from insurance policies are recognised as income when due from the policyholder. Receipts under investment contracts are not recognised as gross premium income; instead, deposit accounting is applied. When applying deposit accounting, the amounts contributed by policyholders are recognised as direct increases in the provision for investment contracts, not as premium income and payments are deducted directly from the provision. Net fee and commission income (Note 24) Fees and commissions are generally recognised as the service is provided. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Earnings per ordinary share (Note 32) Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue. Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if these changes occurred after the reporting date but before the annual accounts are authorised for issue. Diluted earnings per share data are computed as if all convertible instruments outstanding at the year-end were exercised at the beginning of the period. It is also assumed that NN Group uses the assumed proceeds received to buy its own shares against the average market price in the financial year. The net increase in the number of shares resulting from the exercise is added to the average number of shares used to calculate diluted earnings per share. Segments and Principal subsidiaries and geographical information (Notes 33 and 34) A segment is a distinguishable component of NN Group, engaged in providing products or services, subject to risks and returns that are different from those of other segments. A geographical area is a distinguishable component of NN Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The geographical analysis is based on the location of the business unit from which the transactions are originated . 2 The war in Ukraine In February 2022, the Russian military build-up on the border of Ukraine escalated tensions between Russia and Ukraine. At the date of this report, Russian troops continue to invade Ukraine and millions of Ukrainians have fled their homes. NN Group does not have business activities in Ukraine or Russia, and NN Group\u2019s direct financial exposure to these countries is limited. However, the Russian military actions and the resulting sanctions have adversely affected the global economy and financial markets. Any possible further escalation thereof, might have further adverse impact on the global economy and financial markets and, therefore, NN Group\u2019s financial results. More detailed information is provided in Note 52 \u2018Risk management \u2019. 3 Cash and cash equivalents Cash and cash equivalents 2022 2021 Cash and bank balances 4,148 4,203 Money market funds 1,744 1,965 Short-term deposits 778 761 Cash and cash equivalents 6,670 6,929 Cash and cash equivalents classified as assets held for sale 226 Cash and cash equivalents at the end of the year 6,670 7,155 As at 31 December 2022, NN Group held EUR 2,183 million (2021: EUR 1,325 million) at central banks. NN Group invests in several types of money market funds, some qualifying as cash equivalents and some as investments. Short-term investments in money market funds are presented as cash equivalents only if these are highly liquid and quoted in an active market and have low investment risk 3 Cash and cash equivalents continued Changes in Cash and cash equivalents 2022 2021 Cash and cash equivalents at beginning of the year 7,155 12,390 Net cash flow -343 -5,161 Effect of exchange rate changes on cash and cash equivalents -142 -74 Cash and cash equivalents at the end of the year 6,670 7,155 The change in market interest rates in 2022 significantly impacted cash collateral amounts paid and received as well as other assets and liabilities which are components of the net cash flow. Consequently, the net cash flow for 2022 increased by EUR 4,818 million to EUR -343 million. 4 Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss 2022 2021 Investments for risk of policyholders 34,562 39,261 Non-trading derivatives 2,452 6,419 Designated as at fair value through profit or loss 681 991 Financial assets at fair value through profit or loss 37,695 46,671 Investments for risk of policyholders 2022 2021 Equity securities 31,687 37,010 Debt securities 1,758 1,368 Loans and receivables 1,117 883 Investments for risk of policyholders 34,562 39,261 Investments in investment funds (with underlying investments in debt and equity securities, real estate and derivatives) are included in equity securities. Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 62 29 \u2013 cash flow hedges 256 4,622 \u2013 hedges of net investments in foreign operations 23 Other non-trading derivatives 2,111 1,768 Non-trading derivatives 2,452 6,419 The fair value of derivatives was impacted significantly in 2022 by the change (increase) in market interest rates. This change in market interest rates also significantly impacted other balance sheet items, including Available-for-sale investments and Other liabilities \u2013 Cash collateral amounts received as well as other liabilities in the consolidated statement of cash flows. Other non-trading derivatives includes derivatives for which no hedge accounting is applied . Designated as at fair value through profit or loss 2022 2021 Equity securities 371 415 Debt securities 27 28 Money market funds 283 548 Designated as at fair value through profit or loss 681 991 5 Available-for-sale investments Available-for-sale investments 2022 2021 Equity securities: \u2013 shares in NN Group managed investment funds 2,459 \u2013 shares in third-party managed investment funds 7,370 3,970 \u2013 other 3,645 5,537 Equity securities 11,015 11,966 Debt securities 70,595 95,917 Available-for-sale investments 81,610 107,883 Since the transfer of the NN Investment Partners (NN IP) activities to Goldman Sachs has been finalised in April 2022 the amount of shares in NN Group managed investment funds as at 31 December 2022 is nil and all shares of the investment funds are managed by third-parties as of April 2022. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Changes in Available-for-sale investments Equity securities Debt securities Total 2022 2021 2022 2021 2022 2021 Available-for-sale investments \u2013 opening balance 11,966 11,299 95,917 106,876 107,883 118,175 Additions 2,339 2,375 22,363 24,378 24,702 26,753 Amortisation -222 -379 -222 -379 Transfers and reclassifications 132 -2 132 -2 Changes in unrealised revaluations -1,157 1,093 -19,226 -5,462 -20,383 -4,369 Impairments -735 -44 -24 -759 -44 Disposals and redemptions -1,473 -2,797 -29,436 -26,474 -30,909 -29,271 Changes in the composition of the group and other changes 3 -6 1,680 -3,111 1,683 -3,117 Exchange rate differences -60 46 -457 91 -517 137 Available-for-sale investments \u2013 closing balance 11,015 11,966 70,595 95,917 81,610 107,883 Changes in composition of the group and other changes includes in 2022 the impact of the acquisition of MetLife\u2019s businesses in Poland and Greece. NN Group\u2019s total exposure to debt securities is included in the following balance sheet lines: Total exposure to debt securities 2022 2021 Available-for-sale investments 70,595 95,917 Loans 145 281 Available-for-sale investments and loans 70,740 96,198 Investments for risk of policyholders 1,758 1,368 Designated as at fair value through profit or loss 27 28 Financial assets at fair value through profit or loss 1,785 1,396 Total exposure to debt securities 72,525 97,594 NN Group\u2019s total exposure to debt securities (excluding debt securities presented as held for sale) is included in \u2018Available-for-sale investments\u2019 and \u2018Loans\u2019 is specified as follows by type of exposure 5 Available-for-sale investments continued Debt securities by type Available-for-sale investments Loans Total 2022 2021 2022 2021 2022 2021 Government bonds 43,432 61,587 43,432 61,587 Corporate bonds 16,203 20,427 16,203 20,427 Financial institutions and Covered bonds 7,930 10,454 7,930 10,454 Bond portfolio (excluding ABS) 67,565 92,468 \u2013 \u2013 67,565 92,468 US RMBS 420 464 420 464 Non-US RMBS 2,039 2,107 74 198 2,113 2,305 CDO/CLO 479 444 479 444 Other ABS 92 434 71 83 163 517 ABS portfolio 3,030 3,449 145 281 3,175 3,730 Debt securities \u2013 Available-for-sale investments and Loans 70,595 95,917 145 281 70,740 96,198 For more details, reference is made to Note 52 \u2018Risk management\u2019. Available-for-sale equity securities 2022 2021 Listed 3,633 5,579 Unlisted 7,382 6,387 Available-for-sale equity securities 11,015 11,966 6 Loans Loans 2022 2021 Loans secured by mortgages 59,899 59,283 Loans related to savings mortgages 1,293 1,426 Loans to or guaranteed by public authorities 1,379 1,478 Asset-backed securities 145 281 Policy loans 753 937 Other loans 4,710 4,954 Loans \u2013 before loan loss provisions 68,179 68,359 Loan loss provisions -135 -159 Loans 68,044 68,200 Changes in Loans secured by mortgages 2022 2021 Loans secured by mortgages \u2013 opening balance 59,283 55,310 Additions/origination 8,195 10,509 Amortisation -109 -160 Redemption -4,807 -5,231 Disposals -673 -686 Fair value changes recognised on hedged items -1,947 -453 Changes in the composition of the group and other changes -43 -6 Loans secured by mortgages \u2013 closing balance 59,899 59,283 NN Group has sold mortgage loans to securitisation entities that, in turn, issued notes to investors that are collateralised by the purchased assets. These mortgage loans continue to be recognised on NN Group\u2019s balance sheet as NN Group retained all or substantially all of the risks and rewards of the mortgage loans. Reference is made to Note 47 \u2018Structured entities\u2019 6 Loans continued Changes in Loan loss provisions 2022 2021 Loan loss provisions \u2013 opening balance 159 182 Write-offs -50 -7 Increase/decrease in loan loss provisions 35 -13 Changes in the composition of the group and other changes -9 -3 Loan loss provisions \u2013 closing balance 135 159 7 Associates and joint ventures Associates and joint ventures (2022) 2022 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,771 9,403 2,100 -7 -1 CBRE Dutch Office Fund FGR 19% 364 2,693 733 -84 83 Macquarie European Infrastructure Debt Fund 48% 360 757 Rivage Euro Debt Infrastructure 3 34% 297 870 2 Lazora S.I.I. S.A. 22% 241 1,636 545 122 40 CBRE Dutch Residential Fund FGR 8% 238 3,301 139 125 40 Ardstone Residential Income Fund 33% 226 892 203 54 10 CBRE Retail Industrial Fund Iberica FGR 50% 221 986 544 63 17 NRP Nordic Logistic Fund SA 42% 201 509 32 10 5 CBRE UK Property Fund PAIF 10% 174 1,697 19 -85 13 CBRE Dutch Retail Fund FGR 20% 170 1,181 342 -8 43 Healthcare Activos SOCIMI S.A. 38% 164 784 350 42 11 Dutch Student and Young Professional Housing fund FGR 49% 143 372 82 39 3 Dutch Urban Living Venture FGR 45% 142 469 157 -5 10 Allee center Kft 50% 117 259 25 24 14 Hayfin Amber GP S.A R.L. 100% 106 185 79 Fiumaranuova s.r.l. 50% 105 216 7 12 9 Parcom Buy-Out Fund V CV 21% 88 534 114 173 5 The Fizz Student Housing Fund SCS 50% 88 259 82 7 6 Robeco Bedrijfsleningen FGR 26% 81 314 0 12 1 Delta Mainlog Holding GmbH & Co. KG 50% 79 164 7 -21 2 Octopus Commercial Real Estate Debt Fund III LP 46% 78 190 21 Rivage Hopitaux Publics Euro 34% 75 249 30 DPE Deutschland III (Parallel) GmbH & Co 17% 74 554 110 -11 9 Parquest Capital II B FPCI 29% 71 251 8 7 Prime Ventures V C.V. 20% 69 378 27 8 4 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 69 193 55 5 8 NL Boompjes Property 5 C.V. 50% 68 141 4 11 1 Rivage Euro Debt Infrastructure High Return 2 34% 62 183 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 46 18 8 CBRE Dutch Retail Fund II FGR 10% 57 585 11 -50 11 Other 498 Associates and joint ventures 6,556 The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity. Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group\u2019s financial interest for own risk and other arrangements, such as participation in the relevant boards. NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these are classified as associates and are not consolidated 7 Associates and joint ventures continued Other includes EUR 413 million of associates and joint ventures with an individual balance sheet value of less than EUR 50 million and EUR 85 million of receivables from associates and joint ventures. The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the individual amounts have been brought in line with NN Group\u2019s accounting principles. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time. Associates and joint ventures (2021) 2021 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,840 9,464 1,909 1,588 132 CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68 CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39 CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34 Rivage Euro Debt Infrastructure 3 34% 226 665 2 CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26 NRP Nordic Logistic Fund SA 42% 222 532 3 100 5 Lazora S.I.I. S.A. 22% 212 1,542 583 72 43 CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2 CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37 Ardstone Residential Income Fund 45% 178 540 147 28 1 Dutch Urban Living Venture FGR 45% 152 447 112 53 5 Macquarie European Infrastructure Debt Fund 77% 152 198 1 DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3 Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8 Dutch Student and Young Professional Housing fund FGR 49% 127 339 80 30 5 Allee center Kft 50% 124 275 27 14 11 Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5 Fiumaranuova s.r.l. 50% 110 229 9 13 10 Parcom Buy-Out Fund V CV 21% 107 584 81 127 6 Siresa House S.L. 49% 98 484 282 61 54 Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2 The Fizz Student Housing Fund SCS 50% 91 259 74 20 6 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 79 189 31 11 4 Parquest Capital II B FPCI 26% 78 308 14 8 Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23 CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13 NL Boompjes Property 5 C.V. 50% 65 133 4 14 3 Rivage Hopitaux Publics Euro 34% 61 178 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 44 14 8 Prime Ventures V C.V. 19% 57 306 3 4 Siresa House 2 S.L. 49% 55 199 86 11 8 DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3 Other 588 Associates and joint ventures 6,919 7 Associates and joint ventures continued Changes in Associates and joint ventures 2022 2021 Associates and joint ventures \u2013 opening balance 6,919 5,673 Additions 766 719 Transfers to/from available-for-sale investments -130 Share in changes in equity (Revaluations) 11 Share of result 269 899 Dividends received -276 -223 Disposals -971 -156 Exchange rate differences -32 7 Associates and joint ventures \u2013 closing balance 6,556 6,919 8 Real estate investments Changes in Real estate investments 2022 2021 Real estate investments \u2013 opening balance 2,719 2,444 Additions 136 156 Transfers to/from property in own use 10 Transfers to/from other assets -3 2 Fair value gains/losses -8 241 Disposals -100 -124 Real estate investments \u2013 closing balance 2,754 2,719 The total amount of rental income recognised in the profit and loss account for the year ended 31 December 2022 is EUR 169 million (2021: EUR 161 million). The Real estate investments include properties that are leased (ground lease). At 31 December 2022, the corresponding right of use assets amount to EUR 45 million (2021: EUR 38 million). The total amount of direct operating expenses (including repairs and maintenance) in relation to real estate investments recognised in rental income for the year ended 31 December 2022 is EUR 60 million (2021: EUR 57 million). Real estate investments by year of most recent appraisal 2022 2021 Most recent appraisal in current year 100% 100% 100% 100% NN Group\u2019s total exposure to real estate is included in the following balance sheet lines: Real estate exposure 2022 2021 Real estate investments 2,754 2,719 Available-for-sale investments 2,909 2,415 Associates and joint ventures 4,915 5,612 Property and equipment - property in own use 97 71 Real estate exposure 10,675 10,817 Furthermore, the exposure is impacted by third-party interests, leverage in funds and off-balance commitments. Reference is made to Note 52 \u2018Risk management\u2019 9 Property and equipment Property and equipment 2022 2021 Property in own use 97 71 Equipment 100 101 Property and equipment owned 197 172 Right of use assets 202 242 Property and equipment total 399 414 Changes in Property in own use 2022 2021 Property in own use \u2013 opening balance 71 74 Additions 1 Transfers to/from real estate investments -10 Revaluations 5 -1 Disposals -1 -2 Depreciation -2 -2 Changes in the composition of the group and other changes 33 2 Property in own use \u2013 closing balance 97 71 Gross carrying value 142 118 Accumulated depreciation, revaluations and (reversal of) impairments -45 -47 Net carrying value 97 71 Revaluation surplus \u2013 opening balance 11 12 Revaluation in year 5 -1 Revaluation surplus \u2013 closing balance 16 11 Changes in Equipment Data processing equipment Fixtures and fittings and other equipment Total 2022 2021 2022 2021 2022 2021 Equipment \u2013 opening balance 33 26 68 67 101 93 Additions 16 26 21 20 37 46 Disposals -3 -6 -1 -3 -7 Depreciation -15 -13 -19 -16 -34 -29 Exchange rate differences -1 -2 -1 -2 Equipment \u2013 closing balance 30 33 70 68 100 101 Gross carrying value 179 167 267 246 446 413 Accumulated depreciation -149 -134 -197 -178 -346 -312 Net carrying value 30 33 70 68 100 101 9 Property and equipment continued Changes in Right of use assets Property Equipment Total 2022 2021 2022 2021 2022 2021 Right of use assets \u2013 opening balance 220 257 22 24 242 281 Additions 5 21 11 10 16 31 Disposals -5 -5 -5 -1 -10 -6 Depreciation -33 -42 -10 -11 -43 -53 Changes in the composition of the group and other changes 2 -8 1 3 -8 Exchange rate differences -6 -3 -6 -3 Right of use assets \u2013 closing balance 183 220 19 22 202 242 Gross carrying value 343 346 65 58 408 404 Accumulated depreciation -160 -126 -46 -36 -206 -162 Net carrying value 183 220 19 22 202 242 10 Intangible assets Intangible assets (2022) 2022 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 549 196 75 309 1,129 Additions 324 43 32 399 Amortisation -41 -36 -33 -110 Changes in the composition of the group and other changes 185 6 16 207 Exchange rate differences -2 3 -2 -1 Intangible assets \u2013 closing balance 871 343 86 324 1,624 Gross carrying value 1,844 497 968 832 4,141 Accumulated amortisation -154 -816 -460 -1,430 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 871 343 86 324 1,624 Additions to Goodwill and Changes in the composition of the group and other changes in 2022 mainly relate to acquisition of MetLife Poland and Greece. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Intangible assets (2021) 2021 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 533 210 87 233 1,063 Additions 334 37 13 384 Amortisation -17 -33 -33 -83 Disposals -1 -8 -9 Changes in the composition of the group and other changes -311 -13 104 -220 Exchange rate differences -7 3 -2 -6 Intangible assets \u2013 closing balance 549 196 75 309 1,129 Gross carrying value 1,522 309 921 784 3,536 Accumulated amortisation -113 -780 -427 -1,320 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 549 196 75 309 1,129
10 Intangible assets continued
Additions to Goodwill in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses
acquired and divested\u2019. Changes in composition of the group and other changes includes the impact of the classification of the asset
management activities as held for sale.
Other intangible assets include the intangibles recognised upon the acquisition of Met Life Greece, Heinenoord, VIVAT Non-life and the
remaining part of the intangibles recognised in 2017 on the acquisition of Delta Lloyd. Changes in composition of the group and other
changes in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses acquired and
divested\u2019. The acquisition intangibles comprise:
\u2022 Brand names \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years
\u2022 Client relationships \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years
\u2022 Distribution channels/agreements \u2013 with an average expected remaining useful life at the acquisition date of approximately 18 years
Amortisation of software and other intangible assets is included in the profit and loss account in \u2018Other operating expenses\u2019 and
\u2018Amortisation of intangible assets and other impairments\u2019, respectively.
Goodwill by cash generating unit (reporting unit)
2022 2021
Netherlands Non-life 462 424
Insurance Europe 347 63
Bank 62 62
Goodwill 871 549
Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019.
Goodwill impairment
Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as
the cash generating unit (reporting unit) as set out above. Goodwill is tested for impairment by comparing the carrying value of the cash
generating unit (reporting unit) to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying
value is determined as the IFRS-EU book value including goodwill and certain acquisition intangibles. The recoverable amount is estimated
as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the
recoverable amount.
The identification of impairment is an inherently uncertain process involving various assumptions and factors. Estimates and assumptions
(including unobservable Level 3 inputs) are based on management\u2019s judgement and other information available.
For the goodwill recognised there is a significant excess of recoverable amount over book value for the cash generating units (reporting
units) to which goodwill is allocated.
In 2022 and 2021, there was no impairment of goodwill.
11 Deferred acquisition costs Changes in Deferred acquisition costs Life insurance Non-life insurance Total 2022 2021 2022 2021 2022 2021 Deferred acquisition costs \u2013 opening balance 1,807 1,781 86 90 1,893 1,871 Capitalised expenses 441 447 629 656 1,070 1,103 Amortisation and unlocking -400 -384 -636 -662 -1,036 -1,046 Changes in the composition of the group and other changes 1 -2 2 2 3 \u2013 Exchange rate differences -72 -35 -72 -35 Deferred acquisition costs \u2013 closing balance 1,777 1,807 81 86 1,858 1,893 12 Assets and liabilities held for sale Disposal groups (and groups of non-current assets) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable and the disposal group (or group of assets) is available for immediate sale in its present condition; management must be committed to the sale, which is expected to occur within one year from the date of classification as held for sale. Upon classification as held for sale, the carrying amount of the disposal group (or group of assets) is compared to their fair value less cost to sell. If the fair value less cost to sell is lower than the carrying value, this expected loss is recognised through a reduction of the carrying value of any goodwill related to the disposal group or the carrying value of certain other non-current non-financial assets to the extent that the carrying value of those assets exceeds their fair value. Any excess of the expected loss over the reduction of the carrying amount of these relevant assets is not recognised upon classification as held for sale, but is recognised as part of the result on disposal if and when a divestment transaction occurs. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet. When a group of assets that is classified as held for sale or is sold also represents a major line of business or geographical area, the disposal group is classified as discontinued operations. In the Consolidated profit and loss account, the result after tax from discontinued operations is reported separately from income and expenses from continuing operations. The information for comparative years is adjusted accordingly. Reference is made to Note 31 \u2018Discontinued operations\u2019. As at 31 December 2021 assets and liabilities held for sale relate to NN Group\u2019s asset management activities executed by NN Investment Partners (NN IP) and a closed book life insurance portfolio in NN Belgium. Assets held for sale 2022 2021 Cash and cash equivalents 226 Available-for-sale investments 3,117 Loans 64 Reinsurance contracts 1 Property and equipment 12 Intangible assets 345 Other assets 356 Total assets \u2013 4,121 Liabilities held for sale 2022 2021 Insurance and investment contracts 3,115 Other liabilities 349 Total liabilities \u2013 3,464 Reference is made to Note 46 \u2018Companies acquired and companies divested 14 Equity continued Changes in Equity (2022) 2022 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 38 12,575 20,275 32,888 Total amount recognised directly in equity (Other comprehensive income) -16,576 -16,576 Net result for the period 1,562 1,562 Changes in share capital -3 3 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on undated subordinated notes -58 -58 Equity \u2013 closing balance 35 12,578 3,392 16,005 Purchase/sale of treasury shares (2022) In 2022, 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 6 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2022, 22,878,210 NN Group treasury shares were cancelled. As at 31 December 2022, 13,608,384 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2022) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 58 million (net of tax) from equity. Changes in Equity (2021) 2021 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 39 12,574 24,118 36,731 Total amount recognised directly in equity (Other comprehensive income) -6,103 -6,103 Net result for the period 3,278 3,278 Changes in share capital -1 1 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on undated subordinated notes -59 -59 Equity \u2013 closing balance 38 12,575 20,275 32,888 Purchase/sale of treasury shares (2021) In 2021, 12,828,981 ordinary shares for a total amount of EUR 550 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 5 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2021, 12,400,000 NN Group treasury shares were cancelled. As at 31 December 2021, 12,294,129 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2021) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 59 million (net of tax) from equity 14 Equity continued Shareholders\u2019 equity (parent) Share capital Ordinary shares (in number) Ordinary shares (amounts in millions of euros) 2022 2021 2022 2021 Authorised share capital 700,000,000 700,000,000 84 84 Unissued share capital 405,000,000 382,121,790 49 46 Issued share capital 295,000,000 317,878,210 35 38 Ordinary shares The authorised ordinary share capital consists of 700,000,000 ordinary shares with a par value of EUR 0.12 per share. At 31 December 2022 issued and fully paid ordinary share capital consists of 295,000,000 ordinary shares with a par value of EUR 0.12 per share. Distributable reserves NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains the restriction that dividends can only be paid up insofar as NN Group N.V. equity exceeds the amount equal to total shareholders\u2019 equity less the paid-up and called share capital and less the reserves required pursuant to law or the Articles of Association. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts. In addition, NN Group\u2019s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures. NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject to dividend payment restrictions. Such restrictions may among others be of a similar nature as the restrictions which apply to NN Group. Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code, from NN Group\u2019s subsidiaries, associates and joint ventures are as follows: Distributable reserves based on the Dutch Civil Code 2022 2022 2021 2021 Total shareholders\u2019 equity 16,005 32,888 \u2013 share capital 35 38 \u2013 non-distributable reserves 3,980 16,951 Total non-distributable part of shareholders\u2019 equity: 4,015 16,989 Distributable reserves based on the Dutch Civil Code 11,990 15,899 Reference is made to Note 6 \u2018Equity\u2019 in the Parent company annual accounts. The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on the basis of solvency requirements and freely distributable capital on the basis of capital protection. Freely distributable reserves 2022 2022 2021 2021 Solvency requirement under the Financial Supervision Act 9,040 9,840 Reserves available for financial supervision purposes 17,904 20,927 Total freely distributable reserves on the basis of solvency requirements 8,864 11,087 Total freely distributable reserves on the basis of the Dutch Civil Code 11,990 15,899 Total freely distributable reserves (lower of the values above) 8,864 11,087 Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for more information on solvency requirements. 14 Equity continued Other restrictions There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for the minimum capital requirements. In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the Group\u2019s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations. Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist. Furthermore, NN Group is subject to legal restrictions with respect to repayment of nominal share capital to holders of ordinary shares. Nominal share capital may be repaid to the holders of ordinary shares pursuant to an amendment of NN Group\u2019s Articles of Association whereby the ordinary shares are written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group\u2019s creditors opposes such a repayment within two months following the announcement of a resolution to that effect. Preference shares As at 31 December 2022, none of the preference shares had been issued. The authorised number of preference shares is 700,000,000 shares. Changes in Revaluation reserve (2022) 2022 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 5,576 8,837 14,422 Unrealised revaluations 3 -15,738 -15,735 Realised gains/losses transferred to the profit and loss account 112 112 Changes in cash flow hedge reserve -5,942 -5,942 Deferred interest credited to policyholders 4,986 4,986 Changes in the composition of the group and other changes 24 24 Revaluation reserve \u2013 closing balance 12 -5,040 2,895 -2,133 Changes in Revaluation reserve (2021) 2021 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 8,239 12,220 20,468 Unrealised revaluations -3,093 -3,093 Realised gains/losses transferred to the profit and loss account -1,431 -1,431 Changes in cash flow hedge reserve -3,383 -3,383 Deferred interest credited to policyholders 1,861 1,861 Revaluation reserve \u2013 closing balance 9 5,576 8,837 14,422 Deferred interest credited to policyholders reflects the change in the deferred profit sharing liabilities (net of deferred tax). Reference is made to Note 18 \u2018Insurance and investment contracts, reinsurance contracts\u2019. Changes in Currency translation reserve 2022 2021 Currency translation reserve \u2013 opening balance -181 -97 Unrealised revaluations after taxation 45 -18 Exchange rate differences for the period -164 -66 Currency translation reserve \u2013 closing balance -300 -181 Unrealised revaluations relate to changes in the value of hedging instruments that are designated as net investment hedges
14 Equity continued
Changes in Other reserves (2022)
2022
Retained
earnings
Share of
associates
reserve Total
Other reserves \u2013 opening balance 4,042 2,111 6,153
Net result for the period 1,562 1,562
Transfers to/from share of associates reserve 198 -198 \u2013
Dividend -413 -413
Purchase/sale of treasury shares -1,392 -1,392
Employee stock option and share plans -6 -6
Coupon on subordinated notes -58 -58
Changes in the composition of the group and other changes 31 31
Other reserves \u2013 closing balance 3,964 1,913 5,877
Changes in Other reserves (2021)
2021
Retained
earnings
Share of
associates
reserve Total
Other reserves \u2013 opening balance 2,473 1,412 3,885
Net result for the period 3,278 3,278
Transfers to/from share of associates reserve -699 699 \u2013
Dividend -412 -412
Purchase/sale of treasury shares -545 -545
Employee stock option and share plans -2 -2
Coupon on subordinated notes -59 -59
Changes in the composition of the group and other changes 8 8
Other reserves \u2013 closing balance 4,042 2,111 6,153
Dividends
2022 2021
Dividend distributed from Other reserves:
Dividend paid in cash (interim current year) 162 160
Dividend paid in cash (final previous year) 252 252
Stock dividend (interim current year) 131 128
Stock dividend (final previous year) 218 202
Total dividend 763 742
Interim dividend 2022
In September 2022, NN Group paid an interim dividend of EUR 1.00 per ordinary share, or approximately EUR 294 million in total based on the
current number of outstanding shares (net of treasury shares). The interim dividend was paid either in cash, after deduction of withholding
tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares were delivered from
NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount
equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves.
Proposed final dividend 2022
At the annual general meeting on 2 June 2023, a final dividend will be proposed of EUR 1. 79 per ordinary share, or approximately
EUR 504 million in total based on the current number of outstanding shares. The final dividend will be paid either in cash, after deduction of
withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares will be
delivered from NN Group treasury shares or issued at the expense of the share premium reserve. To neutralise the dilutive effect of the stock
dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. The final dividend is subject to adoption
by the General Meeting at the annual general meeting to be held on 2 June 2023 .
14 Equity continued Interim dividend 2021 In September 2021 NN Group paid an interim dividend of EUR 0.93 per ordinary share, or approximately EUR 287 million in total. The interim dividend was paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares have been delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the stock dividend. Final dividend 2021 On 19 May 2022, the General Meeting adopted the proposed final dividend of EUR 1.56 per ordinary share, or approximately EUR 476 million in total based on the current number of outstanding shares (net of treasury shares). Together with the 2021 interim dividend of EUR 0.93 per ordinary share paid in September 2021, NN Group\u2019s total dividend for 2021 was EUR 2.49 per ordinary share. The final dividend was paid in cash, after deduction of withholding tax if applicable, or ordinary shares, at the election of the shareholder. Dividends paid in the form of ordinary shares were delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves. Appropriation of result The result is appropriated pursuant to Article 34 of the Articles of Association of NN Group N.V., of which the relevant provisions state that the appropriation of result shall be determined by the General Meeting, on the proposal of the Executive Board, as approved by the Supervisory Board. It is proposed to add the 2022 net result less the (interim and final) cash dividends to the retained earnings. Minority interest NN Group owns 51% of the shares of ABN AMRO Verzekeringen Holding B.V. (ABN AMRO Verzekeringen). ABN AMRO Verzekeringen\u2018s principal place of business is Zwolle, the Netherlands. ABN AMRO Verzekeringen is fully consolidated by NN Group, with a minority interest recognised of 49%. The minority interest decreased by EUR 153 million following the acquisition by NN Group of the minority interest in ABN AMRO Life from ABN AMRO Verzekeringen in July 2022. The difference of EUR 30 million between the payment and the reduction of the minority interest was recognised in Other reserves. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. At 31 December 2022, the minority interest relating to ABN AMRO Verzekeringen recognised in equity was EUR 55 million (2021: EUR 245 million). Summarised information ABN AMRO Verzekeringen 1 2022 2 2021 Total assets 378 4,566 Total liabilities 266 4,065 Total income 294 502 Total expenses 288 470 Net result recognised in period 5 23 Other comprehensive income recognised in period -75 7 Dividends paid 250 59 1 All on 100% basis. 2 2022 excludes ABN AMRO Life. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Undated subordinated notes In July 2014, NN Group N.V. issued fixed to floating rate undated subordinated notes with a par value of EUR 1,000 million. The notes are undated, but are callable after 11.5 years and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.5% per annum for the first 11.5 years and will be floating thereafter. As these notes are undated and include optional deferral of interest at the discretion of NN Group, these are classified under IFRS-EU as equity. Coupon payments are distributed out of equity if and when paid or contractually due. The discount to the par value and certain issue costs were deducted from equity at issue, resulting in a balance sheet value equal to the net proceeds of EUR 986 million. In June 2014, fixed to floating rate undated subordinated notes with a par value of EUR 750 million were originally issued by Delta Lloyd which are classified as equity under IFRS-EU. The notes are undated, but are callable as from 13 June 2024 and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.375% per annum until 13 June 2024 and will be floating thereafter. Coupon payments are distributed out of equity if and when paid or contractually due. These notes were recognised upon acquisition of Delta Lloyd for an amount of EUR 778 million 15 Subordinated debt Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 4.625% 2014 8 April 2044 8 April 2024 1,000 1,000 997 995 4.625% 2017 13 January 2048 13 January 2028 850 850 843 841 5.250% 2022 1 March 2043 30 August 2032 500 494 9.000% 2017 29 August 2042 29 August 2022 500 520 Subordinated debt 2,334 2,356 The above subordinated debt instruments have been issued to raise hybrid capital. Under IFRS-EU these debt instruments are classified as liabilities. They are considered capital for regulatory purposes. All subordinated debt is euro denominated. In August 2022, NN Group issued EUR 500 million of subordinated notes. This was the first issuance under NN Group\u2019s Sustainability Bond Framework, which was established in February 2022 with the aim to finance green and social projects. The EUR 500 million subordinated notes have a maturity of 20.5 years and are first callable after 10 years, subject to redemption conditions. The coupon is fixed at 5.25% per annum until the first reset date on 1 March 2033 and will be floating thereafter. The subordinated notes qualify as Tier 2 regulatory capital under Solvency II. The outstanding EUR 500 million 9.0% Fixed to Floating Rate Subordinated Notes due 2042 were redeemed early on their first call date, 29 August 2022. 16 Debt securities issued Debt securities issued Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 1.000% 2015 18 March 2022 Not applicable 600 600 0.875% 2017 13 January 2023 13 January 2023 500 500 500 499 1.625% 2017 1 June 2027 1 March 2027 600 600 597 596 0.875% 2021 23 November 2031 23 May 2031 600 600 597 597 Debt securities issued 1,694 2,292 The outstanding EUR 600 million 1.000% fixed rate senior unsecured bond, due 18 March 2022, was redeemed on the due date. NN Group repaid the outstanding EUR 500 million 0.875% fixed rate unsecured senior notes that matured on 13 January 2023 . 17 Other borrowed funds Other borrowed funds 2022 2021 Credit institutions 5,078 578 Other 6,040 6,723 Other borrowed funds 11,118 7,301 Other borrowed funds includes the funding of the consolidated securitisation programmes as disclosed in Note 47 \u2018Structured entities\u2019 and repo transactions used for liquidity management purposes. During 2022, NN Bank issued EUR 0.5 billion bonds under its Covered Bond Programme, backed by Dutch prime residential mortgage loans (2021: EUR 0.5 billion)
Reconciliaton of balance sheet
IFRS 9 IFRS 17 Preliminary balance sheet item
Balance sheet item
- current balance sheet IAS 39
and IFRS 4
Reported
amount 1. Remeasurement 2. Reclassification 3. Reclassification 4. Remeasurement
Adjusted
amount - with IFRS 9 and IFRS 17
Cash and cash
equivalents 6,929 6,929
Cash and cash
equivalents
Available-for-sale
investments 107,883 49,279 -7,212 149,950
Investments at FV
through OCI
Loans 68,200 -45,880 -944 21,376 Investments at cost
Financial assets
designated at fair value
through profit or loss 991 123 46,473 47,587
Investments at fair value
through profit or loss
Real estate investments 2,719 2,719 Investments in real estate
Associates and joint
ventures 6,919 6,919
Investment in associates
and joint ventures
Investments for risk of
policyholders 39,261 -39,261
125 125 Insurance contracts
Reinsurance contracts 954 -247 707 Reinsurance contracts
Non-trading derivatives 6,419 6,419 Derivatives
Property and equipment 414 414 Property and equipment
Intangible assets 1,129 -197 932 Intangible assets
Deferred acquisition costs 1,893 -1,893
Deferred tax assets 47 -60 44 31 Deferred tax assets
Other assets 3,706 -506 3,200 Other assets
Assets held for sale 4,121 14 4,135 Assets held for sale
Total assets 251,585 3,462 \u2013 -3,540 -64 251,443 Total assets
Insurance and investment
contracts 168,812 -1,863 15,631 182,580
Insurance contracts
325 325 Reinsurance contracts
2,698 2,698 Investment contracts
Debt securities issued 2,292 2,292 Debt securities issued
Subordinated debt 2,356 2,356 Subordinated debt
Other borrowed funds 7,301 7,301 Other borrowed funds
Customer deposits and
other funds on deposit 15,945 15,945
Customer deposits
Non-trading derivatives 1,904 1,904 Derivatives
Deferred tax liabilities 4,817 839 -4,875 781 Deferred tax liabilities
Other liabilities 9,776 -1,677 8,099 Other liabilities
Liabilities held for sale 3,464 66 3,530 Liabilities held for sale
Total liabilities 216,667 839 \u2013 -3,540 13,845 227,811 Total liabilities
Total equity 34,918 2,623 \u2013 \u2013 -13,909 23,632 Total equity
The references in the columns above are explained as follows:
1. Loans held by insurance entities within NN Group are remeasured from amortised cost to fair value and mostly presented and measured
as Investments at fair value through OCI; these are subject to an expected credit loss provision.
2. Available-for-sale investments that do not qualify for measurement at fair value through OCI are presented as Investments at fair value
through profit or loss. Investments for risk of policyholders are presented as Investments at fair value through profit or loss.
3. DAC (deferred acquisition costs), VOBA (value of business acquired), policy loans and insurance receivables and payables are derecognised
and form part of the liability for insurance contracts
4. Measurement differences on (re)insurance assets and liabilities; Reinsurance and Investment contracts are presented separately
Employee benefits Defined benefit pension plans The net defined benefit asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the fair value of the plan assets less the present value of the defined benefit obligation at the balance sheet date. Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the expected return on plan assets is determined using a high quality corporate bond rate identical to the discount rate used in determining the defined benefit obligation. Defined contribution pension plans For defined contribution plans, NN Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual or voluntary basis. NN Group has no further payment obligations once the contributions have been paid. The contributions are recognised as staff expenses in the profit and loss account when they are due. Other post-employment obligations Some NN Group companies provide post-employment benefits to certain employees and former employees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans. Share-based payments Share-based payment expenses are recognised as staff expenses over the vesting period. A corresponding increase in equity is recognised for equity-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions is measured at the grant date. For cash-settled share-based payment transactions, a liability is recognised at fair value; this fair value is remeasured at every balance sheet date . Interest income and expenses Interest income and expenses are recognised in the profit and loss account using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts throughout the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the financial asset or financial liability. When calculating the effective interest rate, NN Group estimates cash flows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income and expenses from non-trading derivatives are classified as interest income and interest expenses in the profit and loss account, except for interest income/expense on derivatives for which no hedge accounting is applied. The latter is classified in \u2018Valuation results on non-trading derivatives\u2019, together with the changes in the (clean) fair value of these derivatives. Fiduciary activities NN Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions when conducting asset management activities. The assets and income arising thereof are excluded from these annual accounts, as they are not assets or income of NN Group. Fees received acting as trustee and in other fiduciary capacities are recognised as income. Statement of cash flows The Consolidated statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year. Cash and cash equivalents comprise balances with less than three months\u2019 maturity from the date of acquisition. Investments qualify as a cash equivalent if they are readily convertible into a known amount of cash and are not subject to significant risk of changes in value. Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of the cash flows
In 2021, Intangible assets under Assets held for sale includes EUR 311 million goodwill that relates to asset management. For businesses
classified as held for sale, the related goodwill is no longer evaluated at the level of the reporting unit to which it was allocated in the regular
goodwill impairment test. Instead, it is reviewed as part of the valuation of the disposal unit that is presented as held for sale. This goodwill
was recovered through the sale above book value.
The fair value hierarchy of financial assets and liabilities (measured at fair value and measured at amortised cost), which are presented as
held for sale is included below. The fair value hierarchy consists of three levels, depending upon whether fair values were determined based
on quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate
inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Reference is
made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more details on the methods applied in determining fair values.
Methods applied in determining the fair value of financial assets and liabilities at fair value \u2013 held for sale (2021)
2021 Level 1 Level 2 Level 3 Total
Available-for-sale investments 2,492 625 3,117
Financial assets 2,492 625 \u2013 3,117
Notes to the Consolidated annual accounts continued
13 Other assets
Other assets
2022 2021
Insurance and reinsurance receivables 681 634
Income tax receivables 366 141
Accrued interest and rents 1,237 1,307
Other accrued assets 172 131
Cash collateral amounts paid 5,001 803
Other 520 690
Other assets 7,977 3,706
Cash collateral amounts paid relate to collateralised derivatives. The increase is a result of the increase in fair value of outstanding
collateralised derivatives following an increase in market interest rates.
Insurance and reinsurance receivables
2022 2021
Receivables on account of direct insurance from:
\u2013 policyholders 424 434
\u2013 intermediaries 144 139
Reinsurance receivables 113 61
Insurance and reinsurance receivables 681 634
The allowance for uncollectable insurance and reinsurance receivables amounts to EUR 38 million as at 31 December 2022 (2021: EUR
33 million). The receivable is presented net of this allowance.
14 Equity
Total equity
2022 2021
Share capital 35 38
Share premium 12,578 12,575
Revaluation reserve -2,134 14,422
Currency translation reserve -300 -181
Net defined benefit asset/liability remeasurement reserve -51 -119
Other reserves 5,877 6,153
Shareholders\u2019 equity (parent) 16,005 32,888
Minority interests 63 266
Undated subordinated notes 1,764 1,764
Total equity 17,832 34,918
18 Insurance and investment contracts, reinsurance contracts Insurance and investment contracts, reinsurance contracts Liabilities net of reinsurance Reinsurance contracts Insurance and investment contracts 2022 2021 2022 2021 2022 2021 Non-participating life policy liabilities 52,773 55,364 470 475 53,243 55,839 Participating life policy liabilities 55,846 54,739 105 98 55,951 54,837 Investment contracts with discretionary participation features 3,044 3,222 3,044 3,222 Liabilities for (deferred) profit sharing and rebates 778 7,305 778 7,305 Life insurance liabilities excluding liabilities for risk of policyholders 112,441 120,630 575 573 113,016 121,203 Liabilities for life insurance for risk of policyholders 32,227 37,499 32 32 32,259 37,531 Investment contract with discretionary participation features for risk of policyholders 217 259 217 259 Life insurance liabilities 144,885 158,388 607 605 145,492 158,993 Liabilities for unearned premiums and unexpired risks 392 406 16 19 408 425 Reported claims liabilities 5,094 4,940 280 265 5,374 5,205 Claims incurred but not reported (IBNR) 1,764 1,722 116 65 1,880 1,787 Claims liabilities 6,858 6,662 396 330 7,254 6,992 Insurance liabilities and investment contracts with discretionary participation features 152,135 165,456 1,019 954 153,154 166,410 Investment contracts 1,167 953 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Investment contracts liabilities 3,224 2,402 3,224 2,402 Insurance and investment contracts, reinsurance contracts 155,359 167,858 1,019 954 156,378 168,812 The liabilities for insurance and investment contracts are presented gross in the balance sheet as \u2018Insurance and investment contracts\u2019. The related reinsurance is presented as \u2018Reinsurance contracts\u2019 under Assets in the balance sheet. Deferred interest credited to policyholders is included in the \u2018Liabilities for (deferred) profit sharing and rebates\u2019 and amounts to EUR 455 million as at 31 December 2022 (2021: EUR 7,148 million) 18 Insurance and investment contracts, reinsurance contracts continued Changes in Life insurance liabilities (2022) 2022 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 120,630 37,758 605 158,993 Deferred interest credited to policyholders -6,694 -6,694 Current year liabilities 4,070 2,792 1,125 7,987 Prior years liabilities: \u2013 benefit payments to policyholders -7,562 -2,671 -1,097 -11,330 \u2013 interest accrual and changes in fair value of liabilities 2,077 1 2,078 \u2013 valuation changes for risk of policyholders -5,522 -5,522 \u2013 effect of changes in discount rate assumptions -6 -6 \u2013 effect of changes in other assumptions -420 -25 -445 Changes in the composition of the group and other changes 1,605 304 7 1,916 Exchange rate differences -1,259 -192 -34 -1,485 Life insurance liabilities \u2013 closing balance 112,441 32,444 607 145,492 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2022 includes the impact of the acquisition of MetLife Poland and Greece. Changes in Life insurance liabilities (2021) 2021 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 126,842 33,532 717 161,091 Deferred interest credited to policyholders -2,381 -2,381 Current year liabilities 4,567 2,971 1,082 8,620 Prior years liabilities: \u2013 benefit payments to policyholders -7,495 -2,525 -809 -10,829 \u2013 interest accrual and changes in fair value of liabilities 2,135 3 2,138 \u2013 valuation changes for risk of policyholders 4,201 4,201 \u2013 effect of changes in discount rate assumptions -15 -4 -19 \u2013 effect of changes in other assumptions -94 -22 -116 Changes in the composition of the group and other changes -2,316 -339 -373 -3,028 Exchange rate differences -613 -60 -11 -684 Life insurance liabilities \u2013 closing balance 120,630 37,758 605 158,993 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2021 includes the impact of the classification of a closed book life insurance portfolio in NN Belgium as held for sale. Where discounting is used in the calculation of life insurance liabilities, the discount rate for the main units in the Netherlands was in a range of 1.0% to 4.0% (2021: 1.0% to 4.0%). The range of discount rates in the international entities was -1.0% to 6.0% (2021: -1.0% to 6.0%) 18 Insurance and investment contracts, reinsurance contracts continued Longevity reinsurance In May 2020, NN Group entered into three reinsurance agreements to reinsure the full longevity risk associated with in total approximately EUR 13.5 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The three reinsurance agreements are similar in nature but are agreed with three different assuming reinsurers, Canada Life, Munich Re and Swiss Re. The risk transfer has been effective as of 1 January 2020 and will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurers is fixed and includes a margin of approximately EUR 456 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 26 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 378 million (undiscounted) remains to be recognised in future periods. In December 2021, NN Group entered into a fourth reinsurance agreement to reinsure the full longevity risk associated with in total approximately EUR 4 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The fourth reinsurance agreement is similar in nature to the first three contracts but is agreed with a different reinsurer, RGA. The risk transfer for the fourth contract is effective as of 31 December 2021. The risk transfer will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurer is fixed and includes a margin of approximately EUR 140 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 5 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 135 million (undiscounted) remains to be recognised in future periods. Changes in Liabilities for unearned premiums and unexpired risks Liabilities net of reinsurance Reinsurance contracts Liabilities for unearned premiums and unexpired risk 2022 2021 2022 2021 2022 2021 Liabilities for unearned premiums and unexpired risks \u2013 opening balance 406 443 19 16 425 459 Premiums written 3,639 3,648 212 221 3,851 3,869 Premiums earned during the year -3,648 -3,681 -215 -218 -3,863 -3,899 Changes in the composition of the group and other changes -5 -4 -5 -4 Liabilities for unearned premiums and unexpired risks \u2013 closing balance 392 406 16 19 408 425 18 Insurance and investment contracts, reinsurance contracts continued Changes in Claims liabilities Liabilities net of reinsurance Reinsurance contracts Claims liabilities 2022 2021 2022 2021 2022 2021 Claims liabilities \u2013 opening balance 6,662 6,540 330 330 6,992 6,870 Additions: \u2013 for the current year 2,435 2,347 115 60 2,550 2,407 \u2013 for prior years -44 -28 -2 -18 -46 -46 \u2013 interest accrual of liabilities 55 58 55 58 Additions 2,446 2,377 113 42 2,559 2,419 Claim settlements and claim settlement costs: \u2013 for the current year -882 -859 -7 -9 -889 -868 \u2013 for prior years -1,368 -1,396 -40 -33 -1,408 -1,429 Claim settlements and claim settlement cost -2,250 -2,255 -47 -42 -2,297 -2,297 Claims liabilities \u2013 closing balance 6,858 6,662 396 330 7,254 6,992 Where discounting is used in the calculation of the claims liabilities the rate is within the range of 0.0% to 4.0% (2021: -1.0% to 4.0%). Changes in Investment contracts 2022 2021 Investment contracts \u2013 opening balance 2,402 2,252 Current year liabilities 416 276 Prior years liabilities: \u2013 payments to contract holders -280 -266 \u2013 interest accrual 9 8 \u2013 valuation changes investments -292 132 Changes in the composition of the group and other changes 969 Investment contracts \u2013 closing balance 3,224 2,402
18 Insurance and investment contracts, reinsurance contracts continued
Gross claims development table
Accident
year
2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total
Estimate of cumulative claims
At the end of accident year 2,789 2,669 2,546 2,709 2,602 2,837 2,640 2,674 2,443 2,597
1 year later 2,874 2,687 2,596 2,721 2,598 2,792 2,648 2,569 2,378
2 years later 2,839 2,661 2,615 2,699 2,539 2,795 2,664 2,565
3 years later 2,814 2,680 2,611 2,715 2,555 2,817 2,675
4 years later 2,778 2,656 2,577 2,658 2,538 2,788
5 years later 2,762 2,655 2,569 2,694 2,542
6 years later 2,769 2,670 2,587 2,691
7 years later 2,772 2,630 2,584
8 years later 2,775 2,630
9 years later 2,779
Estimate of cumulative claims 2,779 2,630 2,584 2,691 2,542 2,788 2,675 2,565 2,378 2,597 26,229
Cumulative payments -2,545 -2,384 -2,260 -2,339 -2,095 -2,166 -1,961 -1,699 -1,418 -889 -19,756
234 246 324 352 447 622 714 866 960 1,708 6,473
Effect of discounting -19 -18 -24 -22 -26 -36 -42 -28 -29 -44 -288
Liabilities recognised 215 228 300 330 421 586 672 838 931 1,664 6,185
Liabilities relating to accident
years prior to 2013 1,069
Gross claims 7,254
To the extent that the assuming reinsurers are unable to meet their obligations, NN Group is liable to its policyholders for the portion
reinsured. Consequently, provisions are made for receivables on reinsurance contracts if and when they are deemed uncollectable.
As at 31 December 2022, the total reinsurance exposure including reinsurance contracts and receivables from reinsurers (presented in Note
13 \u2018Other assets\u2019) amounts to EUR 1,132 million (2021: EUR 1,015 million).
19 Customer deposits and other funds on deposit
Customer deposits and other funds on deposit
2022 2021
Savings 7,627 7,364
Bank annuities 8,608 8,577
Corporate deposits 4
Customer deposits and other funds on deposit 16,235 15,945
Customers have not entrusted any funds to NN Group on terms other than those prevailing in the normal course of business. All customer
deposits and other funds on deposit are interest bearing.
Changes in Customer deposits and other funds on deposit
2022 2021
Customer deposits and other funds on deposit \u2013 opening balance 15,945 15,803
Deposits received 3,842 4,826
Withdrawals -3,527 -4,656
Amortisation -25 -28
Customer deposits and other funds on deposit \u2013 closing balance 16,235 15,945
20 Financial liabilities at fair value through profit or loss Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 4 \u2013 cash flow hedges 3,242 904 \u2013 hedges of net investments in foreign operations 10 Other non-trading derivatives 3,220 986 Non-trading derivatives 6,462 1,904 Other non-trading derivatives includes derivatives for which no hedge accounting is applied. Reference is made to Note 38 \u2018Derivatives and hedge accounting\u2019. 21 Other liabilities Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 Other staff-related liabilities include provisions for vacation leave, variable compensation, jubilee and disability/illness . Cash collateral amounts received relate to collateralised derivatives. The decrease is a result of the decrease in fair value of outstanding collateralised derivatives following an increase in market interest rates. Other mainly relates to year-end accruals in the normal course of business. Net defined benefit liability 2022 2021 Fair value of plan assets 69 79 Defined benefit obligation 109 217 Net defined benefit liability recognised in the balance sheet (funded status) 40 138 21 Other liabilities continued Changes in Provisions 2022 2021 Provisions \u2013 opening balance 137 158 Additions 61 69 Releases -22 -12 Charges -38 -74 Changes in the composition of the group and other changes 62 -3 Exchange rate differences -1 -1 Provisions \u2013 closing balance 199 137 Provisions relate to reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions were recognised for operations in the Netherlands for the cost of workforce reductions. Additions to the reorganisation provision were recognised in 2022 and 2021 due to additional initiatives announced during the year. During 2022 EUR 31 million was charged to the reorganisation provision for the cost of workforce reductions (2021: EUR 66 million) . 22 Gross premium income Gross premium income 2022 2021 Gross premium income from life insurance policies 9,790 10,443 Gross premium income from non-life insurance policies 3,851 3,869 Gross premium income 13,641 14,312 Gross premium income is presented before deduction of reinsurance and retrocession premiums. Gross premium income excludes premium received for investment contracts, for which deposit accounting is applied. Premiums written \u2013 net of reinsurance Life Non-life Total 2022 2021 2022 2021 2022 2021 Direct gross premiums written 9,745 10,411 3,847 3,864 13,592 14,275 Reinsurance assumed gross premiums written 45 32 4 5 49 37 Gross premiums written 9,790 10,443 3,851 3,869 13,641 14,312 Reinsurance ceded -1,342 -1,304 -212 -221 -1,554 -1,525 Premiums written net of reinsurance 8,448 9,139 3,639 3,648 12,087 12,787 Non-life premiums earned \u2013 net of reinsurance 2022 2021 Direct gross premiums earned 3,859 3,894 Reinsurance assumed gross premiums earned 4 5 Gross premiums earned 3,863 3,899 Reinsurance ceded -215 -218 Non-life premiums earned \u2013 net of reinsurance 3,648 3,681 Reinsurance ceded is included in Underwriting expenditure. Reference is made to Note 26 \u2018Underwriting expenditure \u2019 23 Investment income Investment income 2022 2021 Interest income from investments in debt securities 1,757 1,739 Interest income from loans 1,546 1,531 Interest income from investments in debt securities and loans 3,303 3,270 Realised gains/losses on disposal of available-for-sale debt securities 112 569 Impairments of available-for-sale debt securities -24 Realised gains/losses and impairments of available-for-sale debt securities 88 569 Realised gains/losses on disposal of available-for-sale equity securities 380 1,141 Impairments of available-for-sale equity securities -735 -44 Realised gains/losses and impairments of available-for-sale equity securities -355 1,097 Interest income on non-trading derivatives 210 210 Changes in loan loss provisions -35 13 Income from real estate investments 109 104 Dividend income 329 301 Change in fair value of real estate investments -8 241 Investment income 3,641 5,805 Impairments on investments by segment 2022 2021 Netherlands Life -587 -39 Netherlands Non-life -43 -1 Insurance Europe -71 -4 Japan Life -6 Other -52 Impairments on investments -759 -44 24 Net fee and commission income Net fee and commission income 2022 2021 Asset management fees 292 288 Insurance brokerage and advisory fees 182 153 Other 71 -14 Gross fee and commission income 545 427 Asset management fees 94 34 Commission expenses and other 89 88 Fee and commission expenses 183 122 Net fee and commission income 362 305 25 Valuation results on non-trading derivatives Valuation results on non-trading derivatives 2022 2021 Change in fair value of derivatives relating to: \u2013 fair value hedges 1,701 481 \u2013 cash flow hedges (ineffective portion) -75 -10 \u2013 other non-trading derivatives -1,454 -716 Net result on non-trading derivatives 172 -245 Change in fair value of assets and liabilities (hedged items) -1,692 -486 Valuation results on assets and liabilities designated as at fair value through profit or loss -19 29 Valuation results on non-trading derivatives -1,539 -702 Included in \u2018Valuation results on non-trading derivatives\u2019 are the fair value movements on derivatives used to economically hedge exposures, but for which no hedge accounting is applied. These derivatives hedge exposures in insurance contract liabilities and foreign exchange exposures in the investment portfolio. The fair value movements on the derivatives are influenced by changes in the market conditions, such as share prices, interest rates and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance contract liabilities, which are included in \u2018Underwriting expenditure\u2019 and partly offset by foreign currency results. Reference is made to Note 26 \u2018Underwriting expenditure\u2019 and the line Foreign currency results in the consolidated profit and loss account. Valuation results on non-trading derivatives are reflected in the Consolidated statement of cash flows in the section \u2018Result before tax\u2019, in the line item \u2018Adjusted for: other\u2019. Reference is made to Note 38 \u2018Derivatives and hedge accounting\u2019. 26 Underwriting expenditure Underwriting expenditure 2022 2021 Gross underwriting expenditure: \u2013 before effect of investment result for risk of policyholders 14,878 15,821 \u2013 effect of investment result for risk of policyholders -5,517 4,201 Gross underwriting expenditure 9,361 20,022 Investment result for risk of policyholders 5,517 -4,201 Reinsurance recoveries -1,216 -1,045 Underwriting expenditure 13,662 14,776 The investment income and valuation results regarding investments for risk of policyholders is EUR -5,517 million (2021: EUR 4,201 million). This amount is recognised in \u2018Underwriting expenditure\u2019. As a result, it is shown together with the equal amount of related change in insurance liabilities for risk of policyholders 26 Underwriting expenditure continued Underwriting expenditure by class 2022 2021 Expenditure from life underwriting: \u2013 reinsurance and retrocession premiums 1,342 1,304 \u2013 gross benefits 11,203 11,044 \u2013 reinsurance recoveries -1,162 -991 \u2013 change in life insurance liabilities -1,769 -509 \u2013 costs of acquiring insurance business 515 470 \u2013 other underwriting expenditure 220 194 \u2013 profit sharing and rebates 72 62 Expenditure from life underwriting 10,421 11,574 Expenditure from non-life underwriting: \u2013 reinsurance and retrocession premiums 213 221 \u2013 gross claims 2,233 2,260 \u2013 reinsurance recoveries -54 -54 \u2013 changes in the liabilities for unearned premiums -10 -33 \u2013 changes in claims liabilities 196 122 \u2013 costs of acquiring insurance business 689 712 \u2013 other underwriting expenditure -36 -35 Expenditure from non-life underwriting 3,231 3,193 Expenditure from investment contracts: \u2013 costs of acquiring investment contracts 1 1 \u2013 other changes in investment contract liabilities 9 8 Expenditure from investment contracts 10 9 Underwriting expenditure 13,662 14,776 Profit sharing and rebates 2022 2021 Distributions on account of interest or underwriting results 36 7 Bonuses added to policies 36 55 Profit sharing and rebates 72 62 The total costs of acquiring insurance business (life and non-life) and investment contracts amounted to EUR 1,205 million (2021: EUR 1,183 million). This includes amortisation and unlocking of DAC of EUR 1,036 million (2021: EUR 1,046 million) and the net amount of commissions paid of EUR 1,239 million (2021: EUR 1,240 million) and commissions capitalised in DAC of EUR 1,070 million (2021: EUR 1,103 million). The total amount of commission paid and commission payable amounted to EUR 1,417 million (2021: EUR 1,418 million). This includes the commissions recognised in \u2018costs of acquiring insurance business\u2019 of EUR 1,239 million (2021: EUR 1,240 million) referred to above and commissions recognised in \u2018other underwriting expenditure\u2019 of EUR 178 million (2021: EUR 178 million). Other underwriting expenditure also includes reinsurance commissions received of EUR 90 million (2021: EUR 89 million) 26 Underwriting expenditure continued As set out in the section \u2018Accounting policies for specific items \u2013 Insurance and investment contracts, reinsurance contracts\u2019, NN Group applies, for certain specific products or components thereof, the option in IFRS 4 to measure (components of) the liabilities for insurance contracts using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees embedded in insurance contracts in Japan. The impact of these market-consistent assumptions is reflected in \u2018Underwriting expenditure \u2013 change in life insurance liabilities\u2019. This impact is largely offset by the impact of related hedging derivatives. As disclosed in Note 25 \u2018Valuation results on non-trading derivatives\u2019, the valuation results on non-trading derivatives include the fair value movements on derivatives used to economically hedge exposures, but for which no hedge accounting is applied. For insurance operations, these derivatives hedge mainly exposures in Insurance contract liabilities. The fair value movements on the derivatives are influenced by changes in the market conditions, such as stock prices, interest rates and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance contract liabilities, which are included in \u2018Underwriting expenditure\u2019. 27 Amortisation of intangible assets and other impairments Amortisation of intangible assets and other impairments 2022 2021 Other impairments and reversals of other impairments \u2013 \u2013 Amortisation of other intangible assets 33 33 Amortisation of intangible assets and other impairments 33 33 Impairment on debt securities, equity securities and loans are included in Note 23 \u2018Investment income \u2019. 28 Staff expenses Staff expenses 2022 2021 Salaries 892 813 Variable salaries 39 38 Pension costs 113 117 Social security costs 138 123 Share-based compensation arrangements 5 6 External staff costs 287 272 Education 15 14 Other staff costs 44 46 Staff expenses 1,533 1,429 Pension costs 2022 2021 Current service cost 7 9 Past service cost -8 Net interest cost -8 -7 Defined benefit plans -9 2 Defined contribution plans 122 115 Pension costs 113 117 Defined contribution plans Certain group companies sponsor defined contribution pension plans. The assets of all NN Group\u2019s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of pay. These plans do not give rise to balance sheet provisions, other than relating to short-term timing differences included in \u2018Other assets\u2019 or \u2018Other liabilities 28 Staff expenses continued Number of employees Reference is made to Note 34 \u2018Principal subsidiaries and geographical information\u2019 for information on the average number of employees. Remuneration of Executive Board, Management Board and Supervisory Board Reference is made to Note 49 \u2018Key management personnel compensation\u2019. Share plans NN Group has granted shares to a number of senior executives (members of the Management Board, general managers and other officers nominated by the Management Board). The purpose of the share schemes is to attract, retain and motivate senior executives and staff. Share awards comprise upfront shares and deferred shares. The entitlement to the deferred shares is granted conditionally. If the participant remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional. A retention period applies from the moment of vesting these awards (five years for Management Board and one year for Identified Staff). Share awards Changes in Share awards outstanding Share awards (in number) Weighted average grant date fair value (in euros) 2022 2021 2022 2021 Share awards outstanding \u2013 opening balance 410,383 454,738 33.64 29.29 Granted 132,048 271,322 42.93 40.48 Vested -348,175 -279,522 34.53 33.13 Forfeited -7,371 -36,155 36.46 34.12 Share awards outstanding \u2013 closing balance 186,885 410,383 38.41 33.64 In 2022, 13,764 (2021: 35,645) share awards on NN Group shares were granted to the members of the Executive and Management Board. In 2022, 118,284 (2021: 235,677) share awards on NN Group shares were granted to senior management and other employees. In 2022, the outstanding share awards (209,423) related to NN IP employees vested as part of the divestment of NN IP. As at 31 December 2022, the share awards on NN Group shares consist of 178,482 (2021: 383,942) share awards relating to equity-settled share-based payment arrangements and 8,403 (2021: 26,441) share awards relating to cash-settled share-based payment arrangements. The fair value of share awards granted is allocated over the vesting period of the share awards as an expense under staff expenses. As at 31 December 2022, total unrecognised compensation costs related to share awards amount to EUR 3 million (2021: EUR 7 million). These costs are expected to be recognised over a weighted average period of 1.4 years (2021: 1.3 years). 29 Interest expenses Interest expenses 2022 2021 Interest expenses on non-trading derivatives 273 238 Other interest expenses 339 283 Interest expenses 612 521 In 2022, total interest income and total interest expenses for items not valued at fair value through profit or loss were EUR 3,303 million (2021: EUR 3,270 million) and EUR 339 million (2021: EUR 283 million) respectively. Interest income and expenses are included in the following profit and loss account lines. Total net interest income 2022 2021 Investment income 3,513 3,480 Interest expenses on non-trading derivatives -273 -238 Other interest expenses -339 -283 Total net interest income 2,901 2,959
30 Other operating expenses
Other operating expenses
2022 2021
Depreciation of property and equipment 77 79
Amortisation of software 36 33
Computer costs 289 281
Office expenses 71 60
Travel and accommodation expenses 11 3
Advertising and public relations 85 66
External advisory fees 237 211
Addition/(releases) of provisions for reorganisation and relocations 27 31
Other 96 78
Other operating expenses 929 842
31 Discontinued operations
As of 2021, NN Group\u2019s asset management activities executed by NN Investment Partners (NN IP) are classified as discontinued operations.
Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019.
Net result from discontinued operations consists of the net result (after tax) of the businesses classified as discontinued operations and
is presented separately in the profit and loss account for both 2022 and 2021. No gain or loss has been recognised in the profit and loss
account upon the classification as held for sale and discontinued operations.
Net result from discontinued operations
2022 2021
Total income 110 482
Total expenses 74 304
Net result from disposal of discontinued operations 1,062
Result before tax from discontinued operations 1,098 178
Taxation 9 43
Net result from discontinued operations 1,089 135
The activities of NN IP were reported in the segment Asset Management before these were classified as discontinued operations and held
for sale. The segment Asset Management ceased to exist in 2021, following the classification as discontinued operations, as all activities
previously included in this segment are now discontinued operations. The sale of NN IP was completed in April 2022. Reference is made to
Note 46 \u2018Companies and businesses acquired and divested\u2019.
Net cash flow from discontinued operations
2022 2021
Operating cash flow 94 95
Investing cash flow -2 -10
Financing cash flow -4
Net cash flow from discontinued operations 92 81
32 Earnings per ordinary share
Earnings per ordinary share shows earnings per share amounts for profit or loss attributable to shareholders of the parent. Earnings per ordinary
share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of
ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue.
Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if these
changes occurred after the reporting date but before the annual accounts are authorised for issue.
Diluted earnings per share is calculated as if the share plans had been exercised at the beginning of the period and assuming that the cash
received from exercised share plans and warrants was used to buy own shares against the average market price during the period. The net
increase in the number of shares resulting from exercising share plans and warrants is added to the average number of shares used for the
calculation of diluted earnings per share.
Earnings per ordinary share from continuing and discontinued operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2022 2021 2022 2021 2022 2021
Net result from continuing and discontinued operations 1,562 3,278
Coupon on undated subordinated notes -58 -59
Basic earnings from continuing and discontinued
operations 1,504 3,219 295.5 308.9 5.09 10.42
Dilutive instruments:
\u2013 Share plans 0.2 0.4
Dilutive instruments 0.2 0.4
Diluted earnings from continuing and discontinued
operations 1,504 3,219 295.7 309.3 5.09 10.41
Earnings per ordinary share from continuing operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2022 2021 2022 2021 2022 2021
Net result from continuing operations 475 3,151
Coupon on undated subordinated notes -58 -59
Basic earnings from continuing operations 417 3,092 295.5 308.9 1.41 10.01
Dilutive instruments:
\u2013 Share plans 0.2 0.4
Dilutive instruments 0.2 0.4
Diluted earnings from continuing operations 417 3,092 295.7 309.3 1.41 10.00
Earnings per ordinary share from discontinued operations
Amounts
(in millions of euros)
Weighted average
number of ordinary shares
(in millions)
Per ordinary share
(in euros)
2022 2021 2022 2021 2022 2021
Net result from discontinued operations 1,087 127
Basic earnings from discontinued operations 1,087 127 295.5 308.9 3.68 0.41
Dilutive instruments:
\u2013 Share plans 0.2 0.4
Dilutive instruments 0.2 0.4
Diluted earnings from discontinued operations 1,087 127 295.7 309.3 3.68 0.41
33 Segments The reporting segments for NN Group, based on the internal reporting structure, are as follows: \u2022 Netherlands Life (Group life and individual life insurance products in the Netherlands) \u2022 Netherlands Non-life (Non-life insurance in the Netherlands including disability and accident, fire, motor and transport insurance) \u2022 Insurance Europe (Life insurance, pension products and to a small extent non-life insurance and retirement services in Central and Rest of Europe) \u2022 Japan Life (Life insurance primarily Corporate Owned Life Insurance (COLI) business) \u2022 Banking \u2022 Other (Operating segments that have been aggregated due to their respective size; including Japan Closed Block VA (Closed block single premium variable annuity individual life insurance portfolio in Japan, including the internally reinsured minimum guarantee risk, which has been closed to new business and which is being managed in run-off), reinsurance and items related to capital management and the head office) As disclosed in Note 31 \u2018Discontinued operations\u2019 as of 2021 the segment Asset Management ceased to exist. As a result, the result from the Asset management activities is presented separately from the results of the remaining segments. The Executive Board and the Management Board set the performance targets and approve and monitor the budgets prepared by the reporting segments. The segments formulate strategic, commercial and financial policies in conformity with the strategy and performance targets set by the Executive Board and the Management Board. The accounting policies of the segments are the same as those described in Note 1 \u2018Accounting policies\u2019. Transfer prices for inter-segment transactions are set at arm\u2019s length. Corporate expenses are allocated to segments based on time spent by head office personnel, the relative number of staff, or on the basis of income and/or assets of the segment. Intercompany loans that qualify as equity instruments under IFRS-EU are presented in the segment reporting as debt; related coupon payments are presented as income and expenses in the respective segments. Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments. The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and premium-based revenues and the technical margin. Disclosures on comparative years also reflect the impact of current year\u2019s divestments. Operating result as presented below is an Alternative Performance Measure (non-GAAP financial measure) and is not a measure of financial performance under IFRS-EU. Because it is not determined in accordance with IFRS-EU, operating result as presented by NN Group may not be comparable to other similarly titled measures of performance of other companies. The net result on transactions between segments is eliminated in the net result of the relevant segment. Operating result is calculated as explained below in the section Alternative Performance Measures 33 Segments continued Segments (2022) 2022 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Investment margin 980 145 6 1,131 Fees and premium-based revenues 387 859 546 1,792 Technical margin 123 281 14 418 Operating income 1,490 \u2013 1,286 565 \u2013 \u2013 3,342 Administrative expenses 465 515 124 1,104 DAC amortisation and trail commissions 26 460 223 710 Expenses 491 \u2013 976 347 \u2013 \u2013 1,814 Operating result non-life 255 -1 254 Operating result banking 97 97 Operating result other -172 -172 Operating result from continuing operations 999 255 309 218 97 -172 1,706 Non-operating items from continuing operations: \u2013 gains/losses and impairments -126 -38 -92 -7 -50 -312 \u2013 revaluations -1,373 14 13 -10 96 -1,260 \u2013 market and other impacts 646 -6 -8 9 -63 578 Special items before tax -32 -22 -39 -3 -1 -39 -136 Acquisition intangibles and goodwill -2 -28 -30 Result on divestments 15 15 Result before tax from continuing operations 115 209 201 190 105 -258 562 Taxation -26 47 55 53 27 -71 85 Minority interests 3 -1 2 Net result from continuing operations 141 158 146 137 78 -186 474 Net result from discontinued operations 1,088 1,088 Net result 141 158 146 137 78 902 1,562 Special items in 2022 mainly reflect integration and IFRS 9 and IFRS 17 project expenses
33 Segments continued
Operating result (2022)
2022
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Operating result from continuing
operations 999 255 310 218 97 -172 1,706
Operating result from discontinued
operations 38 38
Operating result 999 255 310 218 97 -134 1,743
Result before tax (2022)
2022
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Result before tax from continuing
operations 115 209 201 190 105 -258 562
Result before tax from discontinued
operations 1,098 1,098
Result before tax 115 209 201 190 105 842 1,662
Segments (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Investment margin 996 116 -12 1,100
Fees and premium-based revenues 391 811 610 1,812
Technical margin 103 235 30 368
Operating income non-modelled life
business 1 1
Operating income 1,490 \u2013 1,163 628 \u2013 \u2013 3,281
Administrative expenses 473 446 135 1,054
DAC amortisation and trail commissions 31 401 230 662
Expenses 504 \u2013 847 365 \u2013 \u2013 1,716
Operating result non-life 314 -1 313
Operating result banking 134 134
Operating result other -157 -157
Operating result from continuing
operations 986 314 315 263 134 -157 1,855
Non-operating items from continuing
operations:
\u2013 gains/losses and impairments 1,618 33 2 4 2 12 1,671
\u2013 revaluations 379 24 46 -2 39 485
\u2013 market and other impacts -51 -28 -26 -105
Special items before tax -17 -35 -14 -3 -30 -99
Acquisition intangibles and goodwill -7 -21 -28
Result on divestments 54 54
Result before tax from continuing
operations 2,915 336 396 262 106 -184 3,832
Taxation 431 71 80 74 25 -11 669
Minority interests -4 16 12
Net result from continuing operations 2,488 250 316 188 82 -172 3,151
Net result from discontinued operations 127 127
Net result 2,488 250 316 188 82 -45 3,278
33 Segments continued
Special items in 2021 mainly reflect integration expenses and other project related expenses such as the implementation of IFRS 17.
Operating result (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Operating result from continuing
operations 986 314 315 263 134 -157 1,855
Operating result from discontinued
operations 181 181
Operating result 986 314 315 263 134 24 2,036
Result before tax (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking
Other and
eliminations Total
Result before tax from continuing
operations 2,915 336 396 262 106 -184 3,832
Result before tax from discontinued
operations 178 178
Result before tax 2,915 336 396 262 106 -6 4,010
Gross premium income and investment income by segment (2022)
2022
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Gross premium income 3,569 3,774 3,247 3,006 45 13,641
Investment income 2,410 149 344 177 609 -48 3,641
Gross premium income and investment income by segment (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Gross premium income 3,972 3,798 3,127 3,381 34 14,312
Investment income 4,382 213 429 182 613 -14 5,805
Interest income and interest expenses by segment (2022)
2022
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Interest income 2,135 171 422 182 607 -4 3,513
Interest expenses -291 -29 -13 -3 -303 27 -612
Interest income and interest expenses 1,844 142 409 179 304 23 2,901
Interest income and interest expenses by segment (2021)
2021
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Interest income 2,201 147 389 176 603 -36 3,480
Interest expenses -222 -19 -21 -4 -298 42 -522
Interest income and interest expenses 1,979 128 368 172 305 6 2,958
33 Segments continued
Total assets and Total liabilities by segment
Total assets Total liabilities Total assets Total liabilities
2022 2022 2021 2021
Netherlands Life 134,035 121,722 158,579 131,056
Netherlands Non-life 9,743 8,833 10,011 8,389
Insurance Europe 27,039 24,886 30,837 28,063
Japan Life 19,179 17,674 21,527 19,205
Banking 23,969 23,181 24,194 23,347
Other (Including held for sale) 33,048 15,211 53,018 17,678
Total 247,013 211,507 298,166 227,738
Eliminations -29,903 -12,229 -46,581 -11,071
Total assets and Total liabilities 217,110 199,278 251,585 216,667
Alternative Performance Measures (Non-GAAP measures)
NN Group uses three Alternative Performance Measures (APMs, also referred to as Non-GAAP measures) in its external financial reporting:
Operating result, Adjusted allocated equity and Administrative expenses.
Operating result
Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments. Each segment\u2019s operating result is
calculated by adjusting the reported result before tax for the following items:
\u2022 Non-operating items: related to (general account) investments that are held for own risk (net of policyholder profit sharing):
\u2013 Gains/losses and impairments: realised gains and losses as well as impairments on financial assets that are classified as Available-for-
sale and debt securities that are classified as loans. These investments include debt and equity securities (including fixed income and
equity funds), private equity (< 20% ownership), real estate funds and loans quoted in active markets.
\u2013 Revaluations: revaluations on assets marked-to-market through the Consolidated profit and loss account. These investments include
private equity (associates), real estate (property and associates), derivatives unrelated to product hedging programmes (i.e. interest rate
swaps, foreign exchange hedges) and direct equity hedges.
\u2013 Market & other impacts: these impacts mainly include movements in the liability for guarantees on separate account pension contracts
and unit-linked guarantee provisions in the Netherlands and related hedges, the accounting volatility related to the reinsurance
of minimum guaranteed benefits of Japan Closed Block VA and the changes in valuation of certain inflation linked liabilities and
related derivatives.
\u2022 Special items: items of income or expense before tax that are significant and arise from events or transactions that are clearly distinct from
the ordinary business activities and therefore are not expected to recur frequently or regularly. This includes, for example, restructuring
expenses, rebranding costs, results related to early redemption of debt, and gains/losses from employee pension plan amendments
or curtailments.
\u2022 Acquisition intangibles and goodwill: At the acquisition date, all assets and liabilities (including investments, loans and funding liabilities)
were remeasured to fair value. Acquisition related intangible assets (mainly brand names, distribution agreements and client relationships)
were recognised and will be amortised through the profit and loss account over their useful life. Goodwill on acquisition was also
recognised; goodwill is not amortised but tested annually for impairment. Any amortisation and goodwill impairment is recognised in the line
\u2018Amortisation of acquisition intangibles and other impairments\u2019.
\u2022 Result on divestments: Result before tax related to divested operations.
The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and
premium-based revenues and the technical margin. Investment margin is defined as the investment income (on the investments for the
account of NN Group) minus interest credited to policyholders and investment expenses. Technical margin includes the difference between
costs charged and claim related revenues (such as risk premiums, surrenders and reserve releases) and incurred claims. Disclosures on
comparative years also reflect the impact of current year\u2019s divestments. Operating result as presented below is an Alternative Performance
Measure (non-GAAP financial measure) and is not a measure of financial performance under IFRS-EU. Because it is not determined
in accordance with IFRS-EU, operating result as presented by NN Group may not be comparable to other similarly titled measures of
performance of other companies. The net result on transactions between segments is eliminated in the net result of the relevant segment.
33 Segments continued
Adjusted allocated equity
NN Group evaluates the efficiency of the operational deployment of its equity of its banking operations by calculating Return On Equity
(ROE). The net operating ROE is calculated using Net operating result in the numerator and average Adjusted allocated equity in the
denominator. Net operating result of NN Group is the Net operating result, adjusted to reflect the deduction of the accrued coupon on
undated subordinated notes classified in equity. Adjusted allocated equity is derived from IFRS equity by adjusting for:
\u2022 Revaluation reserves
\u2022 Undated subordinated notes classified as equity under IFRS
\u2022 Goodwill and Intangible assets recognised as a result of the Delta Lloyd acquisition
Allocated equity per segment represents the part of equity that is economically deployed by the segments. This allocation does not
impact equity in total for NN Group. Adjusted allocated equity is an Alternative Performance Measure that is not a measure under IFRS-
EU. Adjusted allocated equity as applied by NN Group may not be comparable to other similarly titled measures of other companies.
Adjusted allocated equity is reconciled to IFRS Total equity as follows:
Adjusted allocated equity
2022 2021
IFRS Total equity 17,832 34,918
Revaluation reserves, Goodwill and Intangible assets recognised upon acquisitions 1,890 -14,925
Undated subordinated notes -1,764 -1,764
Adjusted allocated equity excluding Japan Closed Block VA 17,959 18,229
Administrative expenses
NN Group monitors the level of expenses and assesses cost savings through the Administrative expenses. Administrative expenses are the
expenses included in operating result, unless already included in the technical margin or the investment margin in the margin analysis of the
operating result.
Administrative expenses
2022 2021
Staff expenses 1,533 1,429
Other operating expenses 929 842
IFRS operating expenses 2,462 2,271
Presented in non-operating items (including special items) -144 -112
Presented in the Technical margin (claims handling expenses) -147 -123
Presented in the Investment margin (investment expenses) -34 -56
Administrative expenses continuing operations 2,137 1,980
Administrative expenses are calculated as the total of IFRS Staff expenses and IFRS Other operating expenses, adjusted for expenses
already recognised in the technical margin and the investment margin and for expenses that are not included in operating result (non-
operating expenses and special items). From the total administrative expenses of EUR 2,137 million (2021: EUR 1,980 million), EUR 1,104 million
(2021: EUR 1,055 million) relates to the segments Netherlands Life, Insurance Europe Life and Japan Life. The remainder of EUR 1,033 million
(2021: EUR 925 million) is included in the operating result non-life, banking and other.
33 Segments continued
In addition, NN Group discloses a number of other metrics (that are not defined in IFRS and/or not defined in regulatory capital legislation).
As these are not derived from comparable metrics under IFRS, these cannot be reconciled to an IFRS equivalent. These include the following:
\u2022 Operating Capital Generation (OCG): NN Group analyses the change in the excess of Solvency II Own Funds over the Solvency Capital
Requirement (SCR) in the following components: Operating Capital Generation, Market variance, Capital flows and Other. Operating Capital
Generation is the movement in the Solvency II surplus (Own Funds before eligibility over SCR at 100%) in the period due to operating items,
including the impact of new business, expected investment returns in excess of the unwind of liabilities, release of the risk margin, operating
variances, non-life underwriting result, contribution of non-Solvency II entities and holding expenses and debt costs and the change in the
SCR. It excludes economic variances, economic assumption changes and non-operating expenses.
\u2022 Annual Premium Equivalent (APE): the total of the IFRS annual recurring premiums and 10% of the IFRS single premiums received in a
given period
\u2022 Combined ratio: the sum of the claims ratio (claims incurred, net of reinsurance, excluding unwind of interest accrual, divided by net earned
premiums) and the expense ratio (sum of acquisition costs and administrative expenses, divided by net earned premiums)
\u2022 Financial leverage ratio: the percentage of financial leverage in the total of financial leverage and equity
\u2022 Fixed cost coverage ratio: the ability of Earnings Before Interest and Tax (EBIT) to cover funding costs on financial leverage; calculated on a
last 12-months basis
\u2022 Free cash flow: the change in the cash capital position at the holding company over the period, excluding acquisitions and capital
transactions with shareholders and debtholders
\u2022 Cash capital position at the holding company: net current assets available at the holding company
\u2022 Net interest margin (NIM): interest result of the banking operations divided by the average total interest bearing assets of the
banking operations
\u2022 Net operating ROE\u2013 Segment banking only: the (annualised) net operating result of the banking operations, divided by (average) adjusted
allocated equity of the banking operations
\u2022 Value of New Business (VNB): the additional economic value created through writing new business during the period
34 Principal subsidiaries and geographical information The table below provides additional information on principal subsidiaries, the nature of the main activities and employees by country. Information on guarantees issued by NN Group N.V. to subsidiaries under article 403 of Book 2 of the Dutch Civil Code is filed with the Chamber of Commerce. Principal subsidiaries and geographical information (2022) Name of principal subsidiaries Main activity Country Average number of employees 1 Total income Total assets Result before tax Taxation 2 Income tax paid Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance Nationale-Nederlanden Bank N.V. Banking Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance REI Investment I B.V. Real estate NN Re (Netherlands) N.V. Reinsurance ABN AMRO Levensverzekering N.V. Life insurance The Netherlands 8,746 10,187 168,243 8 -95 -20 NN Life Insurance Company, Ltd. Life insurance Japan 937 3,159 18,436 317 90 73 NN Insurance Belgium nv Life insurance Belgium 659 998 11,281 70 17 -51 Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance Spain 554 704 4,794 22 4 1 Nationale-Nederlanden Towarzystwo Ubezpiecze\u0144 na \u017bycie S.A. Life insurance Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions Poland 1,125 583 3,198 58 16 59 NN Hellenic Life Insurance Co. S.A. Life insurance Greece 500 765 4,155 23 7 NN \u017divotn\u00ed poji\u0161\u0165ovna N.V. (pobo\u010dka pro \u010ceskou republiku) Life insurance Czech Republic 668 219 1,327 12 3 42 NN Biztos\u00edt\u00f3 Z\u00e1rtk\u00f6r\u00fben M\u00fbk\u00f6d\u00f5 R\u00e9szv\u00e9nyt\u00e1rsas\u00e1g Life insurance Hungary 446 253 1,148 4 3 3 NN Asigurari de Viata S.A. Life insurance Romania 488 249 989 34 6 7 NN \u017divotn\u00e1 poist\u2019ovna, a.s. Life insurance Slovak Republic 361 164 749 12 3 15 Germany 5 -1 541 -2 -3 3 France 4 21 1,116 13 31 11 Italy 3 3 266 3 -1 Denmark 15 215 13 3 United Kingdom 7 -9 606 -19 2 1 Turkey 197 19 40 -5 -1 Ireland 1 Singapore 16 Mexico 1 1 5 -1 United States 7 Switzerland 2 Argentina 2 1 1 Uruguay 1 Total 14,729 17,331 217,110 562 85 145 1 The average number of employees is on a full-time equivalent basis. 2 Taxation is the taxation amount charged to the profit and loss account 34 Principal subsidiaries and geographical information continued Principal subsidiaries and geographical information (2021) Name of principal subsidiaries Main activity Country Average number of employees 1 Total income Total assets Result before tax Taxation 2 Income tax paid Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance Nationale-Nederlanden Bank N.V. Banking Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance REI Investment I B.V. Real estate NN Re (Netherlands) N.V. Reinsurance ABN AMRO Levensverzekering N.V. Life insurance The Netherlands 9,144 13,643 196,434 2,875 459 247 NN Life Insurance Company, Ltd. Life insurance Japan 915 3,549 21,642 253 71 55 NN Insurance Belgium nv Life insurance Belgium 673 1,093 16,129 106 21 57 Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance Spain 535 748 5,166 53 13 3 Nationale-Nederlanden Towarzystwo Ubezpiecze\u0144 na \u017bycie S.A. Life insurance Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions Poland 1,032 485 2,230 66 16 -3 NN Hellenic Life Insurance Co. S.A. Life insurance Greece 413 579 2,386 23 10 NN \u017divotn\u00ed poji\u0161\u0165ovna N.V. (pobo\u010dka pro \u010ceskou republiku) Life insurance Czech Republic 671 226 1,479 27 6 21 NN Biztos\u00edt\u00f3 Z\u00e1rtk\u00f6r\u00fben M\u00fbk\u00f6d\u00f5 R\u00e9szv\u00e9nyt\u00e1rsas\u00e1g Life insurance Hungary 404 298 1,390 9 3 3 NN Asigurari de Viata S.A. Life insurance Romania 471 257 1,106 49 8 7 Slovak Republic 334 186 859 34 8 6 Germany 9 102 392 131 20 2 France 8 129 1,255 119 29 8 Italy 6 13 278 13 -8 2 Denmark 45 196 43 7 United Kingdom 13 31 595 33 1 2 Bulgaria 66 16 3 Turkey 250 32 43 -4 1 Ireland 4 -16 Singapore 31 2 Mexico 1 4 -1 United States 13 Switzerland 4 1 Argentina 2 1 Uruguay 2 Total 14,997 21,433 251,585 3,832 669 397 1 The average number of employees is on a full-time equivalent basis. 2 Taxation is the taxation amount charged to the profit and loss account 35 Taxation Deferred tax (2022) Net liability 2021 Changes through equity Changes through net result Changes in the composition of the group and other changes Exchange rate differences Net liability 2022 Investments 3,271 -4,865 -126 74 -7 -1,653 Real estate investments 1,172 -10 1,162 Financial assets and liabilities at fair value through profit or loss 29 -22 -2 5 Deferred acquisition costs 460 -6 31 -19 466 Fiscal reserves 91 -91 - Depreciation 18 -2 5 -1 20 Insurance liabilities -3,273 1,703 358 -96 -9 -1,317 Cash flow hedges 3,069 -2,063 1,006 Pension and post-employment benefits 20 24 4 -1 1 48 Other provisions -27 -4 2 -29 Receivables 17 -4 -3 10 Loans 28 -3 25 Unused tax losses carried forward -81 -48 -2 -131 Other -24 14 -24 -60 1 -93 Net Deferred tax liability (asset) 4,770 -5,187 22 -51 -35 -481 Presented in the balance sheet as: Deferred tax liabilities 4,817 423 Deferred tax assets -47 -904 Net Deferred tax liability (asset) 4,770 -481 Deferred tax (2021) Net liability 2020 Changes through equity Changes through net result Changes in the composition of the group and other changes Exchange rate differences Net liability 2021 Investments 4,638 -1,230 -39 -89 -9 3,271 Real estate investments 926 248 -2 1,172 Financial assets and liabilities at fair value through profit or loss 22 7 29 Deferred acquisition costs 439 9 22 -10 460 Fiscal reserves 12 79 91 Depreciation 21 -2 -1 18 Insurance liabilities -3,778 530 -108 87 -4 -3,273 Cash flow hedges 4,073 -1,004 3,069 Pension and post-employment benefits 5 4 -1 11 1 20 Other provisions -54 19 7 1 -27 Receivables 12 1 5 -1 17 Loans -87 3 112 28 Unused tax losses carried forward -77 -6 2 -81 Other 104 -6 -20 -101 -1 -24 Net Deferred tax liability (asset) 6,256 -1,706 190 54 -24 4,770 Presented in the balance sheet as: Deferred tax liabilities 6,329 4,817 Deferred tax assets -73 -47 Net Deferred tax liability (asset) 6,256 4,770
35 Taxation continued
Deferred tax on unused tax losses carried forward
2022 2021
Total unused tax losses carried forward 716 511
Unused tax losses carried forward not recognised as a deferred tax asset -196 -184
Unused tax losses carried forward recognised as a deferred tax asset 520 327
Average tax rate 25.1% 24.8%
Deferred tax asset 131 81
Tax losses carried forward will expire as follows as at 31 December:
Total unused tax losses carried forward analysed by term of expiration
No deferred tax asset recognised Deferred tax asset recognised
2022 2021 2022 2021
Within 1 year 4 12
More than 1 year but less than 5 years 49 34 9 14
More than 5 years but less than 10 years 7 3
Unlimited 136 135 511 313
Total unused tax losses carried forward 196 184 520 327
Deferred tax assets are recognised for temporary deductible differences, for tax losses carried forward and unused tax credits only to the
extent that realisation of the related tax benefit is probable.
Taxation on result
2022 2021
Current tax 64 480
Deferred tax 21 189
Taxation on result 85 669
NN Group N.V., together with certain of its subsidiaries, is a part of a fiscal unity for Dutch income tax purposes. The members of the fiscal
unity are jointly and severally liable for any income taxes payable by the Dutch fiscal unity.
Reference is made to Note 34 \u2018Principal subsidiaries and geographical information\u2019 for more information on the taxation per country.
Reconciliation of the weighted average statutory tax rate to NN Group\u2019s effective tax rate
2022 2021
Result before tax from continuing operations 562 3,832
Weighted average statutory tax rate 25.3% 24.9%
Weighted average statutory tax amount 142 954
Participation exemption -125 -319
Other income not subject to tax and other -14 -11
Expenses not deductible for tax purposes 30 13
Impact on deferred tax from change in tax rates 7
Deferred tax benefit for previously unrecognised amounts -3 -9
Tax for non-recognised losses 3 2
Write-off/reversal of deferred tax assets -3 1
Adjustments to prior periods 55 31
Effective tax amount 85 669
Effective tax rate 15.2% 17.5%
35 Taxation continued In 2022, the effective tax rate for continuing operations of 15.2% was lower than the weighted average statutory tax rate of 25.3%. This was mainly a result of tax exempt results of associates and participations. This was partly offset by a tax expense following a reassessment of prior year tax liabilities. In 2021, the effective tax rate of 17.5% was lower than the weighted average statutory tax rate of 24.9%. This was mainly a result of tax exempt results of associates and participations. Taxation on components of other comprehensive income 2022 2021 Unrealised revaluations available-for-sale investments and other 5,127 1,189 Realised gains/losses transferred to the profit and loss account -153 235 Changes in cash flow hedge reserve 2,063 1,004 Deferred interest credited to policyholders -1,703 -530 Remeasurement of the net defined benefit asset/liability -24 -5 Income tax 5,310 1,893 36 Fair value of financial assets and liabilities The following table presents the estimated fair value of NN Group\u2019s financial assets and liabilities. Certain balance sheet items are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of NN Group. Fair value of financial assets and liabilities Estimated fair value Balance sheet value 2022 2021 2022 2021 Financial assets Cash and cash equivalents 6,670 6,929 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 681 991 Available-for-sale investments 81,610 107,883 81,610 107,883 Loans 61,442 72,597 68,044 68,200 Total financial assets 187,417 234,080 194,019 229,683 Financial liabilities Subordinated debt 2,287 2,624 2,334 2,356 Debt securities issued 1,498 2,351 1,694 2,292 Other borrowed funds 10,683 7,364 11,118 7,301 Investment contracts with discretionary participation features for risk of policyholders 217 259 217 259 Investment contracts for risk of company 1,083 976 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Customer deposits and other funds on deposit 15,619 16,460 16,235 15,945 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 6,462 1,904 6,462 1,904 Total financial liabilities 39,906 33,387 41,284 32,459 For the other financial assets and financial liabilities not included in the table above, including short-term receivables and payables, the carrying amount is a reasonable approximation of fair value 36 Fair value of financial assets and liabilities continued Reference is made to Note 1 \u2018Accounting policies\u2019 for the upcoming changes as a result of IFRS 9 \u2018Financial instruments\u2019. One of the requirements in IFRS 9 is to assess whether investments in debt securities and loans meet the definition of \u2018Solely Payments of Principal and Interest\u2019, also referred to as \u2018SPPI assets\u2019. SPPI assets are financial assets with contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (as defined in IFRS 9), excluding assets that are held for trading and/or that are managed and whose performance is evaluated on a fair value basis. The table below provides a split of the fair value of financial assets into three categories: SPPI assessment applicable under IFRS 9 and conditions met (SPPI compliant assets), SPPI assessment applicable under IFRS 9 and conditions not met (SPPI non-compliant assets), and SPPI assessment not applicable. Whilst IFRS 9 becomes effective for NN Group on the same date as IFRS 17, the information in the table below is based on the assets held, and business models in place. Fair value of financial assets - SPPI assessment SPPI compliant assets SPPI non-compliant assets SPPI assessment not applicable 2022 2021 2022 2021 2022 2021 Cash and cash equivalents 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 Available-for-sale investments 69,861 94,940 5,091 4,842 6,659 8,101 Loans 60,751 71,576 45 62 645 959 Financial assets 130,612 166,516 5,136 4,904 51,669 62,660 The estimated fair value represents the price at which an orderly transaction to sell the financial asset or to transfer the financial liability would take place between market participants at the balance sheet date (exit price). The fair value of financial assets and liabilities is based on unadjusted quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available market prices are obtained from independent market vendors, brokers or market makers. Because substantial trading markets do not exist for all financial instruments, various techniques have been developed to estimate the approximate fair value of financial assets and liabilities that are not actively traded. The fair value presented may not be indicative of the net realisable value. In addition, the calculation of the estimated fair value is based on market conditions at a specific point in time and may not be indicative of the future fair value. The following methods and assumptions were used by NN Group to estimate the fair value of the financial instruments: Cash and cash equivalents Cash and cash equivalents are recognised at their nominal value which approximates the fair value. Financial assets and liabilities at fair value through profit or loss Derivatives Derivative contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments that are not actively traded, the fair value is estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principal techniques used to value these instruments are based on discounted cash flows, Black-Scholes option models and Monte Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on \u2018no arbitrage\u2019 principles. These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model calibration procedures. The inputs used include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available 36 Fair value of financial assets and liabilities continued Available-for-sale investments Equity securities The fair value of publicly traded equity securities is determined using quoted market prices when available. Where no quoted market prices are available, fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private equity is based on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by reference to market valuations for similar entities quoted in an active market. Debt securities The fair value for debt securities is based on quoted market prices, where available. Quoted market prices may be obtained from an exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available, fair value is based on an analysis of available market inputs, which may include values obtained from one or more pricing services or by a valuation technique that discounts expected future cash flows using market interest rate curves, referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable. Loans For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying values represent a reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions. The fair value of mortgage loans is estimated by taking into account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes. Subordinated debt and debt securities issued The fair value of subordinated debt and debt securities issued is estimated using discounted cash flows based on interest rates and credit spreads that apply to similar instruments. Other borrowed funds The fair value of other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity. Investment contracts For investment contracts for risk of the company, the fair value has been estimated using a discounted cash flow approach based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For investment contracts for risk of policyholders, the fair value generally equals the fair value of the underlying assets. For other investment- type contracts, the fair value is estimated based on the cash surrender values. Customer deposits and other funds on deposit The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair value. The fair values of deposits with stated maturities have been estimated based on discounting future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at fair value The fair value of the financial instruments carried at fair value was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at fair value (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 33,593 359 610 34,562 Non-trading derivatives 130 2,322 2,452 Financial assets designated as at fair value through profit or loss 491 190 681 Available-for-sale investments 49,405 26,784 5,421 81,610 Financial assets 83,619 29,655 6,031 119,305 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 217 217 Investment contracts (for contracts at fair value) 2,057 2,057 Non-trading derivatives 3 6,440 19 6,462 Financial liabilities 2,060 6,657 19 8,736 Methods applied in determining the fair value of financial assets and liabilities at fair value (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 38,092 444 725 39,261 Non-trading derivatives 30 6,381 8 6,419 Financial assets designated as at fair value through profit or loss 823 168 991 Available-for-sale investments 69,336 34,656 3,891 107,883 Financial assets 108,281 41,649 4,624 154,554 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 259 259 Investment contracts (for contracts at fair value) 1,449 1,449 Non-trading derivatives 30 1,851 23 1,904 Financial liabilities 1,479 2,110 23 3,612 NN Group has categorised its financial instruments that are either measured in the balance sheet at fair value or for which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending on whether the fair value is determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include, for example, illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), mortgage loans and consumer lending, private equity instruments and investments in real estate funds. Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Transfers into and transfers out of levels in the fair value hierarchy are recognised on the date of the event or change of circumstances that caused the transfer
36 Fair value of financial assets and liabilities continued
Level 1 \u2013 (Unadjusted) Quoted prices in active markets
This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market
that NN Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly
available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and
regularly occurring market transactions with sufficient frequency and volume to provide reliable pricing information on an ongoing basis.
Level 2 \u2013 Valuation technique supported by observable inputs
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the
model are taken from an active market or are observable. If certain inputs in the model are unobservable the instrument is still classified
in this category, provided that the impact of those unobservable inputs elements on the overall valuation is insignificant. Included in this
category are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other
market observable external data and items whose value is derived from quoted prices but for which there was insufficient evidence of an
active market.
Level 3 \u2013 Valuation technique supported by unobservable inputs
This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than
an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets
and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument is
classified in its entirety as Level 3 if a significant portion of the instrument\u2019s fair value is driven by unobservable inputs. Unobservable in this
context means that there is little or no current market data available from which the price at which an orderly transaction would likely occur
can be derived.
Changes in Level 3 financial assets (2022)
2022
Investments
for risk of
policyholders
Non-trading
derivatives
Available-for-
sale
investments Total
Level 3 Financial assets \u2013 opening balance 725 8 3,891 4,624
Amounts recognised in the profit and loss account -83 -8 -21 -112
Revaluations recognised in other comprehensive income (equity) -3 -3
Purchase 1,625 1,625
Sale -32 -174 -206
Maturity/settlement -2 -2
Other transfers and reclassifications 130 130
Exchange rate differences -25 -25
Level 3 Financial assets \u2013 closing balance 610 \u2013 5,421 6,031
Changes in Level 3 financial assets (2021)
2021
Investments
for risk of
policyholders
Non-trading
derivatives
Available-for-
sale
investments Total
Level 3 Financial assets \u2013 opening balance 787 22 2,680 3,489
Amounts recognised in the profit and loss account -41 -14 -18 -73
Revaluations recognised in other comprehensive income (equity) 388 388
Purchase 1,097 1,097
Sale -21 -50 -71
Maturity/settlement -116 -116
Transfers into Level 3 11 11
Transfers out of Level 3 -120 -120
Exchange rate differences 19 19
Level 3 Financial assets \u2013 closing balance 725 8 3,891 4,624
36 Fair value of financial assets and liabilities continued Changes in Level 3 financial liabilities (2022) 2022 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 23 Amounts recognised in the profit and loss account -4 Level 3 Financial liabilities \u2013 closing balance 19 Changes in Level 3 financial liabilities (2021) 2021 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 42 Amounts recognised in the profit and loss account -19 Level 3 Financial liabilities \u2013 closing balance 23 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2022) 2022 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -83 -83 Non-trading derivatives -8 -8 Available-for-sale investments -21 -21 Financial assets -112 \u2013 -112 Financial liabilities Non-trading derivatives -4 -4 Financial liabilities -4 \u2013 -4 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2021) 2021 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -41 -41 Non-trading derivatives -14 -14 Available-for-sale investments -18 -18 Financial assets -73 \u2013 -73 Financial liabilities Non-trading derivatives -19 -19 Financial liabilities -19 \u2013 -19 Level 3 Financial assets at fair value Financial assets measured at fair value in the balance sheet as at 31 December 2022 of EUR 119,305 million (2021: EUR 154,554 million) include an amount of EUR 6,031 million (5.1%) that is classified as Level 3 (2021: EUR 4,625 million (3.0%)). Changes in Level 3 are disclosed above in the table \u2018Level 3 Financial assets 36 Fair value of financial assets and liabilities continued Financial assets in Level 3 include both assets for which the fair value was determined using valuation techniques that incorporate unobservable inputs and assets for which the fair value was determined using quoted prices, but for which the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Fair values that are determined using valuation techniques using unobservable inputs are sensitive to the inputs used. Fair values that are determined using quoted prices are not sensitive to unobservable inputs, as the valuation is based on unadjusted external price quotes. These are classified in Level 3 as a result of the illiquidity in the relevant market, but are not significantly sensitive to NN Group\u2019s own unobservable inputs. Unrealised gains and losses that relate to \u2018Level 3 Financial assets\u2019 are included in the profit and loss account as follows: \u2022 Those relating to Investments for risk of policyholders are included in \u2018Underwriting expenditure\u2019 \u2022 Those relating to Non-trading derivatives are included in \u2018Valuation results on non-trading derivatives\u2019 \u2022 Those relating to financial assets designated as at fair value through profit or loss are included in \u2018Valuation results on non-trading derivatives \u2013 Valuation results on assets and liabilities designated as at fair value through profit or loss (excluding trading)\u2019 Unrealised gains and losses that relate to available-for-sale investments are recognised in other comprehensive income (equity) and included in reserves in \u2018Unrealised revaluations available-for-sale investments and other\u2019. Investments for risk of policyholders Investments for risk of policyholders classified as \u2018Level 3 Financial assets\u2019 amounted EUR 610 million as at 31 December 2022 (2021: EUR 725 million). Net result is unaffected when reasonable possible alternative assumptions would have been used in measuring these investments. Non-trading derivatives Non-trading derivatives classified as \u2018Level 3 Financial assets\u2019 are mainly used to hedge the fair value risk of the mortgage loan portfolio at NN Bank. These derivatives classified as Level 3 amounted nil as at 31 December 2022 (2021: EUR 8 million). Available-for-sale investments The available-for-sale investments classified as \u2018Level 3 Financial assets\u2019 amounted EUR 5,421 million as at 31 December 2022 (2021: EUR 3,891 million) mainly consists of investments in debt securities and shares in real estate investment funds and private equity investment funds of which the fair value is determined using (unadjusted) quoted prices in inactive markets for the securities or quoted prices obtained from the asset managers of the funds. It is estimated that a 10% change in valuation of these investments would have no significant impact on net result but would increase or reduce shareholders\u2019 equity by EUR 542 million (2021: EUR 389 million), being approximately 3.4% (before tax) (2021: 1.1% (before tax)), of total equity. Level 3 Financial liabilities at fair value Non-trading derivatives The total amount of financial liabilities classified as Level 3 at 31 December 2022 of EUR 19 million (2021: EUR 23 million) relates to non-trading derivative positions. In 2022, nil (2021: EUR 9 million) relates to derivatives used to hedge the interest rate risk associated with the funding position of NN Bank. EUR 19 million (2021: EUR 12 million) relates to longevity hedges closed by NN Group. It is estimated that a 5% increase in mortality assumptions for these longevity hedges reduces result and equity before tax by EUR 5 million (2021: EUR 13 million) and a 5% decrease in mortality assumptions increases result and equity before tax by EUR 7 million (2021: EUR 17 million) 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at amortised cost The fair value of the financial instruments carried at amortised cost in the balance sheet (where fair value is disclosed) was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,669 1 6,670 Loans 20 3,018 58,404 61,442 Financial assets 6,689 3,018 58,405 68,112 Financial liabilities Subordinated debt 2,287 2,287 Debt securities issued 1,498 1,498 Other borrowed funds 5,596 5,087 10,683 Investment contracts for risk of company 317 766 1,083 Customer deposits and other funds on deposit 10,309 5,310 15,619 Financial liabilities 20,007 10,397 766 31,170 Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,929 6,929 Loans 4 3,832 68,761 72,597 Financial assets 6,933 3,832 68,761 79,526 Financial liabilities Subordinated debt 2,624 2,624 Debt securities issued 2,351 2,351 Other borrowed funds 6,372 941 51 7,364 Investment contracts for risk of company 49 927 976 Customer deposits and other funds on deposit 9,980 6,480 16,460 Financial liabilities 21,376 7,421 978 29,775
37 Fair value of non-financial assets
The following table presents the estimated fair value of NN Group\u2019s non-financial assets that are measured at fair value in the balance sheet.
Reference is made to Note 1 \u2018Accounting policies\u2019 in the sections \u2018Real estate investments\u2019 and \u2018Property and equipment\u2019 for the methods and
assumptions used by NN Group to estimate the fair value of the non-financial assets.
Fair value of non-financial assets
Estimated fair value Balance sheet value
2022 2021 2022 2021
Real estate investments 2,754 2,719 2,754 2,719
Property in own use 97 71 97 71
Fair value of non-financial assets 2,851 2,790 2,851 2,790
The fair value of the non-financial assets were determined as follows:
Methods applied in determining the fair value of non-financial assets at fair value (2022)
2022 Level 1 Level 2 Level 3 Total
Real estate investments 2,754 2,754
Property in own use 97 97
Non-financial assets \u2013 \u2013 2,851 2,851
Methods applied in determining the fair value of non-financial assets at fair value (2021)
2021 Level 1 Level 2 Level 3 Total
Real estate investments 2,719 2,719
Property in own use 71 71
Non-financial assets \u2013 \u2013 2,790 2,790
Changes in Level 3 non-financial assets (2022)
2022
Real estate
investments
Property
in own use
Level 3 non-financial assets \u2013 opening balance 2,719 71
Amounts recognised in the profit and loss account during the year -8 -2
Purchase 136 1
Revaluation recognised in equity during the year 3
Sale -100 -1
Changes in the composition of the group and other changes 7 25
Level 3 non-financial assets \u2013 closing balance 2,754 97
Changes in Level 3 non-financial assets (2021)
2021
Real estate
investments
Property
in own use
Level 3 non-financial assets \u2013 opening balance 2,444 74
Amounts recognised in the profit and loss account during the year 241 -2
Purchase 156
Sale -124 -2
Changes in the composition of the group and other changes 2 1
Level 3 non-financial assets \u2013 closing balance 2,719 71
37 Fair value of non-financial assets continued Level 3 \u2013 Amounts recognised in the profit and loss account during the year on non-financial assets (2022) 2022 Held at balance sheet date Derecognised during the year Total Real estate investments -8 -8 Property in own use -2 -2 Level 3 Amounts recognised in the profit and loss account during the year on non-financial assets -8 -2 -10 Level 3 \u2013 Amounts recognised in the profit and loss account during the year on non-financial assets (2021) 2021 Held at balance sheet date Derecognised during the year Total Real estate investments 241 241 Property in own use -2 -2 Level 3 Amounts recognised in the profit and loss account during the year on non-financial assets 239 \u2013 239 Real estate investments and Property in own use Valuation methodology The fair value of real estate is based on regular appraisals by independent, qualified valuers. The fair value is established using valuation methods that take into account recent comparable market transactions (CMT), capitalisation of income (CI) methods and/or discounted cash flow (DCF) calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. Future rental income is taken into account in accordance with the terms in existing leases, (expected) vacancies, estimations of the rental values for new leases when leases expire and incentives like rent-free periods. These estimated cash flows are discounted using market- based discount rates that reflect appropriately the risk characteristics of the real estate investments
37 Fair value of non-financial assets continued
Key assumptions
Key assumptions in the valuation of real estate include the estimated current rental value per square metre, the estimated future rental value
per square metre (ERV), the net initial yield and the vacancy rate. These assumptions were in the following ranges:
Significant assumptions
Fair value
Valuation
technique
Current
rent/m
2
ERV/m
2
Net initial
yield % Vacancy %
Average
lease term
in years
The Netherlands
Office 169 DCF 333\u2013342 364\u2013406 3.52\u20133.54 1.26 7.4
Residential 64 DCF 218.1 245.0 4.5 4.5
Residential 4 Residual
approach
Industrial 172 DCF 49\u201352 54\u201364 3.23\u20133.63 3.7
Retail 12 DCF 139.2 202.1 4.5 35.1 8.2
Ground positions 2 Residual
approach
IPUC 97 Residual
approach
Germany
Retail 258 DCF 192\u2013321 173\u2013322 4.26\u20134.48 6.6 4.7
Industrial 258 DCF 48\u201396 60\u201397 3.9\u20134.5 2.0 6.2
France
Residential 228 DCF 286\u2013429 225\u2013353 3.66\u20134.86 1.9 2.0
Industrial 339 DCF 46\u201373 46\u201373 3.86\u20134.78 5.1
Spain
Retail 246 DCF 225\u2013233 195\u2013256 6.41\u20138.48 5.0 3.6
Industrial 124 DCF 0\u201345 30\u201345 0.82\u20136.56 40.2 1.7
Italy
Retail 219 DCF 161\u2013760 170\u2013780 0.9\u20137.51 2.0 5.9
Industrial 37 DCF 52 55 4.6 1.4
Denmark
Industrial 83 DCF 112\u2013165 142\u2013195 4.72\u20135 10.4
Residential 122 DCF 271 271 3.9
Belgium
Retail 116 DCF 82\u2013365 103\u2013324 5.45\u20136.86 3.6 2.9
Industrial 34 DCF 45 48 4.6 0.7
Residential 25 DCF 189 188 26.2
Office 18 DCF 315 194 5.0 23.0 0.5
Poland
Retail 82 DCF 154 157 8.2 5.0 3.3
Real estate under construction and other \u2013
Total real estate 2,709
37 Fair value of non-financial assets continued Sensitivities Significant increases (decreases) in the estimated rental value and rent growth in isolation would result in a significantly higher (lower) fair value of the real estate investments. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would result in a significantly lower (higher) fair value of the real estate investments. During 2022, the number of transactions in relevant real estate markets has decreased, resulting in larger uncertainties around the inputs to the valuations and, therefore, increased uncertainty in the fair value of real estate investments. 38 Derivatives and hedge accounting Use of derivatives and hedge accounting NN Group uses derivatives for effective portfolio management and the management of its asset and liability portfolios. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure. The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and reported in accordance with the nature of the hedged item and the type of IFRS-EU hedge model that is applicable. The three models applicable under IFRS-EU are: cash flow hedge accounting, fair value hedge accounting and net investment hedge accounting. The company\u2019s detailed accounting policies for these three hedge models are set out in Note 1 \u2018Accounting policies\u2019 in the section on \u2018Accounting policies for specific items\u2019. To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non- qualifying hedges are taken to the profit and loss account. However, in certain cases, NN Group mitigates the profit and loss account volatility by designating hedged assets and liabilities at fair value through profit or loss. If hedge accounting is applied under IFRS-EU, it is possible that a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot be continued, even if the hedge remains economically effective. As a result, the volatility arising from undertaking economic hedging in the profit and loss account may be higher than would be expected from an economic point of view. With respect to exchange rate and interest rate derivative contracts, the notional or contractual amount of these instruments is indicative of the nominal value of transactions outstanding at the balance sheet date; however, they do not represent amounts at risk. In 2017, NN Group entered into a longevity hedge, based on a general index of Dutch mortality. The maximum pay-out of the hedge amounts to EUR 100 million, payable after 20 years. The hedge is financed by annual premium payments to the counterparty. The longevity hedge is accounted for as derivative. The hedge reduces the impact of longevity trend scenarios implying more improvement in life expectancy. The regulator gave approval to include the effects of this specific hedge on the SCR. The purpose of the hedge is to reduce the longevity risk. Cash flow hedge accounting NN Group\u2019s hedge accounting consists mainly of cash flow hedge accounting. NN Group\u2019s cash flow hedges principally consist of Euribor based (forward) interest rate swaps and cross-currency interest rate swaps that are used to protect against its exposure to variability in future interest cash flows on assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors including estimates of prepayments and defaults. Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders\u2019 equity. Interest income and expenses on these derivatives are recognised in the profit and loss account consistent with the manner in which the forecast cash flows affect Net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the profit and loss account. For the year ended 31 December 2022, NN Group recognised EUR -5,942 million (2021: EUR -3,383 million) in equity as effective fair value changes on derivatives under cash flow hedge accounting. The balance of the cash flow hedge reserve in equity as at 31 December 2022 is EUR 3,901 million (2021: EUR 11,906 million) gross and EUR 2,895 million (2021: EUR 8,837 million) after deferred tax. This cash flow hedge reserve will fluctuate with the fair value of the underlying derivatives and will be reflected in the profit and loss account under Interest income/expenses over the remaining term of the underlying hedged items. The cash flow hedge reserve relates to a large number of derivatives and hedged items with varying maturities up to 48 years with the largest concentrations in the range 1 year to 13 years. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in EUR 75 million loss (2021: EUR 10 million loss) which was recognised in the profit and loss account .
38 Derivatives and hedge accounting continued
As at 31 December 2022, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR -2,986 million
(2021: EUR 3,718 million), presented in the balance sheet as EUR 256 million (2021: EUR 4,622 million) positive fair value under assets and EUR
3,242 million (2021: EUR 904 million) negative fair value under liabilities.
As at 31 December 2022 and 2021, there were no non-derivatives designated as hedging instruments for cash flow hedge
accounting purposes.
Included in \u2018Interest income and Interest expenses on non-trading derivatives\u2019 is EUR 137 million (2021: EUR 164 million) and EUR 127 million
(2021: EUR 98 million), respectively, relating to derivatives used in cash flow hedges.
Fair value hedge accounting
NN Group\u2019s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect
against changes in the fair value of fixed-rate instruments due to movements in market interest rates.
Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective
portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting
ineffectiveness has an impact on the net result.
For the year ended 31 December 2022, NN Group recognised EUR 1,701 million (2021: EUR 481 million) of fair value changes on derivatives
designated under fair value hedge accounting in the profit and loss account. This amount was offset by EUR -1,692 million (2021:
EUR\u2219-486 million) fair value changes recognised on hedged items. This resulted in EUR 9 million income (2021: EUR 5 million loss) net
accounting ineffectiveness recognised in the profit and loss account. As at 31 December 2022, the fair value of outstanding derivatives
designated under fair value hedge accounting was EUR 62 million (2021: EUR 25 million), presented in the balance sheet as EUR 62 million
(2021: EUR 29 million) positive fair value under assets and EUR 0 million (2021: EUR 4 million) negative fair value under liabilities.
NN Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU.
The EU \u2018carve-out\u2019 for macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as
the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under-
hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to core deposits and ineffectiveness only arises when
the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. NN Group
applies the IFRS-EU \u2018carve-out\u2019 to hedge the interest rate risk of mortgage loans. The hedging activities are designated under a portfolio fair
value hedge on the mortgages, under IFRS-EU.
39 Assets by contractual maturity Amounts presented in these tables by contractual maturity are the amounts as presented in the balance sheet. Assets by contractual maturity (2022) 2022 Less than 1 month 1 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Assets Cash and cash equivalents 6,636 34 6,670 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 2 34,562 34,562 \u2013 non-trading derivatives 71 242 77 147 1,915 2,452 \u2013 designated as at fair value through profit or loss 286 25 1 369 681 Available-for-sale investments 2,147 1,785 4,475 16,541 45,647 11,015 81,610 Loans 229 289 1,254 5,950 60,324 -2 68,044 Reinsurance contracts 30 37 194 139 584 35 1,019 Intangible assets 2 26 70 266 381 879 1,624 Deferred acquisition costs 48 26 118 396 1,256 14 1,858 Deferred tax assets 2 48 29 779 46 904 Other assets 5,880 831 539 147 511 69 7,977 Remaining assets (for which maturities are not applicable) 3 9,709 9,709 Total assets 15,329 3,272 6,800 23,616 111,397 56,696 217,110 1 Includes assets on demand. 2 Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not) have a maturity depending on their nature, this does not impact the liquidity position of NN Group. 3 Included in remaining assets for which maturities are not applicable are Property and equipment, Real estate investments and Associates and joint ventures. Due to their nature remaining assets consist mainly of assets expected to be recovered after more than 12 months. Assets by contractual maturity (2021) 2021 Less than 1 month 1 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Assets Cash and cash equivalents 4,268 2,661 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 2 39,261 39,261 \u2013 non-trading derivatives 5 98 84 108 6,124 6,419 \u2013 designated as at fair value through profit or loss 552 28 411 991 Available-for-sale investments 1,747 2,576 6,086 20,787 64,721 11,966 107,883 Loans 20 301 1,447 6,451 59,992 -11 68,200 Reinsurance contracts 25 32 130 137 596 34 954 Intangible assets 5 15 49 198 309 553 1,129 Deferred acquisition costs 53 26 111 309 1,392 2 1,893 Assets held for sale 4,121 4,121 Deferred tax assets -13 1 1 24 34 47 Other assets 1,935 794 548 156 271 2 3,706 Remaining assets (for which maturities are not applicable) 3 10,052 10,052 Total assets 8,597 6,503 12,577 28,175 133,429 62,304 251,585 1 Includes assets on demand. 2 Investments for risk of policyholders are managed on behalf of policyholders on a fair value basis. Although individual instruments may (or may not) have a maturity depending on their nature, this does not impact the liquidity position of NN Group. 3 Included in remaining assets for which maturities are not applicable are Property and equipment, Real estate investments and Associates and joint ventures. Due to their nature, remaining assets consist mainly of assets expected to be recovered after more than 12 months 40 Liabilities by maturity The tables below include all financial liabilities by maturity based on contractual, undiscounted cash flows. Furthermore, the undiscounted future coupon interest on financial liabilities payable is included in a separate line and in the relevant maturity bucket. Derivative liabilities are included on a net basis if cash flows are settled net. For other derivative liabilities, the contractual gross cash flow payable is included. Non-financial liabilities, including insurance and investment contracts, are included based on a breakdown of the (discounted) balance sheet amounts by expected maturity. Reference is made to the Liquidity risk paragraph in Note 52 \u2018Risk management\u2019 for a description on how liquidity risk is managed. Liabilities by maturity (2022) 2022 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Adjustment 1 Total Liabilities Subordinated debt 2 1,000 1,350 -16 2,334 Debt securities issued 500 600 600 -6 1,694 Other borrowed funds 1,261 1,807 2,688 2,002 3,360 11,118 Customer deposits and other funds on deposit 10,427 151 584 2,215 2,858 16,235 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 5 66 166 1,120 6,513 -1,408 6,462 Financial liabilities 12,193 2,024 3,438 6,937 14,681 \u2013 -1,430 37,843 Insurance and investment contracts 771 1,033 3,608 15,027 102,105 33,833 1 156,378 Deferred tax liabilities 5 8 -18 51 446 -69 423 Other liabilities 2,976 675 163 193 580 48 -1 4,634 Non-financial liabilities 3,752 1,716 3,753 15,271 103,131 33,812 \u2013 161,435 Total liabilities 15,945 3,740 7,191 22,208 117,812 33,812 -1,430 199,278 Coupon interest due on financial liabilities 21 34 152 762 2,242 3,211 1 This column reconciles the contractual undiscounted cash flow on financial liabilities to the balance sheet values. The adjustments mainly relate to valuation differences, the impact of discounting and, for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net). 2 Subordinated debt maturities are presented based on the first call date. For the legal date of maturity reference is made to Note 15 \u2018Subordinated debt 40 Liabilities by maturity continued Liabilities by maturity (2021) 2021 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Adjustment 1 Total Liabilities Subordinated debt 2 500 1,000 850 6 2,356 Debt securities issued 600 500 1,200 -8 2,292 Other borrowed funds 55 675 385 2,805 3,381 7,301 Customer deposits and other funds on deposit 10,113 150 602 2,168 2,912 15,945 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 30 125 307 1,154 8,328 -8,040 1,904 Financial liabilities 10,198 1,550 1,794 7,627 16,671 \u2013 -8,042 29,798 Insurance and investment contracts 821 1,187 3,961 16,796 108,051 37,996 168,812 Liabilities held for sale 3,464 3,464 Deferred tax liabilities 4 6 -14 58 4,459 304 4,817 Other liabilities 7,853 495 516 287 633 -8 9,776 Non-financial liabilities 8,678 1,688 7,927 17,141 113,143 38,292 \u2013 186,869 Total liabilities 18,876 3,238 9,721 24,768 129,814 38,292 -8,042 216,667 Coupon interest due on financial liabilities 15 25 102 660 1,924 2,726 1 This column reconciles the contractual undiscounted cash flow on financial liabilities to the balance sheet values. The adjustments mainly relate to the impact of discounting and, for derivatives, to the fact that the contractual cash flows are presented on a gross basis (unless the cash flows are actually settled net). 2 Subordinated debt maturities are presented based on the first call date. For the legal date of maturity reference is made to Note 15 \u2018Subordinated debt\u2019. 41 Assets not freely disposable Assets not freely disposable of EUR 118 million (2021: EUR 136 million) relates to the mandatory reserve deposit at De Nederlandsche Bank and cash balances held at BNG Bank regarding the structured entities Arena NHG, Hypenn RMBS entities and the Covered Bond companies. Assets relating to securities lending are disclosed in Note 42 \u2018Transferred, but not derecognised financial assets\u2019. Assets in securitisation programmes originated by NN Bank are disclosed in Note 47 \u2018Structured entities\u2019. 42 Transferred, but not derecognised financial assets The majority of NN Group\u2019s financial assets that have been transferred, but do not qualify for derecognition, are debt instruments used in securities lending. NN Group retains substantially all risks and rewards of those transferred assets. The assets are transferred in return for cash collateral or other financial assets. Non-cash collateral is not recognised in the balance sheet. Cash collateral is recognised as an asset and an offsetting liability is established for the same amount as NN Group is obligated to return this amount upon termination of the lending arrangement. Transfer of financial assets not qualifying for derecognition 2022 2021 Transferred assets at carrying value Available-for-sale investments 8,703 17,761 Associated liabilities at carrying value Other borrowed funds 250 580 The table above does not include assets transferred to consolidated securitisation entities, as these related assets are not transferred from a consolidated perspective. Reference is made to Note 47 \u2018Structured entities\u2019
43 Offsetting of financial assets and liabilities
The following tables include information about rights to offset and the related arrangements. The amounts included consist of all recognised
financial instruments that are presented net in the balance sheet under the IFRS-EU offsetting requirements (legal right to offset and
intention to settle on a net basis) and amounts presented gross in the balance sheet but subject to enforceable master netting arrangements
or similar arrangement.
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2022)
2022
Related amounts not offset
in the balance sheet
Balance sheet line item Financial instrument
Gross financial
assets
Gross financial
liabilities
offset in the
balance sheet
Net financial
assets in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 2,405 2,405 -1,642 -735 28
Financial assets at fair
value through profit or loss 2,405 \u2013 2,405 -1,642 -735 28
Other items where
offsetting is applied
in the balance sheet 158 \u2013 158 -110 -48 \u2013
Total financial assets 2,563 \u2013 2,563 -1,752 -783 28
Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2021 )
2021
Related amounts not offset
in the balance sheet
Balance sheet line item Financial instrument
Gross financial
assets
Gross financial
liabilities
offset in the
balance sheet
Net financial
assets in the
balance sheet
Financial
instruments
Cash and
financial
instruments
collateral Net amount
Non-trading derivatives Derivatives 6,411 6,411 -1,152 -5,231 28
Financial assets at fair
value through profit or loss 6,411 \u2013 6,411 -1,152 -5,231 28
Other items where
offsetting is applied
in the balance sheet 127 \u2013 127 -56 -70 1
Total financial assets 6,538 \u2013 6,538 -1,208 -5,301 29
43 Offsetting of financial assets and liabilities continued Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2022) 2022 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial liabilities Gross financial assets offset in the balance sheet Net financial liabilities in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 6,321 6,321 -1,643 -4,610 68 Financial liabilities at fair value through profit or loss 6,321 \u2013 6,321 -1,643 -4,610 68 Other items where offsetting is applied in the balance sheet 4,291 4,291 -110 -4,129 52 Total financial liabilities 10,612 \u2013 10,612 -1,753 -8,739 120 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2021) 2021 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial liabilities Gross financial assets offset in the balance sheet Net financial liabilities in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 1,679 1,679 -1,152 -495 32 Financial liabilities at fair value through profit or loss 1,679 \u2013 1,679 -1,152 -495 32 Other items where offsetting is applied in the balance sheet 58 58 -56 -2 \u2013 Total financial liabilities 1,737 \u2013 1,737 -1,208 -497 32 44 Contingent liabilities and commitments In the normal course of business (excluding investment commitments) NN Group is party to activities whose risks are not reflected in whole or in part in the Consolidated annual accounts. In response to the needs of its customers, NN Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. Contingent liabilities and commitments (2022) 2022 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 669 1,255 2,601 225 18 63 4,831 Guarantees 18 3 21 Contingent liabilities and commitments 669 1,255 2,619 228 18 63 4,852 Contingent liabilities and commitments (2021) 2021 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 505 989 2,132 244 21 343 4,234 Guarantees 20 1 21 Contingent liabilities and commitments 505 989 2,152 245 21 343 4,255 Next to this NN Group has committed amounts to investments of EUR 4,310 million (2021: 3,713 million) where it is uncertain when those amounts will be invested 44 Contingent liabilities and commitments continued NN Group has issued certain guarantees, other than those included in \u2018Insurance contracts\u2019, which are expected to expire without being drawn on and therefore does not necessarily represent future net cash outflows. In addition to the items included in \u2018Contingent liabilities\u2019, NN Group has issued guarantees as a participant in collective arrangements of national industry bodies and as a participant in government required collective guarantee schemes which apply in different countries. ING Group During 2016, ING Group, NN Group\u2019s former parent company, sold its remaining stake in NN Group. Therefore, ING Group has ceased to be a related party of NN Group in the course of 2016. The following agreements with ING Group are still relevant: Master claim agreement In 2012, ING Groep N.V., Voya Financial Inc. (formerly ING U.S., Inc.) and ING Insurance Eurasia N.V. entered into a master claim agreement to (a) allocate existing claims between these three parties and (b) agree on criteria for how to allocate future claims between the three parties. The master claim agreement contains further details on claim handling, conduct of litigation and dispute resolution. Indemnification and allocation agreement ING Groep N.V. and NN Group N.V. have entered into an indemnification and allocation agreement, in which ING Group has agreed to indemnify NN Group for certain liabilities that relate to the business of or control over certain (former) U.S. and Latin American subsidiaries of NN Group in the period until 30 September 2013 or, if the relevant subsidiary was divested by NN Group after 30 September 2013, such later date of divestment. These liabilities mainly include contingent liabilities that may arise as a result of the initial public offering of ING U.S. (such as prospectus liability), the sales of the Latin American businesses (such as claims under warranties and other buyer protection clauses) and the liabilities for the claims concerning the performance of certain interest-sensitive products that were sold by a former subsidiary of NN\u2219Group in Mexico. Other agreements In connection with the initial public offering of NN Group N.V., ING Groep N.V. entered in 2014 into several other agreements with NN Group N.V. which are currently, partly or wholly, in force, such as a joinder agreement, an equity administration agreement and a Risk Management Programme (RMP) indemnity agreement. In 2015, NN Group N.V. and ING Groep N.V. entered into an agreement providing amongst others for allocation between them of insurance payments under the public offering securities insurance taken out by ING Groep N.V. with respect to the IPO of NN Group N.V. 45 Legal proceedings General NN Group is involved in litigation and arbitration proceedings in the Netherlands and in a number of foreign jurisdictions, involving claims by and against NN Group which arise in the ordinary course of its business, including in connection with its activities as insurer, lender, seller, broker-dealer, underwriter, issuer of securities and investor and its position as employer and taxpayer. In certain of such proceedings, very large or indeterminate amounts are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate outcome of all pending or threatened legal and regulatory proceedings, NN Group believes that some of the proceedings set out below may have, or have in the recent past had, a significant effect on the financial condition, profitability or reputation of NN Group. Because of the geographic spread of its business, NN Group may be subject to tax audits in numerous jurisdictions at any point in time. Although NN Group believes that it has adequately provided for its tax positions, the ultimate outcome of these audits may result in liabilities that are different from the amounts recognised. Unit-linked products in the Netherlands Since the end of 2006, unit-linked products (commonly referred to in Dutch as \u2018beleggingsverzekeringen\u2019) have received negative attention in the Dutch media, from the Dutch Parliament, the Netherlands Authority for the Financial Markets (Autoriteit Financi\u00eble Markten) and consumer protection organisations. Costs of unit-linked products sold in the past are perceived as too high and Dutch insurers are in general being accused of being less transparent in their offering of such unit-linked products. On 29 April 2015, the European Court of Justice issued its judgment on preliminary questions submitted by the District Court in Rotterdam, upon request of parties, including Nationale- Nederlanden, to obtain clarity on principal legal questions with respect to cost transparency in relation to unit-linked products. The main preliminary question considered by the European Court of Justice was whether European law permits the application of information requirements based on general principles of Dutch law that extend beyond information requirements as explicitly prescribed by laws and regulations in force at the time the policy was written. The European Court of Justice ruled that the information requirements prescribed by the applicable European directive may be extended by additional information requirements included in national law, provided that these requirements are necessary for a policyholder to understand the essential characteristics of the commitment and are clear, accurate and foreseeable. Dutch courts will need to take the interpretation of the European Court of Justice into account in relevant proceedings. 45 Legal proceedings continued In 2013 Woekerpolis.nl and in 2017 Consumentenbond and Wakkerpolis, all associations representing the interests of policyholders of Nationale-Nederlanden, individually initiated so-called \u2018collective proceedings\u2019 against Nationale-Nederlanden. These claims are all based on similar grounds and have been rejected by Nationale-Nederlanden and Nationale-Nederlanden defends itself in these legal proceedings. Woekerpolis.nl requested the District Court in Rotterdam to declare that Nationale-Nederlanden sold products which are defective in various respects. Woekerpolis.nl alleges that Nationale-Nederlanden failed to meet the required level of transparency regarding, cost charges and other product characteristics, failed to warn policyholders of certain product related risks, such as considerable stock depreciations, the inability to realise the projected final policy value, unrealistic capital projections due to differences in geometric versus arithmetic returns and that certain general terms and conditions regarding costs were unfair. On 19 July 2017, the District Court in Rotterdam rejected all claims of Woekerpolis. nl and ruled that Nationale-Nederlanden has generally provided sufficient information on costs and deductions. Woekerpolis.nl has lodged an appeal with the Court of Appeal in The Hague against the judgment of the District Court in Rotterdam. On 23 February 2021, the Court of Appeal in The Hague rendered an interim judgment submitting preliminary questions to the Dutch Supreme Court to obtain clarity on the interpretation of certain principle questions of law that are relevant in disputes concerning unit-linked policies. The questions concern the relationship between the specific Dutch regulations applicable to insurers regarding the provision of (pre)contractual information, and Dutch civil law and the impact thereon by European law. On 11 February 2022, the Supreme Court answered the questions of law submitted to it by the Court of Appeal in The Hague. The Supreme Court primarily considers that Dutch civil law is applicable to the legal relationship between insurer and policyholder. It is up to lower courts to decide whether Dutch civil law entails obligations to provide information in addition to the obligations arising from specific regulations and, if so, which obligations. The Supreme Court holds that if the lower courts were to decide that additional information obligations apply, such obligations must satisfy the criteria formulated by the European Court of Justice in the abovementioned judgment of 2015. This means that the courts have to judge whether these information obligations 1) pertain to information that is clear and accurate, 2) are necessary for a proper understanding of the essential characteristics of the unit-linked policy, and 3) enable the insurer to identify with sufficient foreseeability the additional information that must be provided and that the policyholder may expect. (Only) in case any potential obligation to provide additional information satisfies the aforementioned criteria, the policyholder can claim legal protection before the court. The judgment has no direct consequences for customers with a unit-linked policy. The Court of Appeal in The Hague resumed the collective proceedings between Woekerpolis.nl and Nationale-Nederlanden. Under Dutch law, judgments rendered by lower (including appellate) courts have no legal status as precedent and only bind parties in the respective legal proceedings. The Court of Appeal in The Hague is to independently asses all facts, circumstances, arguments, claims and counter arguments brought forward in the collective proceedings between Woekerpolis.nl and Nationale-Nederlanden. A judgment in appeal is expected in the first half of 2023. Any final judgment by the Court of Appeal is subject to cassation proceedings at the Dutch Supreme Court. Consumentenbond alleges that Nationale-Nederlanden failed to adequately inform policyholders on cost charges, deductions for life insurance cover and the leverage and capital consumption effect and that Nationale-Nederlanden provided misleading capital projections. Consumentenbond requested the District Court in Rotterdam to order a recalculation of certain types of unit-linked insurance products and to declare that Nationale-Nederlanden is liable for any damage caused by a lack of information and misleading capital projections. On 29 July 2020, the District Court in Rotterdam rejected all claims of Consumentenbond. The court ruled that Nationale-Nederlanden has provided sufficient information on the effect of costs and deductions for life insurance cover included in the gross premium, leading to consensus between parties (\u2018wilsovereenstemming\u2019) on these costs and deductions and on the manner in which these costs components are set off during the term of the insurance. Consumentenbond has lodged an appeal with the Court of Appeal in The Hague against the judgment of the District Court. The appeal proceedings commenced on 29 June 2021 and are expected to resume in due course after a deferral in anticipation of the judgment in the preliminary proceedings before the Supreme Court mentioned above. Wakkerpolis\u2019 and several individual policyholders\u2019 claims primarily concentrate on the recovery of initial costs for policyholders, claiming that there is no contractual basis for settling these initial costs. In an interim judgment rendered on 22 April 2020, the District Court in Rotterdam in principle dismissed Wakkerpolis\u2019 most important claim to recalculate unit-linked insurance policies without initial costs for policies taken out after 1 July 1994. In its final judgment (in first instance) of 20 July 2022, the District Court in Rotterdam considered that for policies taken out after 1 July 1994, Nationale-Nederlanden has generally complied with its information obligations towards its policyholders, leading to consensus between parties on initial costs. Only with respect to policies taken out before 1 July 1994, the District Court in Rotterdam concluded that Nationale-Nederlanden did not (fully) comply with its information obligations and, therefore, a contractual basis for settling initial costs is absent. Nationale-Nederlanden has to recalculate these policies, as if the initial costs were never incurred, unless consensus between parties on initial costs can otherwise be established. For premium policies taken out between 1 July 1994 and 1 August 1999 that were surrendered early or converted into a paid-up policy, the District Court in Rotterdam ruled that settlement of initial costs upon surrender or conversion was allowed, but that Nationale-Nederlanden should apply a settlement period of five years instead of a settlement period of five to ten years, if that is more favourable for the policyholder. For policies taken out in the period 1 August 1999 onwards, the District Court in Rotterdam found that Nationale-Nederlanden sufficiently informed policyholders of the consequences of early surrender or conversion into a paid-up policy for the value of the policy. Wakkerpolis lodged an appeal against the judgment of 20 July 2022. Although the judgment is largely in line with Nationale-Nederlanden\u2019s views, Nationale-Nederlanden disagrees with the District Court in Rotterdam on a number of points and will lodge a cross appeal. In the context of the ongoing proceedings against Nationale-Nederlanden, Nationale-Nederlanden does not disclose further details on the (potential) financial impact of this judgment 45 Legal proceedings continued There has been for some time and there continues to be political, regulatory and public attention focused on the unit-linked issue in general. Elements of unit-linked policies are being challenged or may be challenged on multiple legal grounds in current and future legal proceedings. There is a risk that one or more of those legal challenges will succeed. Customers of NN Group\u2019s Dutch insurance subsidiaries have claimed, among others, that (a) the investment risk, costs charged or the deductions was or were not, or not sufficiently, made clear to the customer, (b) the product costs charged on initial sale and on an ongoing basis were so high that the expected return on investment was not realistically achievable, (c) the product sold to the customer contained specific risks that were not, or not sufficiently, made clear to the customer (such as the leverage capital consumption risk) or was not suited to the customer\u2019s personal circumstances, (d) the insurer owed the customer a duty of care which the insurer has breached, (e) the insurer failed to warn of the risk of not realising the projected policy values and/or that these projected policy values were incorrect, (f) the policy conditions were unfair, or (g) the costs charged or the deductions had no contractual basis. These claims may be based on general standards of contract or securities law, such as reasonableness and fairness, error, duty of care, or standards for proper customer treatment or due diligence, such as relating to the fairness of terms in consumer contracts and may be made by customers, or on behalf of customers, holding active policies or whose policies have lapsed, matured or been surrendered. There is no assurance that further proceedings for damages based on aforementioned legal grounds or other grounds will not be brought. The timing of reaching any finality in last instance on these pending legal claims and proceedings is uncertain and such uncertainty is likely to continue for some time. Rulings or announcements made by courts or decision-making bodies or actions taken by regulators or governmental authorities against NN Group\u2019s Dutch insurance subsidiaries or other Dutch insurance companies in respect of unit-linked products, or settlements or any other actions to the benefit of customers (including product improvements or repairs) by other Dutch insurance companies towards consumers, consumer protection organisations, regulatory or governmental authorities or other decision-making bodies in respect of the unit-linked products, may affect the (legal) position of NN Group\u2019s Dutch insurance subsidiaries and may force such subsidiaries to take (financial) measures that could have a substantial impact on the financial condition, results of operations, solvency or reputation of NN Group and its subsidiaries. As a result of the public and political attention the unit-linked issue has received, it is also possible that sector-wide measures may be imposed by governmental authorities or regulators in relation to unit-linked products in the Netherlands. The impact on NN Group\u2019s Dutch insurance subsidiaries of rulings made by courts or decision-making bodies, actions taken by regulators or governmental bodies against other Dutch insurance companies in respect of unit-linked products, or settlements or any other actions to the benefit of customers (including product improvements or repairs), may be determined not only by market share but also by portfolio composition, product features, terms and conditions and other factors. Adverse decisions or the occurrence of any of the developments as described above could result in outcomes materially different than if NN Group\u2019s Dutch insurance subsidiaries or its products had been judged or negotiated solely on their own merits. The book of policies of NN Group\u2019s Dutch insurance subsidiaries dates back many years, and in some cases several decades. Over time, the regulatory requirements and expectations of various stakeholders, including customers, regulators and the public at large, as well as standards and market practice, have developed and changed, increasing customer protection. As a result, policyholders and consumer protection organisations have initiated and may in the future initiate proceedings against NN Group\u2019s Dutch insurance subsidiaries alleging that products sold in the past fail to meet current requirements and expectations. In any such proceedings, it cannot be excluded that the relevant court, regulator, governmental authority or other decision-making body will apply current norms, requirements, expectations, standards and market practices on laws and regulations to products sold, issued or advised on by NN Group\u2019s Dutch insurance subsidiaries. Although the financial consequences of any of these factors or a combination thereof could be substantial for the Dutch insurance business of NN Group and, as a result, may have a material adverse effect on NN Group\u2019s business, reputation, revenues, results of operations, solvency, financial condition and prospects, it is not possible to reliably estimate or quantify NN Group\u2019s overall exposures at this time. Dispute on reinsurance agreement NN Group had reinsured with another insurance company part of the exposure on certain insured pension obligations. The counterparty acknowledged the existence of a reinsurance arrangement, but disputed the applicability of fundamental aspects of the reinsurance agreement. NN Group started legal proceedings in 2019. A provision was recognised in 2019. In 2021, both parties agreed on a settlement. As a result, the reinsurance was cancelled and a settlement amount was received. The net positive impact of the settlement was recognised in 2021. Argentina On 10 April 2019, NN Group filed a claim with the International Centre for Settlement of Investment Disputes (ICSID) under the Bilateral Investment Treaty between Argentina and the Netherlands, in order to resolve a dispute with the Argentine Republic. The dispute relates to the nationalisation of Or\u00edgenes \u2013 NN Group\u2019s former pension fund manager in Argentina - by the Argentine Government in 2008. These proceedings may last for several years. As the case is still pending, it is unclear at this stage whether and to what extent any compensation will be granted to NN Group and therefore no compensation has been recognised 46 Companies and businesses acquired and divested Acquisitions (2022) MetLife\u2019s businesses in Poland and Greece In July 2021, NN Group announced it had reached agreement to acquire 100% of MetLife\u2019s businesses in Poland and Greece as part of the strategy to strengthen NN Group\u2019s position in these growth markets. The acquisition was completed in the first half of 2022: Greece in January 2022 and Poland in April 2022. The amounts in the acquisition balance sheets are as follows: Acquisition accounting amounts for the MetLife transaction MetLife Greece MetLife Poland Total Consideration paid -123 -427 -550 Investments 1,823 940 2,763 Other assets 123 68 191 Insurance liabilities 1,846 928 2,774 Other liabilities 49 59 108 New intangible assets 22 187 209 Fair value of net assets acquired 73 208 281 Goodwill 50 219 269 The amount of revenue and profit of Metlife Greece and Poland since acquisition date and if the acquisition date had been at the start of 2022 are not significant. ABN AMRO Levensverzekering In February 2022 NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen announced that they had reached an agreement to sell the life insurance subsidiary of ABN AMRO Verzekeringen to Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NN Life). This transaction was completed in July 2022. ABN AMRO Verzekeringen is a joint venture between NN Group (51%) and ABN AMRO Bank (49%). The life insurance subsidiary of ABN AMRO Verzekeringen was already consolidated by NN Group and, therefore, this transaction did not have significant impact on NN Group. Acquisitions (2021) Heinenoord In July 2021, NN Group announced that it had reached an agreement to acquire a 70% stake in Dutch insurance broker and service provider Heinenoord, for a total consideration of EUR 179 million. In addition, NN Group refinanced the outstanding debt granted to Heinenoord for an amount of EUR 129 million. Furthermore, the agreement includes a put option and call option structure on the remaining 30% of shares. The put option can be exercised as from 1 January 2024 and the call option can be exercised by NN as from 1 January 2025. The acquisition closed in October 2021 and was accounted for in 2021. Heinenoord is consolidated 100% by NN Group; a liability was recognised for the estimated remaining price to be paid under the put option of EUR 85 million, which was subsequently remeasured to EUR 53 million at 31 December 2022. Intangible assets for the brand name and customer relationships were recognised for an amount of EUR 120 million. In addition, goodwill was recognised for an amount of EUR 310 million. There are no other assets and liabilities in the balance sheet of Heinenoord that are significant to NN Group. Heinenoord is included in the segment Netherlands Non-life. Divestments (2022) NN IP In August 2021, NN Group announced that it had reached an agreement to sell its asset management activities executed by NN Investment Partners (NN IP) to Goldman Sachs for total cash proceeds of EUR 1.7 billion closed in April 2022 resulting in a gain of EUR 1,062 million. Following the announced disposal, the asset management activities were classified as Held for sale in 2021. Reference is made to Note 12 \u2018Assets and liabilities held for sale\u2019. The results from NN IP and the divestment result are presented as Result from discontinued operations. Reference is made to Note 31 \u2018Discontinued operations\u2019. Closed book portfolio NN Belgium In November 2021, NN Group\u2019s subsidiary NN Insurance Belgium sold a closed book life portfolio to Athora Belgium. The closed book portfolio, comprising life insurance policies that are no longer being sold, reflected approximately EUR 3.3 billion of assets and liabilities. The transaction was completed on 4 October 2022. Following the announced disposal, the closed book life portfolio was classified as Held for sale. Therefore, the assets and liabilities of the closed book life portfolio were presented in \u2018Assets held for sale\u2019 and \u2018Liabilities held for sale\u2019 in the balance sheet in 2021. Reference is made to Note 12 \u2018Assets and liabilities held for sale\u2019. 46 Companies and businesses acquired and divested continued Divestments (2021) Bulgaria In February 2021, NN Group announced that it has reached an agreement with KBC Group N.V. (KBC) to sell its Bulgarian operations for a total consideration of EUR 78 million to KBC\u2019s Bulgarian insurance business DZI. The transaction closed in July 2021. The sale did not have a significant impact on the net result, equity or the Solvency II ratio of NN Group. 47 Structured entities NN Group\u2019s activities involve transactions with structured entities in the normal course of business. A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed through contractual arrangements. NN Group\u2019s involvement in these entities varies and includes both debt financing and equity financing of these entities as well as other relationships. Based on its accounting policies, as disclosed in Note 1 \u2018Accounting policies\u2019, NN Group establishes whether these involvements result in no significant influence, significant influence, joint control or control over the structured entity. The structured entities over which NN Group can exercise control are consolidated. NN Group may provide support to these consolidated structured entities as and when appropriate, however, this is fully reflected in the Consolidated annual accounts of NN Group as all assets and liabilities of these entities are included in the Consolidated balance sheet and off-balance sheet commitments are disclosed. NN Group\u2019s activities involving structured entities are explained below in the following categories: \u2022 Consolidated NN Group originated liquidity management securitisation and covered bond programmes \u2022 Investments \u2013 NN Group managed investment funds \u2022 Investments \u2013 Third-party managed structured entities Consolidated NN Group originated liquidity management securitisation and covered bond programmes Mortgage loans issued are partly funded by issuing residential mortgage-backed securities under NN Group\u2019s Dutch residential mortgage- backed securities programmes (Hypenn and Arena) and covered bonds. The mortgage loans transferred to these securitisation vehicles continue to be recognised in the balance sheet of NN Group. Total amounts of mortgage loans securitised (notes issued) and notes held by third parties as at 31 December is as follows: Mortgage loans securitised Related mortgage loans RMBS issued and held by third parties Maturity year 2022 2021 2022 2021 Hypenn RMBS I 2024 1,048 1,169 Hypenn RMBS VI 503 333 Hypenn RMBS VII 2026 1,302 1,563 NN Conditional Pass-Through Covered Bond Company 2024-2039 2,925 2,587 Soft Bullet Covered Bonds 2024-2041 5,819 1,900 4,826 1,742 Total 8,169 8,060 4,826 4,662 NN Group companies hold the remaining notes. NN Group managed investment funds NN Group originates investment funds. NN Group may hold investments in these funds for its own account through the general account investment portfolio of the insurance operations. Other investments in these funds may be held for the risk of policyholders or by third parties. For the majority of these funds, NN Group also acts as the fund manager. NN Group considers both NN Group\u2019s financial interests for own risk and its role as asset manager to establish whether control exists and whether the fund is consolidated. In general, NN Group maintains a minority interest in these funds and NN Group receives a fixed fee over assets under management, at arm\u2019s length basis, for its asset management activities. These funds are generally not consolidated by NN Group. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the \u2018power\u2019) and assume all risks and benefits on these investments (i.e. the policyholder assumes the variable returns). Reference is made to Note 5 \u2018Available-for-sale investments\u2019 in which investments in equity securities are specified by NN Group managed investment funds and Third-party managed investment funds. The maximum exposure to loss for NN Group is equal to the reported carrying value of the investment recognised in the balance sheet of NN Group .
47 Structured entities continued
Third-party managed structured entities
As part of its investment activities, NN Group invests both in debt and equity instruments of structured entities originated by third parties.
Most of the investments in debt instruments of third-party managed structured entities relate to Asset-backed securities (ABS), classified as
loans. Reference is made to Note 5 \u2018Available-for-sale investments\u2019 where the ABS portfolio is disclosed.
The majority of the investments in equity instruments of third-party managed structured entities relate to interests in investment funds that
are not originated or managed by NN Group. Reference is made to Note 5 \u2018Available-for-sale investments\u2019 in which investments in equity
securities are specified by NN Group managed investment funds and Third-party managed investment funds.
NN Group has significant influence for some of its real estate investment funds as disclosed in Note 7 \u2018Associates and joint ventures\u2019.
The maximum exposure to loss for NN Group is equal to the reported carrying value of the investment recognised in the balance sheet of
NN Group.
48 Related parties
In the normal course of business, NN Group enters into various transactions with related parties. Parties are considered to be related if one
party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties
of NN Group include, among others, associates, joint ventures, key management personnel and close family members and the defined benefit
and defined contribution plans. Transactions between related parties have taken place on an arm\u2019s length basis and include distribution
agreements, sourcing and procurement agreements, human resources-related arrangements, and rendering and receiving of services.
There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with
related parties.
NN Group identifies the following (groups of) related party transactions:
Transactions with key management personnel
Transactions with members of NN Group\u2019s Executive Board, Management Board and Supervisory Board and close family members are
considered to be transactions with key management personnel. Reference is made to Note 49 \u2018Key management personnel compensation\u2019
for more information on these transactions.
Transactions with consolidated entities
Entities over which NN Group can exercise control are considered to be related parties of NN Group. These entities are consolidated by NN
Group. Transactions with or between entities controlled by NN Group are eliminated in the Consolidated annual accounts. More information
on the NN Group originated liquidity management securitisation programmes is disclosed in Note 47 \u2018Structured entities\u2019.
Transactions with associates and joint ventures
Associates and joint ventures of NN Group are related parties of NN Group. The transactions with associates and joint ventures can be
summarised as follows:
Transactions with associates and joint ventures
2022 2021
Assets 85 210
Income 5 8
Transactions with post-employment benefit plans
Entities administering or executing post-employment benefit plans of the employees of NN Group are considered to be related parties of
NN\u2219Group. This relates to NN Group\u2019s pensions funds, i.e. the ING Group DB pension fund (joint with ING Bank), the Stichting Pensioenfonds
Delta Lloyd, the NN CDC pension fund and BeFrank in the Netherlands and Instelling voor Bedrijfspensioenvoorziening Delta Lloyd Life OFP
in Belgium. For more information on the post-employment benefit plans, reference is made to Note 28 \u2018Staff expenses\u2019.
48 Related parties continued Transactions with other related parties Investment funds Other related parties include NN Group managed investment funds. Reference is made to Note 47 \u2018Structured entities\u2019 for more information. Pension entities NN Group operates several pension entities in the Netherlands, including BeFrank PPI N.V. and De Nationale Algemeen Pensioenfonds. For these entities, all asset management and other services are provided by NN Group entities on an arm\u2019s length basis. NN Group has no financial interest in the pension schemes that are executed by these entities. These entities are considered related parties. 49 Key management personnel compensation Transactions with key management personnel (Executive Board, Management Board and Supervisory Board) are transactions with related parties. These transactions are disclosed in more detail as required by Part 9 Book 2 of the Dutch Civil Code in sections II and III in the remuneration report in the financial report. These sections of the remuneration report are therefore part of the annual accounts. 2022 Executive Board and Management Board (2022) Amounts in thousands of euros Executive Board Management Board Total Fixed compensation: \u2013 base salary (cash) 2,555 3,820 6,375 \u2013 base salary (fixed shares) 639 955 1,594 \u2013 pension costs 1 49 151 200 \u2013 individual saving allowance 1 690 950 1,640 Variable compensation: \u2013 upfront cash 100 151 251 \u2013 upfront shares 100 151 251 \u2013 deferred cash 150 227 377 \u2013 deferred shares 150 227 377 Fixed and variable compensation 4,433 6,632 11,065 Other benefits 411 294 705 Employer cost social security 3 138 260 398 Total compensation 4,982 7,186 12,168 1 The pension costs consist of an amount of employer contribution (EUR 200 thousand) and an individual savings allowance (EUR 1,640 thousand), which is 23.3% of the amount of base salary above EUR\u2219114,866. 2 Annemiek van Melick was appointed Chief Financial Officer and Member of the Executive Board NN Group on 1 July 2022, succeeding Delfin Rueda, who as he stepped down on 1 July 2022. 3 The employer cost social security does not impact the overall remuneration received by the Executive Board and Management Board members. In the table above, \u2018Executive Board\u2019 refers to the two members of the Executive Board as at 31 December 2022. The two members of the Executive Board are also members of the Management Board. In the table above, \u2018Management Board\u2019 refers to the six members of the Management Board as at 31 December 2022, i.e. those members that are not also member of the Executive Board. In the table above \u2018Total\u2019 refers to all members of the Management Board during 2022. Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in \u2018Staff expenses\u2019 as part of \u2018Total expenses\u2019. The total remuneration as disclosed in the table above (for 2022: EUR 12.2 million) includes all variable remuneration related to the performance year 2022. Under IFRS-EU, certain components of variable remuneration are not recognised in the profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses in 2022 and therefore included in \u2018Total expenses\u2019 in 2022, relating to the fixed expenses of 2022 and the vesting of variable remuneration of 2022 and earlier performance years, is EUR 12.9 million. As at 31 December 2022, members of the Executive Board and Management Board held a total of 186,891 NN Group N.V. shares. In 2022, 13,764 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board
49 Key management personnel compensation continued
Supervisory Board (2022)
Amounts in thousands of euros
Supervisory
Board
Fixed fees 822
Expense allowances 70
Compensation Supervisory Board 892
As at 31 December 2022, members of the Supervisory Board held no NN Group N.V. shares.
Loans and advances to members of the Management Board (2022)
Amounts in thousands of euros
Amount
outstanding
31 December
Average
interest rate Repayments
Management Board members 223 1.90% 178
Loans and advances 223 178
As at 31 December 2022, no loans and advances were provided to members of the Executive Board and Supervisory Board.
2021
Executive Board and Management Board (2021)
Amounts in thousands of euros
Executive
Board
Management
Board
3
Total
Fixed compensation:
\u2013 base salary (cash) 2,557 3,947 6,504
\u2013 base salary (fixed shares) 639 889 1,528
\u2013 pension costs
1
49 162 211
\u2013 individual saving allowance
1
692 953 1,645
Variable compensation:
\u2013 upfront cash 118 206 324
\u2013 upfront shares 118 206 324
\u2013 deferred cash 176 241 417
\u2013 deferred shares 176 309 485
Other
2
67 67
Fixed and variable compensation 4,525 6,980 11,505
Other benefits 350 322 672
Employer cost social security
4
131 270 401
Total compensation 5,006 7,572 12,578
1 The pension costs consist of an amount of employer contribution (EUR\u2219211 thousand) and an individual savings allowance (EUR\u22191,645 thousand), which is 23.3% of the amount of base salary above
EUR\u2219112,189.
2 For the NN Investment Partners business, 50% of deferred awards are made in a deferred investment in funds managed by the business instead of awarding deferred cash. In this way, alignment of interests
is achieved between staff working in the NN Investment Partners business and the clients who invest in funds managed by that business.
3 Satish Bapat was appointed to the Management Board as CEO NN Investment Partners on 1 April 2017 and stepped down on 19 August 2021.
4 The employer cost social security does not impact the overall remuneration received by the Executive Board and Management Board members.
In the table above, \u2018Executive Board\u2019 refers to the two members of the Executive Board as at 31 December 2021. The two members of the
Executive Board were also members of the Management Board. In the table above, \u2018Management Board\u2019 refers to the six members of the
Management Board as at 31 December 2021, i.e. those members who were not also member of the Executive Board. In the table above \u2018Total\u2019
refers to all members of the Management Board during 2021 .
49 Key management personnel compensation continued Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in \u2018Staff expenses\u2019 as part of \u2018Total expenses\u2019. The total remuneration as disclosed in the table above (for 2021: EUR 12.6 million) includes all variable remuneration related to the performance year 2021. Under IFRS-EU, certain components of variable remuneration are not recognised in the profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses in 2021 and therefore included in \u2018Total expenses\u2019 in 2021, relating to the fixed expenses of 2021 and the vesting of variable remuneration of 2021 and earlier performance years, is EUR 13.4 million. As at 31 December 2021, members of the Executive Board and Management Board held a total of 166,577 NN Group N.V. shares. In 2021, 35,645 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board. Supervisory Board (2021) Amounts in thousands of euros Supervisory Board Fixed fees 831 Expense allowances 71 Compensation Supervisory Board 902 The above mentioned amounts include VAT of EUR 37 thousand for 2021. NN Group does not provide for any pension arrangement, termination arrangements (including termination or retirement benefits) or variable remuneration, for members of the Supervisory Board. As at 31 December 2021, members of the Supervisory Board held no NN Group N.V. shares. Loans and advances to members of the Executive Board and Management Board (2021) A mounts in thousands of euros Amount outstanding 31 December Average interest rate Repayments Executive Board members 5.28% 320 Management Board members 401 1.77% 74 Loans and advances 401 394 As at 31 December 2021, no loans and advances were provided to members of the Supervisory Board .50 Fees of auditors Fees of auditors 2022 2021 Audit fees 17 18 Audit related fees 10 4 Fees of auditors 27 22 Fees as disclosed above relate to the network of the NN Group\u2019s auditors and are the amounts related to the respective years, i.e. on an accrual basis (excluding VAT). The audit related fees include mainly fees related to the implementation of IFRS 9 and IFRS 17 and the audit procedures on the 2022 comparatives, as well as services in relation to prospectuses, internal control reports provided to external parties and reporting to regulators. Auditor fees are included in \u2018External advisory fees\u2019 as part of Other operating expenses. 51 Subsequent events Share buyback On 16 February, NN Group announced that it will execute an open market share buyback programme for an amount of EUR 250 million. The programme will be executed within 12 months and commenced on 1 March 2023. NN Group intends to cancel any repurchased NN Group shares under the programmes unless used to cover obligations under share-based remuneration arrangements or to deliver stock dividend. 52 Risk management This note explains details with regard to the risk profile of NN Group. For certain disclosures in the sections \u2018Managing our risks\u2019 and \u2018Corporate Governance\u2019 in chapters 5 and 6 of this Annual Report it is indicated in a footnote that those disclosures are an integral part of the Consolidated Annual Accounts and are part of the disclosures to which the audit opinion relates. Topics described in this section include: \u2022 Partial Internal Model (PIM) (including assumptions and limitations) \u2022 Solvency Capital Requirement of NN Group \u2022 Risk profile, risk mitigation of and risk measurement of the main types of risks: Market risk, Counterparty default risk, Liquidity risk and Non- market risk 1. Partial Internal Model (PIM) The Solvency Capital Requirement (SCR) is calculated based on the actual NN Group risk exposure. Under Solvency II, the SCR is the capital required to ensure that the (re)insurance company will be able to meet its obligations over the next 12 months with a probability of at least 99.5%. The risk-based framework for calculating Solvency Capital Requirements at NN Group is a combination of an Internal Model (IM) and Standard Formula (SF) components, the so-called Partial Internal Model (PIM). The major Dutch insurance entities use an internal model for modelling SCR for the Market, Counterparty default, Business and Insurance risks. The determined SCR is used for both local reporting and group consolidation purposes. For the EU-based international insurance businesses and smaller insurance undertakings in the Netherlands, NN Group uses the Solvency II Standard Formula to calculate the SCR for local reporting and for Group consolidation. The capital requirement for Operational risk is based on the Standard Formula approach across the Group. The non-insurance businesses (e.g. Pension Funds, NN Bank) and international insurance undertakings not based in the EU (e.g. Japan, Turkey) are consolidated in the group SCR based on the local applicable (sectoral) capital requirements. The Solvency II concept of Equivalence is granted to capital frameworks that are deemed to have similarity with the Solvency II framework and/or principles and as such can be relied-upon to assess capital requirements, at NN Group this applies to Japan. The total group SCR is obtained from the Internal Model and Standard Formula capital requirements using EIOPA\u2019s integration technique 3. 52 Risk management continued The choice for a Partial Internal Model is based on the conviction that an Internal Model in general better reflects the risk profile of the major Dutch insurance entities and has additional benefits for risk management purposes, whilst the Standard Formula adequately captures the risk profile of the international businesses and smaller Dutch entities: \u2022 An Internal Model approach can better reflect the specific assets and therefore the Market risk in the portfolio of Dutch businesses e.g., sovereign and other credit spread risks. \u2022 The approach used for most significant Non-market risks within the Life businesses such as longevity (trend uncertainty) and expense risk (closed block treatment) and within the Non-Life business can be better tailored to NN Group\u2019s specific portfolio characteristics. Diversifications effects inherent to the business model can be captured in a more adequate way. \u2022 Variable Annuity risks in a portfolio of NN Re are not adequately addressed by the Standard Formula, while the Internal Model captures the integrated Market risks and hedging programmes more accurately. \u2022 The granularity of the PIM and close alignment of the modelling techniques and parameters to NN\u2019s risk management approach also means that it can support a wide range of business decisions. 2. Assumptions and limitations 2.1 Risk-free rate and Volatility Adjustment (VOLA): The assumptions used to determine the risk-free curve are important, as this curve is used for discounting future cashflows and to calculate market value of liabilities. For liabilities, NN Group uses the methodology prescribed by EIOPA for the risk-free rate including the Credit Risk Adjustment (CRA) and the Ultimate Forwards Rate (UFR). Where appropriate, the risk-free rate is adjusted with the VOLA for the calculation of Own Funds. 2.2 Valuation assumptions \u2013 replicating portfolios: For SCR calculations, NN Group uses replicating portfolio techniques to represent the insurance product-related cash flows, options and guarantees by means of standard financial instruments. The replications are used to determine and revalue insurance liabilities under a large number of Monte Carlo scenarios. 2.3 Diversification and correlation assumptions: As for any integrated financial services provider offering a variety of products across different business segments and geographic regions, and investing into wide range of assets, diversification is key to NN Group\u2019s business model. The resulting diversification reflects the fact that not all potential worst-case losses are likely to materialise at the same time. The Internal Model takes diversification effects into account when aggregating required capitals for different risk types as well as at Group level. Diversification benefits result from diversification across regions, Business Units and risk categories. Where possible, correlation parameters are derived through statistical analysis based on historical data. In case historical data or other portfolio-specific observations are insufficient or not available, correlations are set by expert judgement via an established, well-defined and controlled process. Similar to other risk models, correlations and expert judgements are also monitored for appropriateness given availability of more recent data, and are subject to regular development, validation and regulatory oversight. Based on these correlations, industry- standard aggregation approaches such as Gaussian copula and VaR\u2013CoVaR approach are used to determine the dependency structure of quantifiable risks. 2.4 Model limitations NN Group\u2019s Partial Internal Model (PIM) resulted from managing a balancing between (1) an easy-to-communicate methodology and (2) efficient calculations with appropriate accuracy and granularity in the underlying risks. Despite several limitations stemming from this, the PIM is considered to be adequate to assess NN Group\u2019s risk profile and to determine Solvency Capital Requirements. As a result of the granular modelling approach and the wide variety of NN Group\u2019s assets and liabilities, the PIM is more complex than the Standard Formula. Inherent model limitations of the PIM are related to the calibration of 1-in-200-year stress event for a full spectrum of Market and Non-market risks, which are based on making use of limited historical data. Limitations also relate to the overall aim of determining forward-looking distributions of risk factors under stress based on historical data as well as the use of modelling assumptions and expert judgements. Risks that cannot be directly modelled in the same way as Market risk or Insurance risk, for example Strategic, Reputational and Model risks, and also Emerging risks are managed through qualitative risk assessments. In addition, and as part of the ORSA, NN Group holistically assesses its risk exposure to both quantifiable and non-quantifiable risks in order to also outline the mitigating actions as required
52 Risk management continued
The components of NN Group\u2019s PIM for Market and Counterparty default risk and the models for risk aggregation and replication have
been developed centrally by Group Risk, and thus carry an Inherent risk that the developed models include aspects which might be less
appropriate for individual entities. On a regular basis the Business Units perform \u2018Fit For Local Use\u2019 assessments. Models also undergo
regular reviews and monitoring, under agreed governance, and in addition, model validations are performed by independent model validation
department. Such reviews could result in additional monitoring and/or locally calculated and further centrally processed adjustments.
The Risk Management Function informs the Management Board and Supervisory Board on an annual basis on the performance of the
Internal Model.
3. Solvency II 2020 review
EIOPA\u2019s Opinion on the Solvency II review to the European Commission (EC) was published on 17 December 2020. The Opinion consists of a
proposed package of measures and will be used as input for the European Commission to draft a legislative proposal which will be discussed
with the European Council and European Parliament in the coming years.
On 22 September 2021, the European Commission published as part of the Solvency II 2020 Review the proposed Level I texts (Directive)
and insights in the upcoming Level II (Delegated Acts) regulations. Since this proposal mainly contains details on the Solvency II Directive, full
detailed specifications of Delegated Acts are not yet clear. Furthermore, this EC proposal forms the basis for the upcoming political process,
which can take several quarters and can lead to further changes in the proposals. The EC advice is on many items broadly in line with the
earlier EIOPA proposal published in December 2020. However, some noteworthy changes in the EC advice can be summarised as follows:
\u2022 Interest rate curve: The implementation of the alternative extrapolation methodology used for the valuation of (long) insurance cash-flows
will lead to a higher valuation of liabilities. The phasing-in of this negative impact will follow a simpler phasing-in mechanism and the initial
impact on the Solvency II ratio is expected to be smaller compared to the original EIOPA proposals.
\u2022 Risk margin: The EC proposes to lower the cost-of-capital rate from 6% to 5%. Furthermore, it is proposed to remove the floor in the so
called \u2018lambda approach\u2019 that was part of the EIOPA advice. These changes will lower the valuation of the risk margin. The exact details will
be part of the Level II regulations, but the EC already included in its communication that these changes are considered.
\u2022 VOLA and Enhanced Prudency Principle: The entity specific liquidity haircut for volatility adjustment is not included in the proposals of the
EC. This will increase the effectiveness of the VOLA compared to the EIOPA advice and it impacts the Enhanced Prudency Principle.
The resulting updated legislation is currently expected to be implemented at the earliest in 2026.
4. Solvency Capital Requirement
4.1 Solvency II ratio of NN Group
The following table shows the NN Group Solvency II ratio as at 31 December 2022 and 31 December 2021, respectively.
Solvency II ratio of NN Group
2022 2021
Eligible Own Funds 17,822 20,927
Solvency Capital Requirement 9,040 9,840
NN Group Solvency II ratio (Eligible Own Funds/SCR) 197% 213%
The Solvency Capital Requirement is based on NN Group\u2019s Partial Internal Model. This comprises Internal Model calculation for all risks,
except for Operational risk for NN Life, NN Non-life, NN Re and the main holding companies owned by NN Group N.V. and Standard Formula
calculation for ABN AMRO Life and ABN AMRO Non-life, NN Insurance Services and the European international insurance entities of NN
Group. SCR for Operational risk is calculated using the Standard Formula for all Solvency II entities. The capital requirements of non-
Solvency II entities, in particular NN Life Japan, Pension Funds, and NN Bank were calculated using local sectoral rules.
52 Risk management continued 4.2 Solvency Capital Requirement The following table shows the NN Group Solvency Capital Requirement as at 31 December 2022 and 31 December 2021, respectively. Solvency Capital Requirements 2022 2021 Market risk 6,724 7,397 Counterparty default risk 163 200 Non-market risk 5,070 5,903 Total BSCR (before diversification) 11,957 13,500 Diversification -3,065 -3,603 Total BSCR (after diversification) 8,892 9,897 Operational risk 560 711 LACDT -1,867 -2,225 TCLI 116 Voluntary Prudency Margin 116 Other -24 7 Solvency II entities SCR 7,677 8,506 Non-Solvency II entities 1,363 1,334 Total SCR 9,040 9,840 The Solvency II total Basic Solvency Capital Requirements (total BSCR after diversification) includes both the PIM businesses\u2019 BSCR and the Standard Formula businesses\u2019 BSCR. This figure also reflects the diversification benefits between the Business Units using Internal Model and a Standard Formula. The general developments of the Basic SCR: \u2022 Lower Market risk SCR (mainly due to higher volatility in the financial markets, which led to a decrease in the main standalone market risks, and decrease in the equity portfolio) \u2022 Lower Counterparty default risk SCR (mainly driven by mortgage portfolio changes at NN Belgium) \u2022 Lower Non-market risk SCR (mainly driven by a sharp increase in interest rates partially offset by higher inflation rates and a decrease in the Ultimate Forward Rate) \u2022 Decrease in diversification (mainly reflecting higher interest rates and lower equity exposure) The breakdown of the Market and Non-market risk SCR in specific risk types and explanations for the most important changes in the risk profile and Basic Solvency Capital Requirement over the year 2022 are presented in the next sections. SCR for Operational risk decreased mainly due to lower levels of technical provisions driven by higher interest rates. The offsetting effect of Loss Absorbing Capacity of Deferred Taxes (LACDT) decreased mainly due to a lower effective tax rate. We refer to Chapter \u2219 Managing our risks for more details on how we manage non-financial/operational risks. Prior to the approval by DNB of inclusion of the former VIVAT Non-life portfolio into the PIM scope, NN Non-life calculated the SCR for the merged entity using the NN Group PIM including a Transitional Capital Lock-In (TCLI). The TCLI at the end of 2021 was EUR 116 million reflecting the impact of reporting the former VIVAT Non-life business on the Solvency II Standard Formula versus the NN Group PIM. Following the approval by DNB in 2Q 2022, the TCLI was released both for NN Group and NN Non-Life. In addition, following discussions between DNB and NN Group on various aspects of the Internal Model, NN Group agreed with DNB to assume a Voluntary Prudency Margin (VPM) as of 2Q 2022. The level of the VPM is set at EUR 116 million. In the above table, \u2018Other\u2019 includes loss-absorbing capacity of technical provisions (LACTP) and capital for non-modelled Solvency II entities. Solvency Capital Requirement for non-Solvency II entities includes mainly NN Life Japan, Pension Funds, and NN Bank. The capital requirements for the non-Solvency II entities increased mainly due to the increase in the target capital for NN Bank partially offset by the divestment of NN Investment Partners in April 2022 52 Risk management continued 4.3 Solvency II ratio sensitivities Along with the Solvency II Capital Requirement, NN Group regularly calculates the sensitivities of the Solvency II ratio under various scenarios, by assessing the changes for both Eligible Own Funds and SCR. The Solvency II ratio sensitivities are primarily designed to support the NN Group Management Board and the Risk Management functions in having a forward-looking view on the risks to solvency of the company, and to analyse the impacts of market or other events. The sensitivities are selected to reflect plausible, realistic scenarios that could materialise within the foreseeable future and are not calibrated on a pre-defined confidence interval or time horizon. The effect on the Solvency II ratio is calculated based on applying an instantaneous stress on the balance sheet, and on ceteris paribus basis. For all insurance entities including NN Life Japan, the after stress Own Funds are calculated for each of the sensitivity scenarios; the SCR impacts are recalculated for BSCR and Operational risk SCR. LACDT is recalculated keeping the LACDT percentage fixed. \u2018Other\u2019 SCR components including the LACTP are kept constant. The Solvency II sensitivities are disclosed for the main Market risks in the below sections. Main types of risks In the next sections the main risks associated with NN Group\u2019s business are discussed. Each risk type is analysed through the risk profile, risk mitigation and risk measurement. For Market and Non-market risks more detailed quantification of risk exposures are provided. 5. Market risk Market risk comprises the risks related to the impact of changes in various financial markets indicators on NN Group\u2019s balance sheet. Market risks are taken in pursuit of returns for the benefit of customers and shareholders. Accordingly, risk and return consideration and optimisation are paramount for both policyholder and shareholder. In general, Market risks are managed through a well-diversified portfolio under a number of relevant policies within clearly defined and monitored limits. NN Group reduces downside risk through various hedging programmes, in particular risks for which NN Group has no or only a limited appetite, such as Interest rate, Inflation, and Foreign exchange risks. NN Group also integrates Environmental, Social, and Governance (ESG) factors in the investment decision-making framework (see section Facts and Figures). Impact from in particular, climate change may become more relevant over time for so-called transitional risk, where the value of NN Group\u2019s asset investments may be impacted. This potential impact is currently in the process of being assessed. In managing our assets, we apply the prudent person principle, which means that we only invest in assets and instruments whose risks we properly identify, measure, monitor, manage, control and report and take into account in the assessment of our overall solvency needs. Market risk capital requirements 2022 2021 Interest rate risk 440 1,455 Equity risk 2,436 3,474 Credit spread risk 3,332 4,725 Real estate risk 2,098 2,124 Foreign exchange risk 620 730 Inflation risk 270 135 Basis risk 58 74 Diversification market risk -2,530 -5,320 Market risk 6,724 7,397 In 2022, the Market risk SCR decreased from EUR 7,397 million to EUR 6,724 million, mainly driven by lower equity markets as well as the sale of equities and reduction of the NN Group equity book exposure. The decrease of standalone Interest rate risk SCR and Spread risk SCR due to lower asset valuation driven by higher interest rates is largely offset by lower diversification after aggregation with other Market risk SCR\u2019s. Diversification within Market risk decreased as Real estate risk SCR became more dominant, as a result of decreased Interest rate risk SCR, Credit spread risk SCR and Equity risk SCR. The table below sets out NN Group\u2019s market value of assets for each asset class as at the end of 2022 and 2021. The values in these tables may differ from those included in the consolidated IFRS balance sheet as derivatives are excluded from this overview and furthermore due to classification and valuation differences to reflect a risk management view 52 Risk management continued Investment assets Market value % of total Market value % of total 2022 2022 2021 2021 Fixed income 139,893 83% 163,876 83% Government bonds and loans 42,276 25% 63,126 32% Financial bonds and loans 8,125 5% 10,063 5% Corporate bonds and loans 23,065 14% 26,838 13% Asset-backed securities 3,225 2% 3,850 2% Mortgages 1 62,066 36% 58,499 30% Other retail loans 1,136 1% 1,500 1% Non-fixed income 20,698 12% 22,512 11% Common & preferred stock 2 3,654 2% 5,830 3% Private equity 182 0% 1,215 1% Real estate 3 12,887 8% 12,492 6% Mutual funds (money market funds excluded) 4 3,975 2% 2,975 1% Money market instruments (money market funds included) 5 9,295 5% 11,455 6% Total investments 169,886 100% 197,843 100% 1 Mortgages are on amortised cost value. The mortgage value on the consolidated IFRS balance sheet differs from the value in the current table due to the acquisition premium of mortgages and the inclusion of mortgages underlying the mortgage structure vehicles. 2 All preference shares are included in \u2018common & preferred stock\u2019, even when preference shares are modelled as bonds. 3 The real estate values exclude the real estate forward commitments, since NN Group has no price risk related to them. 4 Fixed income mutual funds are included in mutual funds. 5 Money market mutual funds and commercial papers are included in the Money market instruments. Total investment assets have decreased from EUR 197,843 million at the end of 2021 to EUR 169,886 million at the end of 2022. The decrease is mainly due to a lower NN Group valuation of the fixed income investments subsequent to higher yield curves. Main developments in the NN Group risk profile in 2022 reflect the strategy of NN Group to maintain a relatively conservative investment portfolio to ensure a resilient balance sheet: exposures in high yielding corporate bonds and mortgage loans are currently close to target. 5.1 Interest rate risk Interest rate risk is defined as the possibility of decrease in the Solvency II Own Funds due to adverse changes in the level or shape of the risk-free interest rate curve used for discounting assets and liabilities cash flows. Exposure to Interest rate risk arises from asset or liability positions that are sensitive to changes in this risk-free interest rate curve. 5.1.1 Risk profile The Interest rate risk SCR of NN Group decreased from EUR 1,455 million in 2021 to EUR 440 million in 2022. The decrease is mainly driven by the sharp increase in the interest rates and changes in the shape of the interest rate curve. In addition, widening of spreads for assets and mortgages led to lower asset valuation and further decrease in the Interest rate risk SCR. This was partly offset by an increase of the VOLA by 16bps, from 3bps to 19bps at the end of 2022. The decrease of Interest rate risk SCR is the main driver of the decrease of the diversification across Market risks. 5.1.2 Risk mitigation The Interest rate SCR indicates to what extent assets and liabilities are matched on a Solvency II basis. The majority of NN Group liability cash flows are predictable and stable, since exposure to policyholder behaviour and profit-sharing mechanisms is very limited. To manage Interest rate risk, NN Group applies cash flow matching on economic basis. Until year 30, where markets for fixed income instruments are sufficiently deep and liquid, best estimate liability cash flows (excluding risk margin) are closely matched with government bonds, corporate bonds, mortgages and loans. Cash flows after 30 years are partially hedged on a duration basis with long-term government bonds and interest rate swaps, due to price and illiquidity of markets. NN Group has implemented limits and tolerances for Interest rate risk exposures at NN Group level as well as for relevant Business Units. We continuously monitor and work on mitigating solutions for our new business and products, such as a development of defined contribution pension products in the Netherlands and a shift towards protection products in our markets in general. 52 Risk management continued 5.1.3 Risk measurement For the purpose of discounting EUR-denominated asset cash flows, NN Group uses market swap curves to value assets. For the asset cash flows denominated in other currencies, the relevant swap or government curve is used for that specific currency. For the purpose of discounting the EUR-denominated liability cash flows NN Group uses a swap curve less Credit Risk Adjustment (CRA) plus VOLA in line with definitions under the Solvency II. For the liability cash flows denominated in other currencies, the relevant swap or government curve is used where this curve is also lowered by the Credit Risk Adjustment and adding the VOLA specific for each currency. In line with Solvency II regulations, NN Group extrapolates the EUR swap curve starting from the Last Liquid Point (LLP) onwards to the Ultimate Forward Rate for each relevant currency in its portfolio. The LLP used for EUR is 20 years. As such, the sensitivity of SCR for Interest rate risk primarily depends on the level of cash flow matching between assets and liabilities up to the 20-year point, and the difference between the swap curve and the curve extrapolated to the UFR for longer cash flows. The sensitivity of the Solvency II ratio to changes in interest rates is monitored on a quarterly basis. The table below presents the Eligible Own Funds, SCR, and Solvency II ratio sensitivities to various changes in interest rates. Solvency II Ratio sensitivities for interest rate comprise the following set of shocks, each of them is calculated independently as a standalone scenario: a parallel up and a parallel down shifts of the discount curve, and a steepening scenario for the interest rates used to discount asset cash flows after the LLP. Solvency II ratio sensitivities: Interest rate risk at 31 December 2022 2022 Own Funds impact SCR impact Solvency II ratio impact Interest rate: Parallel shock +50 bps -219 -145 1% Interest rate: Parallel shock -50 bps 290 224 -2% Interest rate: 10 bps steepening between 20y-30y -242 39 -4% Solvency II ratio sensitivities: Interest rate risk at 31 December 2021 2021 Own Funds impact SCR impact Solvency II ratio impact Interest rate: Parallel shock +50 bps -624 -101 -4% Interest rate: Parallel shock -50 bps 803 153 5% Interest rate: 10 bps steepening between 20y-30y -580 96 -8% Changes in the Solvency II ratio sensitivities to interest rates are primarily driven by increased interest rates in combination with the changes in the Interest rate risk profile. Under the parallel shock scenarios, the base risk-free interest rate curves for each currency are shocked by +/-50 bps for all tenors up until the LLP. The other components of the basic risk-free interest rate curve \u2013 namely UFR, Credit Risk Adjustment, VOLA and extrapolation technique towards UFR remain unchanged. The asset interest rate curves are shocked with the parallel shocks for all tenors. In the interest rate steepening scenario, the EUR asset valuation curve is shocked after the LLP (the LLP for EUR is set at 20 years under Solvency II). The steepening is applied for interest rate curve tenors between 20 and 30 years (a linear increase from 0 to 10 bps of 1bp per tenor). After the 30 years point, the shift in the interest rate curve remains constant at 10bps. As the EIOPA risk-free curve is extrapolated after the LLP, the steepening sensitivity only affects the asset discount curve. 5.2 Equity risk Equity risk is defined as the possibility of decrease Solvency II Own Funds due to adverse changes in the level of equity market prices. Exposure to Equity risk arises from direct or indirect asset or liability positions, including equity derivatives such as futures and options, that are sensitive to equity prices. 5.2.1 Risk profile The table below sets out the market value of NN Group\u2019s equity assets as at the 31 December 2022 and 2021, respectively . 52 Risk management continued Equity assets 2022 2021 Common & preferred stock 3,654 5,830 Private equity 182 1,215 Mutual funds (money market funds are excluded, fixed income mutual funds are included) 3,975 2,975 Total 7,811 10,020 NN Group is mostly exposed to public listed equity but also invests in private equity funds and equity exposures through mutual funds. The direct equity exposure is spread mainly across the Netherlands (32% in 2022 compared with 25% in 2021) and remaining exposure in other countries, predominantly in core EU countries (52% in 2022 compared with 54% in 2021, including The Netherlands). Note that mutual funds are classified as equity in the table above but include predominantly fixed income funds. In case economic conditions deteriorate, investments into equities might lose value. About 34% of NN Group\u2019s common equities are invested in defensive sectors, which are less sensitive to economic downturn. 2023 estimates for equity values have already been priced; more downward revisions might be expected if economic growth forecasts decline. Valuations gains are not expected before end of 2023. As shown in the \u2018Market risk capital requirements\u2019 table above, the Equity risk SCR of NN Group decreased from EUR 3,474 million in 2021 to EUR 2,436 million in 2022 mainly driven by lower equity markets as well as the sale of equities. 5.2.2 Risk mitigation Exposure to equities provides additional diversification and upside return potential in the asset portfolio of an insurance company with long- term illiquid liabilities. The Concentration risk on individual issuers is mitigated by having issuer risk limits in place in investment mandates as well as at NN Group level. There is no natural hedge for Equity risk on the liability side of the balance sheet. NN Group has the possibility to protect the downside risk of the equity portfolio by selling equity or buying put options. 5.2.3 Risk measurement The sensitivity of the Solvency II ratio to changes in the value of equity is monitored on a quarterly basis. This scenario estimates the impact of an instantaneous shock of -25% applied to the value of direct equity and equity mutual funds. Derivatives like equity options or equity forwards which have equity as underlying are also revalued using the same shock applied to the underlying equities or equity indices. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in equity prices at 31 December 2022 and 2021. Solvency II ratio sensitivities: Equity risk Own Funds impact SCR impact Solvency II ratio impact 2022 2021 2022 2021 2022 2021 Equity Downward shock -25% -1,464 -1,840 -326 -489 -9% -9% 5.3 Credit spread risk Credit spread risk is defined as the possibility of a decrease in Solvency II Own Funds due to adverse movements in the credit spreads of fixed income assets. The credit spread widening (or narrowing) reflects market supply and demand, rating migration of the issuer and changes in expectation of default. Changes in liquidity and other risk premiums that are relevant to specific assets can play a role in the value changes as well. In the calculation of the SCR for the Partial Internal Model entities, NN Group assumes no change to the VOLA on the liability side of the balance sheet after a shock-event, but instead reflects the illiquidity of liabilities in the asset shocks to ensure appropriate Solvency Capital Requirements. This approach ensures appropriate risk incentives and is approved by DNB. NN Group also shocks all government bonds and its mortgage portfolio in the calculation of Credit spread risk capital requirements for the Partial Internal Model entities. The main asset classes in scope of the Credit spread risk module for Partial Internal Model entities are government and corporate bonds, mortgages and loans. For the calculation of the SCR for Credit spread risk of the Standard Formula insurance entities, the main asset classes in scope are corporate bonds and loans
52 Risk management continued
5.3.1 Risk profile
As shown in the \u2018Market risk capital requirements\u2019 table, the Credit spread risk SCR of NN Group decreased from EUR 4,725 million in 2021 to
EUR 3,332 million in 2022. This decrease is mainly driven by a sharp increase in interest rates, widening of asset and mortgage spreads, an
increase of mortgage cash flow duration due to lower prepayment rates, and refinement of the Credit spread SCR modelling.
The government securities market value delta can mostly be explained by valuation changes (60%). Transactions and redemptions count for
40% of the decrease. The corporate securities market value delta is explained by valuation (50%) and transactions (50%).
The table below shows the market value of NN Group\u2019s fixed-income bonds which are subject to Credit spread risk SCR by type of issuer as
at 31 December 2022 and 31 December 2021, respectively.
Fixed-income bonds and loans by type of issuer
Market value Percentage
2022 2021 2022 2021
Sovereign 42,275 63,126 55% 61%
Manufacturing 6,432 8,022 8% 8%
Finance and Insurance 8,125 10,063 11% 9%
Asset-backed securities 3,225 3,850 4% 4%
Utilities 2,463 2,928 3% 3%
Transportation and Warehousing 2,261 2,947 3% 3%
Information 1,841 2,365 3% 2%
Real Estate and Rental and Leasing 2,146 2,070 2% 2%
Other 7,923 8,506 11% 8%
Total 76,691 103,877 100% 100%
52 Risk management continued Market value government bond and loans exposures (2022) The table below sets out the market value of NN Group\u2019s assets invested in government bonds and loans by country and maturity. Market value of government bond and loans in 2022 by number of years to maturity 4 2022 Rating 1 Domestic exposure 2 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2022 Japan A+ 100% 790 460 468 727 1,909 2,190 1,626 676 8,846 France AA 0% 76 25 28 123 253 1,886 676 2,926 5,993 Germany AAA 0% 49 326 18 187 1,301 2,043 344 207 4,475 Belgium AA- 25% 31 5 11 71 453 1,951 949 609 4,080 Netherlands AAA 99% 551 142 16 418 2,427 47 9 3,610 Austria AA+ 0% 6 171 512 3 307 582 1,030 2,611 Spain A- 27% 74 104 65 600 1,140 463 60 2,506 United States AAA 0% 1 223 1,498 1,722 Multilateral 3 AAA 0% 18 63 5 156 275 772 315 21 1,625 Finland AA+ 0% 7 146 3 65 611 170 1,002 Italy BBB 0% 71 16 14 131 467 229 40 27 995 Other 5 \u2013 Above Investment Grade 275 294 300 560 1,467 616 526 45 4,083 Other 5 \u2013 Below Investment Grade 137 43 64 146 171 145 22 728 Total 2,011 1,477 1,301 2,697 7,382 14,540 7,258 5,610 42,276 1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds. 2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands. 3 Includes EIB, ECB, EFSF, EU and ESM. 4 Based on legal maturity date. 5 Investment Grade reflects a rating of BBB- or higher; Below Investment Grade reflects a rating below BBB-. Market value government bond and loans exposures (2021) Market value of government bond and loans in 2021 by number of years to maturity 4 2021 Rating 1 Domestic exposure 2 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021 France AA 0% 47 68 52 129 212 3,881 750 5,290 10,429 Japan A+ 98% 644 461 503 889 1,919 2,571 1,682 737 9,406 Belgium AA- 35% 401 243 37 173 790 3,723 1,218 950 7,535 Germany AAA 0% 30 95 488 140 1,977 3,030 733 396 6,889 Netherlands AAA 99% 45 618 210 404 2,339 2,034 13 5,663 Austria AA+ 0% 171 11 190 517 737 1,303 1,048 2,012 5,989 Spain A- 26% 24 15 136 155 420 1,999 648 59 3,456 Multilateral 3 AAA 0% 194 48 135 175 202 969 732 15 2,470 United States AAA 0% 1 1 282 2,085 2,369 Italy BBB 0% 43 101 35 50 745 283 11 1,268 Finland AA+ 0% 5 3 166 82 981 1,237 Other 5 \u2013 Above Investment Grade 551 180 258 899 2,029 1,139 462 20 5,538 Other 5 \u2013 Below Investment Grade 107 119 141 144 208 139 19 877 Total 2,263 1,962 1,975 3,648 9,725 21,658 12,403 9,492 63,126 1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds. 2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands. 3 Includes EIB, ECB, EFSF, EU and ESM. 4 Based on legal maturity date. 5 Investment Grade reflects a rating of BBB or higher; Below Investment Grade reflects a rating below BBB. 52% (or EUR 22 billion) of NN Group total sovereign debt exposure is invested in AAA and AA rated eurozone countries in 2022 as compared to 60% in 2021. Of the EUR 22 billion core eurozone government bonds and loans held by NN Group, 76% will mature after year 10 and 35% after year 20 in 2022 while those for 2021 were EUR 38 billion, 78% and 40% respectively. With regard to Central and Eastern Europe, the government bond exposures are mainly domestically held. In the Partial Internal Model, all government bonds contribute to Credit spread risk, including those rated AAA. The tables below show the market value of non-government fixed-income securities (excluding mortgages and derivatives) by rating and maturity 52 Risk management continued Market value non-government bond securities and loans (2022) Market value of non-government bond securities and loans in 2022 by number of years to maturity 2022 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2022 AAA 150 231 307 424 279 996 1,070 1,597 5,054 AA 267 115 190 587 449 271 174 128 2,181 A 1,095 1,104 1,294 2,174 3,055 1,051 718 498 10,989 BBB 1,288 2,053 1,176 2,338 2,903 1,481 693 84 12,016 BB 317 192 417 660 937 21 49 2,593 B and below 57 118 198 449 234 12 1,068 No rating available 208 72 5 116 81 3 29 514 Total 3,382 3,885 3,587 6,748 7,938 3,832 2,707 2,336 34,415 Market value non-government bond securities and loans (2021) Market value of non-government bond securities and loans in 2021 by number of years to maturity 2021 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021 AAA 153 201 257 597 352 1,017 1,365 2,097 6,039 AA 507 358 139 540 663 569 241 173 3,190 A 1,270 1,543 1,210 2,691 3,468 1,204 810 614 12,810 BBB 1,204 1,650 2,113 2,602 3,260 1,781 1,050 118 13,778 BB 271 242 282 777 1,253 51 31 30 2,937 B and below 126 262 219 661 500 21 1,789 No rating available 138 3 4 63 208 Total 3,669 4,259 4,220 7,868 9,500 4,643 3,497 3,095 40,751 The table below shows NN Group\u2019s holdings of loans and other debt securities as at 31 December 2022 and 31 December 2021, respectively. Market value all loans and other debt securities (per credit rating) 2022 2021 AAA 16,054 22,479 AA 17,675 30,545 A 23,430 27,772 BBB 14,547 17,181 BB 3,217 3,868 B and below 1,254 1,824 No rating available 377 70 Mortgages 1 62,066 58,499 Other Retail Loans 1,273 1,638 Total 139,893 163,876 1 Mortgages refer to all mortgages using the same criteria and is aligned with the Mortgages figure in Investment assets above. 5.3.2 Mortgages The required capital for mortgages within entities under the Partial Internal Model is calculated in the credit spread risk module while the required capital for mortgages within entities under Standard Formula is calculated in the counterparty default risk module. The credit spread risk module within the Partial Internal Model captures the behaviour of Own Funds when the valuation of mortgages changes with market mortgage rates, while the counterparty default risk module within Standard Formula captures the behaviour of Own Funds as a result of unexpected loss or default of mortgages. The Loan-to-Value (LTV) for residential mortgages (which is based on the net average loan to property indexed value) at NN Life, the Banking business, NN Non-life and NN Belgium stood at 53%, 53%, 59% and 54% respectively at the end of 2022 while those were 59%, 57%, 65% and 60% respectively at the end of December 2021. The average LTV for NN Group portfolio is 54% 2022 (59% in 2021). The migration towards lower LTV bucket is due to the house price increase in 2022 (11.9%) 52 Risk management continued The inherent credit risk of mortgages is backed primarily by means of the underlying property, but also through the inclusion of mortgages guaranteed by the Nationale Hypotheek Garantie (NHG) and other secondary covers like savings, investments and life insurance policies. Mortgages with NHG accounted for 24%, 31%, 18% and 28% at NN Life, the Banking business, NN Non-life, and NN Belgium respectively at the end of 2022 and 26%, 32%, 20% and 28% at NN Life, the Banking business, NN Non-life and NN Belgium respectively at the end of 2021. The relative NHG coverage is decreasing in the portfolios mostly due to the high house prices, so overall less mortgages are eligible for NHG coverage. Loan-to-Value on mortgage loans 1 2022 2021 NHG 27% 28% LTV <= 80% 69% 65% LTV 80%-90% 3% 5% LTV 90%-100% 1% 1% LTV > 100% 0% 1% Total NN Group 100% 100% 1 Risk figures and parameters do not include third party originated mortgages and collateralised mortgages although they are on the balance sheet of NN Group. The mortgage portfolio is under regular review to ensure troubled assets are identified early and managed properly. The loan is categorised as a non-performing loan (NPL) if the loan is 90 days past due, or the client was in default the previous month, and the minimum holding period (MHP) is active or the loan is classified as Unlikely To Pay (UTP) by the problem loans department. The main criterion for lifting the default status will be that no arrears greater than EUR 250 occurred during the Minimum Holding Period (MHP). For defaulted clients that are classified as \u2018distressed restructuring\u2019, the MHP is 12 months. For all other defaulted clients, the MHP is 3 months. The impact of the recent geopolitical developments and increasing inflation are limited on the creditworthiness of the portfolio. Combined with low levels of unemployment, the outstanding non-performing loans decreased in 2022. Provisions decreased due to sharply increasing house prices between 2021-Q3 and 2022-Q3 (+11.9%) (Q4 figures are unavailable per 2022 year-end, hence Q3 figures are used and based on CBS) and a decrease in non-performing loans. This decrease is partly offset by a EUR 2.2 million management overlay related to high levels of inflation and sharply increasing mortgage interest rates. The net exposure decreased after deduction of capped collaterals and guarantees because of an increase in the house price. The NHG guarantee value slightly increased because calculation of the guarantee value was aligned with the NHG terms. Credit quality: NN Group mortgage portfolio, outstanding 1,2,5 Life business Banking business Other 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Performing mortgage loans that are not past due 26,316 25,285 21,117 20,322 5,255 5,304 52,688 50,911 Performing mortgage loans that are past due 111 128 127 161 18 24 256 313 Non-performing mortgage Loans 4 85 77 99 104 13 12 197 193 Total 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417 Provisions for performing mortgage loans 1 2 2 2 1 1 4 5 Provisions for non-performing mortgage loans 4 5 1 1 5 6 Total 4 5 7 3 3 1 1 9 11 1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million). 2 Amounts are excluding partial transfer of mortgages and DRMF. 3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities. 4 The non-performing loans include \u2018unlikely to pay\u2019 mortgage loans, which may not be past due. 5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits 52 Risk management continued Collateral on mortgage loans 1,5 Life business Banking business Other 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Carrying value 2 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417 Indexed value of real estate 58,286 49,536 47,885 41,478 10,717 9,685 116,888 100,699 Savings held 6 1,144 985 1,462 1,408 76 75 2,682 2,468 NHG guarantee value 4 5,600 5,480 5,518 5,328 1,117 1,113 12,235 11,921 Total cover value + including NHG guarantee capped at carrying value 26,500 25,474 21,335 20,576 5,285 5,337 53,120 51,387 Net exposure 12 16 8 11 1 3 21 30 1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million) . 2 Amounts are excluding partial transfer of mortgages and DRMF. 3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities. 4 The NHG guarantee value follows an annuity scheme and is corrected for the 10% own risk (on the granted NHG claim). 5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits. 6 Savings held includes life policies. 5.3.3 Risk mitigation Our mortgages are subject to strict underwriting criteria and are well collateralised. NN Group has Concentration risk limits for individual issuers which depend on the credit quality of the issuer. These limits ensure that large risk concentrations are avoided. In order to diversify the Credit spread risk further, NN Group has increased its investments in non-listed assets. 5.3.4 Risk measurement The sensitivity of the Solvency II ratio to changes in credit spreads is monitored on a quarterly basis. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivities to various changes in credit spreads. Solvency II ratio sensitivities: Credit spread risk at 31 December 2022 2022 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -343 43 -5% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -417 64 -6% Credit spread: Parallel shock spreads corporates +50 bps 291 -111 6% Credit spread: Parallel shock spreads mortgages +50 bps -880 22 -10% Solvency II ratio sensitivities: Credit spread risk at 31 December 2021 2021 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -628 89 -8% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -938 120 -12% Credit spread: Parallel shock spreads corporates +50 bps 697 -209 12% Credit spread: Parallel shock spreads mortgages +50 bps -1,075 31 -12% Solvency II ratio sensitivities to credit spreads decreased primarily due to increased interest rates resulting in lower asset exposure. For the mortgage spreads sensitivity this was partially offset by increase in the mortgage exposure. NN Group has exposure to government, corporate and financial debt and is exposed to spread changes for these instruments. Furthermore, the VOLA in the valuation of liabilities introduces an offset to the valuation changes on the asset side (except for the mortgages). The Solvency II sensitivities for spread changes cover four possible scenarios \u2013 spread widening for AAA rated government bonds, spread widening for non-AAA rated government bonds, spread widening for corporates and spread widening for mortgages. For all scenarios, a parallel widening of the respective spread curves of +50bps is assumed. There is a corresponding translation of the spread widening on asset valuations on the VOLA according to EIOPA\u2019s reference portfolio in each of the scenarios. Government bond shocks are applied to the following asset classes: government bonds and loans, government-linked instruments (sub- sovereigns and supranational). Corporate spread shocks are applied to the following asset classes: corporate bonds (financials and non-financials), covered bonds, subordinated bonds, asset-backed securities and loans. Mortgages are subject to spread shocks in a separate scenario .
52 Risk management continued
NN Group\u2019s sensitivity to credit spread changes is mainly driven by the difference between NN\u2019s investment portfolio and the EIOPA reference
portfolio. The reference portfolio represents the weights of an average European insurers\u2019 portfolio to different fixed income assets and
is used to determine the level of the VOLA to be applied for the valuation of liabilities. Asset spread changes impact the level of the VOLA
and therefore also the valuation of liabilities, and thus provide an offset to asset valuation changes. NN Group is exposed to widening in
government bond spreads due to a higher exposure to well rated government debt compared with the reference portfolio. At the same time,
the exposure to widening of credit spreads on corporate bonds has a positive impact on the ratio due to a lower exposure of NN Group to
these asset classes compared with the reference portfolio. Mortgages spread widening has a negative impact on the Solvency II ratio, as
mortgages are not part of the reference portfolio.
5.4 Real estate risk
Real estate risk is defined as the possibility of decrease in Solvency II Own Funds due to adverse changes in the value of real estate.
Exposure to Real estate risk arises mainly from holding direct real estate properties or positions in real estate mutual funds. With the long-
term nature of the liabilities of NN Group, illiquid assets such as real estate play an important role in the asset allocation.
5.4.1 Risk profile
NN Group\u2019s real estate exposure (excluding forward commitments) increased mainly due to new investments, from EUR 12,492 million at the
end of 2021 to EUR 12,887 million at the end of 2022. The real estate exposure is mainly present in the portfolios of NN Life, NN Non-life and
NN Belgium Life.
NN Group has various categories of real estate: investments in real estate funds and joint-ventures, real estate directly owned and
investments in buildings occupied by NN Group. Several of the real estate funds, in which NN Group participates, include leverage and
therefore the actual real estate exposure is larger than NN Group\u2019s value of participation in real estate funds. The real estate portfolio is
held for the long-term and is illiquid. Furthermore, there are no hedge instruments available in the market to effectively reduce the impact of
market volatility.
Rental income is increasing with inflation and occupancy rates in 2022 are close to 100%. Indexation of prices has kept up with inflation
in a large portion of our portfolio. Real estate valuations, because of the evidencing that is required, have a lag to market developments
and tend to show prolonged negative movement in case of economic downturn. As such, continued pressure on real estate valuations is
expected in 2023.
The table below sets out NN Group\u2019s real estate exposure per region as at 31 December 2022 and 2021, respectively.
Real estate assets per region
2022 2021
Western Europe 58% 60%
Southern Europe 18% 17%
Nordics 8% 7%
Central and Eastern Europe 5% 5%
UK and Ireland 11% 11%
Other 0% 0%
Total 100% 100%
Real estate exposure is mainly concentrated in Western Europe. Main underlying types are residential real estate (38%) and industrial real
estate (30%). Retail and office real estate represents respectively 17% and 10% of NN total real estate exposure.
As shown in the \u2018Market risk capital requirements\u2019 table, the Real estate risk SCR of NN Group decreased from EUR 2,124 million in 2021
to EUR 2,098 million in 2022 primarily due to modelling refinements partially offset by an increase in the real estate exposure.
5.4.2 Risk mitigation
Exposure to real estate provides for additional diversification for the asset portfolio. The Concentration risk on individual assets is limited
under the relevant investment mandates. Real estate portfolio is also well diversified across European countries and sectors.
5.4.3 Risk measurement
The sensitivity of the Solvency II ratio to changes in the value of real estate is monitored on a quarterly basis. This scenario estimates the
impact of an instantaneous shock of -10% to the value of direct real estate exposures and real estate within mutual funds.
52 Risk management continued The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in the value of real estate at 31 December 2022 and 2021. Solvency II ratio sensitivities: Real estate risk Own Funds impact SCR impact Solvency II ratio impact 2022 2021 2022 2021 2022 2021 Real estate Downward shock -10% -1,057 -921 -78 -58 -10% -8% Solvency II ratio sensitivity to changes in the value of real estate increased due to an increase in proportion of real estate investments in the total portfolio. 5.5 Foreign exchange risk Foreign exchange (FX) risk measures the impact of losses related to changes in currency exchange rates. 5.5.1 Risk profile FX transaction risk can occur on a local entity level, while FX translation risk can occur when non-Euro entities are consolidated at the level of NN Group and show a risk in regard to NN Group\u2019s reporting currency, the Euro. The SCR for Foreign exchange risk decreased from EUR 730 million in 2021 to EUR 620 million in 2022. This is mainly due to a decrease in equity markets and widening of the asset spread for the non-EUR denominated bonds which decreased the valuation. 5.5.2 Risk mitigation The FX risk at the local entity level is mitigated by limiting investment to the non-local currency assets or by hedging through FX forwards and cross currency swaps. 5.6 Inflation risk Inflation risk is defined as the risk of adverse changes in inflation that result into a decrease in Solvency II Own Funds. Inflation risk is calculated for the Dutch entities applying the Partial Internal Model for the SCR calculation. 5.6.1 Risk profile The SCR for Inflation risk increased to EUR 270 million from EUR 135 million at the end of 2021. The increase is primarily driven by an increase in the expected inflation rates. Inflation risk is limited and hedged to a large extent with inflation-linked swaps or bonds, which are exposed to lower inflation rates. Furthermore, with the long-term nature of the liabilities, the effect of the short-term inflation changes on NN Group remains limited. 5.6.2 Risk mitigation The Inflation risk is managed through the use of inflation swaps and investments in inflation bonds. In particular, the exposure to inflation linked liabilities is limited and hedged. 5.7 Basis risk The SCR Basis risk is defined as a risk that the underlying asset or liability behaves differently than the underlying hedge instrument, which results in the loss in the Solvency II balance sheet. 5.7.1 Risk profile The SCR for Basis risk decreased from EUR 74 million in 2021 to EUR 58 million in 2022, mostly due to a decrease in the hedge equity exposure within the separate account business in the Netherlands. 5.7.2 Risk mitigation The Basis risk is mitigated by fund mapping of the underlying funds to risk factors, and also by constant monitoring of the fund performance compared to the benchmark. 5.8 Concentration risk For the Standard Formula entities there is an additional SCR for Concentration risk calculated under Standard Formula, which is defined as the risk of loss in the Basic Own Funds as a result of the default of an issuer in which NN Group has a concentrated investment position. 5.8.1 Risk profile The SCR for Concentration risk remained at nil in 2022. 52 Risk management continued 5.8.2 Risk mitigation This Concentration risk is mitigated by Concentration risk limits aiming to have a well-diversified portfolio with Credit risk concentrations in any particular issuer within the NN Group risk appetite. 5.9 Market risks within separate account businesses The separate account businesses are those in which the policyholder bears the majority of the Market and Credit risk. NN Group\u2019s earnings from the separate account businesses are primarily driven by fee income. However, in the case of variable annuities and the guaranteed separate account pension business in the Netherlands, NN Group retains risk associated with the guarantees provided to its policyholders. Businesses in this separate account category are (i) the group pension business in the Netherlands for which guarantees are provided and (ii) other separate account business, primarily the unit-linked business and variable annuities (VA). 5.9.1 Separate account guaranteed group pension business in NN Life Risk profile In the Dutch separate account guaranteed group pension portfolio, investments are held in separate accounts on behalf of the sponsor employer who concluded their contract with a Business Unit of NN Group. Regardless of actual returns on these investments, pension benefits for the beneficiaries are guaranteed under the contract. The value of the provided guarantee is sensitive to interest rates, movements in the underlying funds and the volatility of those funds. The Assets under management for NN Life\u2019s portfolio decreased from EUR 2.9 billion as at 31 December 2021 to EUR 2.4 billion as at 31 December 2022 mainly driven by higher interest rate. In general, the materiality of the separate account business within NN Group has reduced in the past few years due to the run-off of the portfolio. Risk mitigation NN Group currently hedges the value of the guarantees it provided under group pension contracts in the Netherlands. For the purpose of hedging, the exposure under such guarantees is discounted at the swap curve without the extrapolation to the UFR. The hedge programme includes interest rate swaps and equity futures. Upon contract renewal, NN Group offers policyholders defined contribution products with investments in portfolios that NN Group can more easily hedge, thus reducing the risk to NN Group. 5.9.2 Other separate account businesses Risk profile The other separate account business primarily consists of unit-linked insurance policies and variable annuity (VA) portfolios. Unit-linked insurance policies provide policyholders with selected fund returns combined with an insurance cover. The Investment risk is borne by the policyholder, although there are some unit-linked products where NN Group has provided guarantees on the performance of specific underlying funds. Unit-linked products without guarantees do not expose NN Group to Market risk, except to the extent that the present value of future fees is affected by market movements of the underlying policyholder funds. The variable annuities in the Japan Closed Block VA and VA Europe business consist of guaranteed minimum accumulation benefit products, guaranteed minimum death benefit products and guaranteed minimum withdrawal benefit products. Risk mitigation The Market risks of the unit-linked and other separate account business are managed by the design of the product. Currently, NN Group does not hedge the Market risks related to the present value of future fee income derived from this business (with the exception of the Japan Closed Block VA). For the Japan Closed Block VA business and European VA business NN Group has hedging programmes in place targeting Equity, Interest rate, Credit spread, and FX risk as well as Volatility risk. Risk measurement NN Group determines Eligible Own Funds for the Market and Credit risks of the separate account business through modelling the risks of the fee income and the guarantees including the impact of the hedge programmes. 6 Counterparty default risk Counterparty default risk is the risk of loss due to default or deterioration in the credit standing of the counterparties and debtors (including reinsurers) of NN Group. The SCR for Counterparty default risk is primarily based on the issuer\u2019s probability of default (PD) and the loss-given- default (LGD) of each individual position taking into account diversification across these positions. The Counterparty default risk module also covers any Credit risk exposures which are not covered in the Credit spread risk sub-module 52 Risk management continued 6.1 Risk profile As shown in the \u2018Solvency Capital Requirements\u2019 table above, the Counterparty default risk SCR of NN Group decreased from EUR 200 million at the end of 2021 to EUR 163 million at the end of 2022, driven primarily by the lower market value of the mortgage portfolio in NN Belgium. In the Partial Internal Model the mortgages do not get the capital charge under the Counterparty default risk and are under Credit spread risk SCR sub module for these Business Units. 6.2 Risk mitigation NN Group uses different Credit risk mitigation techniques. For over the counter derivatives, the exchange of collateral under the International Swaps and Derivatives Associations contracts accompanied with Credit Support Annexes is an important example of risk mitigation. Other forms of Credit risk mitigation include reinsurance collateral exchange. For cash and money market funds, limits per counterparty are put in place. 6.3 Risk measurement The Counterparty default risk (CDR) module comprises two sub-modules: \u2022 CDR Type I: applicable to exposures which might not be diversified and where the counterparty is likely to be (externally) rated, e.g., reinsurance contracts, derivatives and money market exposures. The underlying model is the Ter Berg model (which was also the basis for Standard Formula calibration under Solvency II). \u2022 CDR Type II: applicable to exposures that are usually (well) diversified and where the counterparty is likely to be unrated, like retail loans, but also other forms of term lending not covered in Type I The capital charges for CDR Type I and CDR Type II exposures are calculated separately and subsequently aggregated . 7 Liquidity risk Liquidity risk is the risk that one of NN Group\u2019s entities does not have sufficient liquid assets to meet its financial obligations when they become due and payable, at reasonable cost and in a timely manner. Liquidity in this context is the availability of funds, or certainty that funds will be available without significant losses, to honour all commitments when due. NN Group manages Liquidity risk via a Liquidity risk framework: ensuring that \u2013 even after shock \u2013 NN Group\u2019s businesses can meet immediate obligations. Liquidity stress events can be caused by a market-wide event or an idiosyncratic NN Group specific event. These events can be short-term or long-term and can both occur on a local, regional or global scale. Subsidiaries that trade derivatives are responsible for maintaining sufficient liquidity levels to meet their collateral requirements. For this purpose, liquidity buffers are set to ensure sufficient liquidity is available in an adverse scenario and to ensure the liquidity thresholds are being met. 7.1 Risk profile Liquidity risk covers three areas of attention. Operational liquidity risk is the risk that funds are unavailable to meet financial obligations when due. Market liquidity risk, is the risk that an asset cannot be sold on short-term without significant losses. Funding risk is the risk related to not being able to refinance maturing debt instruments and may lead to higher funding costs. The connection between Market and Operational liquidity risk stems from the fact that when payments are due and not enough cash is available, investment positions need to be converted into cash. If market liquidity is low or an adverse market movement took place in this situation, this could lead to a loss. In 2022, liquidity risk has increased due to the rise in interest rates, leading to additional collateral requirements on NN Group\u2019s interest rate derivatives portfolio. In case of a significant increase of interest rates, NN Group is exposed to the risk of having to sell assets which contribute to capital generation or to the hedging of liability cash flows. NN Group has a robust liquidity risk management framework in place to manage this risk. A minimum buffer of immediately available liquidity (cash and committed facilities) is maintained. Repos, Group cash capital and the Revolving Credit Facility at Group can further support the liquidity position if needed 52 Risk management continued 7.2 Risk mitigation NN Group aims to match day-to-day cash in- and outflows and at the same time wants to be able to have sufficient cash in case of a liquidity stress event. NN Group holds a minimum buffer of cash which is immediately available in order to be able to meet collateral calls from derivatives exposures in the case of significant market movements. Furthermore, NN Group has a wide range of options to generate additional liquidity if necessary, amongst which committed repo facilities which are available at all times and a revolving credit facility NN Group Liquidity Management Principles defines three levels of Liquidity Management: \u2022 Short-term liquidity (including operational liquidity) management covers the day-to-day cash requirements under normal business conditions \u2022 Long-term liquidity management considers business conditions, in which Market liquidity risk materialises \u2022 Stress liquidity management looks at the company\u2019s ability to respond to a potential crisis situation 7.3 Risk measurement NN Group Liquidity Risk Management Standard measures Liquidity risk in a stress event through the gap between liquidity needs and liquidity sources compared to available liquid assets for sale. This is calculated for different time horizons and different levels of availability of liquidity sources. Liquidity risk is not part of NN Group\u2019s Partial Internal Model. 8 Non-market risk Within the SCR Partial Internal Model a differentiation is made for the classification of Non-market risks for different NN Group entities depending on the model applied. For the Business Units applying Partial Internal Model, Non-market risks are split between: \u2022 Insurance risk: is the risk related to the events insured by NN Group and comprise Actuarial and Underwriting risks such as Mortality risk (including Longevity), Morbidity risk, and Property & Casualty risk which result from the pricing and acceptance of insurance contracts \u2022 Business risk: is the risk related to the management and development of the insurance portfolio but exclude risks directly connected to insured events. Business risk includes Expense risk, Persistency risk, and Premium re-rating risk. Business risks can occur because of internal, industry, regulatory/political or wider market factors. Persistency risk is the risk that policyholders use options available in the insurance contracts in a way that is different from that expected by NN Group. Depending on the terms and conditions of the insurance policy, and the laws and regulations applicable to the policy, policyholders could have the option to surrender, change premiums, change investment fund selections, extend their contracts, take out policy loans, and make choices about how to continue their annuity and pension savings contracts after the accumulation phase, or even change contract details. Policyholder behaviour therefore affects the profitability of the insurance contracts. Changes in tax laws and regulations can affect policyholder behaviour, particularly when the tax treatment of their products affects the attractiveness of these products for customers 52 Risk management continued For the Business Units applying Standard Formula, Non-market risks are split between: \u2022 Life risk: the life portfolio is mainly attributed to the individual and group business in the international entities of NN Group (mainly Belgium, Spain Life, Poland) and ABN AMRO Life. This risk comprises the Mortality, Longevity, Disability-morbidity, Expense, Lapse, and Life catastrophe risks \u2022 Health risk: this covers the Similar to Life Techniques (SLT) Health portfolio risk (comprising mortality, longevity, disability-morbidity, expense and lapse risks), the Non-SLT (NSLT) Health portfolio risk (comprising premium and reserve risk and lapse risk), and the Health Catastrophe risk. Within NN Group, the health risk stems from morbidity riders in Belgium, Czech, Poland, Slovakia, Romania, from the yearly renewable health insurance portfolio of Greece \u2022 Non-life risk: this covers non-life portfolio mainly contributed by ABN AMRO Non-life and NN Insurance Services. This risk covers the Premiums and reserve risk, Non-life catastrophe risk, and Lapse risk As a result of the Covid-19 pandemic, we have observed higher mortality in our Group Pension portfolios, leading to extra release of technical provisions for these life insurance books. For Non-life disability insurance contracts there are both direct effects from insureds being affected by Covid-19 as well as indirect effects from longer disability as treatment is postponed. For specific portfolios this may lead to increased claims; however, the observed and expected financial impact for NN Group is not significant. 8.1 Risk profile The table below presents the Non-market risk SCR composition at the end of 2022 and at the end of 2021, respectively. The main changes in the risk profile are explained in the subsequent section of this document. Non-market risk capital requirements 2022 2021 Insurance risk (IM entities) 3,069 4,326 Business risk (IM entities) 1,698 1,536 Life risk (SF entities) 1,162 957 Health risk (SF entities) 263 236 Non-life risk (SF entities) 121 113 Diversification non-market risk -1,243 -1,265 Non-market risk 5,070 5,903 The Non-market risk SCR decreased from EUR 5,903 million in 2021 to EUR 5,070 million in 2022. The decrease is predominantly driven by sharp increase in the interest rates resulting in a lower Insurance risk SCR primarily driven by lower mortality risk (due to effect of higher interest rates on longevity). This was partially compensated by an increase in the Life risk, mostly Mass Lapse risk, due to increased interest rates, for the Standard Formula entities 52 Risk management continued 8.2 Risk mitigation Proper pricing, underwriting, claims management and diversification are the main risk mitigating actions for insurance risks. NN Group Insurance risks are diversified between Business Units. By expanding insurance liabilities to cover multiple geographies, product benefits, lengths of contract and both Life and Non-life risk, NN Group reduces the likelihood that a single risk event will have a material impact on NN Group\u2019s financial condition. Risks not sufficiently mitigated by diversification are managed through concentration and exposure limits and through reinsurance: retention limits for Non-life insurance risks are set by line of business for catastrophic events and individual risk. Furthermore, management of the insurance risks is done by ensuring that the terms and conditions of the insurance policies that NN Group underwrites are correctly aligned with the intended policyholder benefits to mitigate the risk that unintended benefits are covered. This is achieved through NN Group\u2019s underwriting standards, product design requirements, and product approval and review processes \u2013 as referred to under Risk Management Policies, Standards and Processes. 8.3 Insurance Risk Insurance risk is the risk that the future insurance claims and other contractual benefits cannot be covered by premiums, policy fees and/or investment income or that insurance liabilities are not sufficient because claims and benefits might differ from the assumptions used in determining the best estimate liability. Insurance risk manifests itself in the life as well as in the non-life portfolio of NN Group. 8.3.1 Risk profile The table below presents the Partial Internal Model insurance risk SCR for the Dutch NN insurance entities of NN Group (namely NN Life, NN Non-life and NN Re) as at 31 December 2022 and 31 December 2021, respectively. Insurance risk capital requirements 2022 2021 Mortality (including longevity) risk 2,728 4,149 Morbidity risk 904 818 Property & Casualty risk 827 669 Diversification insurance risk -1,390 -1,310 Insurance risk (IM entities) 3,069 4,326 Decrease in the Insurance risk SCR is mostly driven by a decrease in Mortality risk due to sharp increase in the interest rates. This is partly offset by the increase in Morbidity risk SCR due to the switch to the long contract boundary, and the increase in Property & Casualty risk SCR due to regular model and assumption updates. Mortality risk occurs when claims are higher due to higher mortality experience (for instance in relation to term insurance). Longevity risk is the risk that technical provisions to cover insurance obligations will not be sufficient due to higher than expected life expectancies arising from mortality improvements such as better living conditions, improved health care, and medical breakthroughs. While NN Group is exposed to both Longevity and Mortality risks, these risks do not fully offset one another as the impact of the Longevity risks in the pension business in the Netherlands is significantly larger than the Mortality risk in the other businesses, which is partially due to the size of the business. Changes in mortality tables impact the future expected benefits to be paid and the present value of these future impacts is reflected directly in measures like Own Funds. Morbidity risk is borne primarily by the health insurance portfolio which pays out a fixed amount benefit, reimburses losses (e.g. in the case of loss of income), or pays for expenses of medical treatment related to certain illness or disability events. The main exposures to Morbidity risks within NN Group are the disability insurance policies underwritten in Netherlands Non-life. The Non-life portfolio includes Property & Casualty (P&C) products covering risks such as fire damage, car accidents, personal and professional liability, windstorms, hail, and third-party liabilities. The P&C risk is primarily underwritten by Netherlands Non-life and catastrophic losses are partially reinsured to external reinsurers through NN Re
52 Risk management continued
8.3.2 Risk mitigation
Insurance risk is mitigated through diversification between NN Group Business Units, between Mortality and Longevity risks within NN Group
Business Units, appropriate pricing, underwriting and claims management policies, and risk transfer via reinsurance and index-based hedges,
which are used to reduce the Own Funds volatility.
The risks that are not sufficiently mitigated by diversification are managed through concentration and exposure limits and
through reinsurance:
\u2022 Retention limits for Life insurance risks are set per insured life and significant mortality events affecting multiple lives such as pandemics
\u2022 Retention is used to manage risk levels (such as non-life reinsurance and morbidity reinsurance in the COLI business in Japan Life)
\u2022 Retention limits for Non-life insurance risks are set by line of business for catastrophic events and individual risks
For NN Non-Life natural catastrophic events are a major risk. One of the main natural catastrophe threatening the Netherlands is storms
causing severe wind damage. NN Non-Life purchased a reinsurance contract offering protection against severe storms and other natural
perils. In addition, reinsurance contracts per risk group are in place, covering NN Non-Life against large one-off events such as fires.
Reinsurance creates Credit risk which is managed in line with the Reinsurance Standard of NN Group.
8.4 Business risk
Business risk include risks related to the management and development of the Insurance risk, Persistency risk, and Expense risks. These risks
occur because of internal, industry, regulatory/political, or wider market factors.
8.4.1 Risk profile
The table below presents the Partial Internal Model business risk SCR for the Dutch NN insurance entities of NN Group as at 31 December
2022 and 31 December 2021, respectively.
Business risk capital requirements
2022 2021
Persistency risk 698 408
Premium risk 9 12
Expense risk 1,388 1,387
Diversification business risk -397 -271
Business risk (IM entities) 1,698 1,536
The Persistency risk SCR increased from EUR 408 million in 2021 to EUR 698 million in 2022 primarily due to model improvements and
assumption changes at NN Non-Life. The main contributors to Persistency risk are NN Non-Life and NN Czech business and the Corporate
Owned Life Insurance (COLI) business in Japan Life (both reinsured by NN RE).
The risk that policyholders maintain their contracts longer than NN Group has assumed is specific to the variable annuity business when
guarantees are higher than the value of the underlying policyholder funds, the pension business in the Netherlands, and the older, higher
interest rate guaranteed savings business in Europe. The risk that policyholders hold their contracts for a shorter period than NN Group has
assumed relates to the life business in Japan and the unit-linked businesses in Central and Eastern Europe. Within NN Group NN Re reinsures
parts of the life business in Japan and Central and Eastern Europe.
The SCR for Expense risk remained stable at EUR 1,388 million in 2022 (vs EUR 1,387 million in 2021). The decrease due to increase in the
interest rates was offset by an increase in inflation rates and refinements in the expense inflation modelling. This risk relates primarily to
the variable part of NN Group\u2019s expenses and is the risk that future actual expenses exceed the expenses assumed. Total administrative
expenses for NN Group for 2022 were EUR 2,210 million compared with EUR 2,280 million in 2021. Parts of these expenses are variable,
depending on the size of the business and sales volumes, and parts are fixed and cannot immediately be adjusted to reflect changes in the
size of the business.
Expense risk of NN Group mainly comprises the Expense level and Expense inflation risks in NN Life. A significant portion of it is incurred in
the closed block operations of Netherlands Life, where NN Group is also exposed to the risk that the expenses will not decrease in line with
the gradual decrease of the in-force book, leading to a per policy expense increase. Furthermore, Expense risk is also driven by the Group
pension business in the Netherlands which includes long-term best estimate expense assumptions, discounted over a long period of time.
52 Risk management continued 8.4.2 Risk mitigation Persistency and Premium risks are managed through the product development, product approval and review processes and by ensuring that appropriate advice is given to the customer, not only at the point of sale but also during the lifetime of the product. The policyholder behaviour experience of in-force policies is assessed at least annually. As part of its strategy, NN Group has put several programmes in place to improve the customer experience. These programmes improve the match between customer needs and the benefits and options provided by NN Group\u2019s products. Over time, NN Group\u2019s understanding and anticipation of the choice policyholders are likely to make, will improve, thereby decreasing the risk of a mismatch between actual and assumed policyholder behaviour. Ongoing initiatives are in place to manage Expense risk throughout NN Group, especially in the Netherlands where company targets are in place to reduce expenses, thus, lowering Expense risk going forward. These initiatives seek to reduce expenses through the number of underlying contracts in place. This is particularly relevant for the Dutch individual life closed-block business that can only reduce in number of contracts. Besides the already described mitigating actions, proper pricing, underwriting, claims management, and diversification are also risk mitigating actions for business risk. 8.5 Life risk Life risk includes risks arising from the underwriting of life insurances of the Business Units applying Standard Formula and is split into Mortality risk, Longevity risk, Disability/Morbidity risk, Persistency risk, Expense risk, Revision risk, and Catastrophic risk. These risks refer to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the conduct of business. 8.5.1 Risk profile Life risk capital requirements 2022 2021 Mortality risk 126 142 Longevity risk 84 103 Morbidity risk 11 11 Expense risk 372 435 Lapse risk 836 546 Catastrophe risk 132 113 Diversification life risk -399 -393 Life risk (SF entities) 1,162 957 As shown in the table above, the Life risk SCR for the SF Business Units increased from EUR 957 million in 2021 to EUR 1,162 million in 2022 mainly due to increase in the interest rates. 8.5.2 Risk mitigation The majority of Life risk is comprised of Lapse, Expense and Mortality risks (in Standard Formula entities) mainly from the international NN Group entities (Belgium, Poland, Spain) as well as ABN AMRO Life. The NN Group Standard Formula entities manage the Expense risk through detailed budgeting and monitoring the costs using activity- based costing. Lapse risk management serves an important objective for NN Group entities. When deviations from assumed lapse rates are observed over a prolonged period of time, a product review and further management actions are taken to address the underlying reasons. 8.6 Health risk Health risk arises from issuing health insurance contracts, which is divided in Similar to Life Techniques (SLT) risk, Non-Similar to Life Techniques (NSLT) risk and Catastrophe risk. SLT risk is associated to health obligations pursued on a similar technical basis to that of life insurance, while NSLT risk applies to health obligations not pursued on a similar technical basis to that of life insurance. These risks refer to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the conduct of business 52 Risk management continued 8.6.1 Risk profile Health risk capital requirements 2022 2021 SLT 245 220 NSLT 20 20 Catastrophe risk 25 19 Diversification health risk -27 -23 Health risk (SF entities) 263 236 As shown in the table above, the Health risk SCR of the Business Units applying Standard Formula increased from EUR 236 million in 2021 to EUR 263 million in 2022. The increase is mainly explained by the acquisition of MetLife Greece and MetLife Poland. The additional physical impact of climate change on the regular Health Catastrophe risk is not quantified yet but is expected to be limited because of the shorter time horizon of 1 year used to define the Solvency Capital Requirements and the mitigating effect of the current external reinsurance programme. NN Group will perform ongoing risk assessments to assess the physical impact of climate change on various Health products qualitatively and quantitively based on the latest IPCC Scenarios and taking into account various time horizons. 8.6.2 Risk mitigation The majority of Health risk originates from international NN Group entities (Belgium, Poland, Slovakia and Romania). They mitigate the risks by strict acceptance policies and stringent claims-handling procedures. An acceptance policy and internal control processes are developed for each product line maintained by those entities. 8.7 Non-life risk Non-life risk involves risks arising from the underwriting of non-life insurance, which includes Premium and Reserve risk, Persistency risk and Catastrophic risk. These risks refer to the adverse deviation from the best estimate liabilities due to the perils covered, policyholder behaviour and the processes used in the conduct of business. 8.7.1 Risk profile Non-life risk capital requirements 2022 2021 Premium and reserve risk 96 99 Lapse risk 21 18 Catastrophe risk 50 33 Diversification non-life risk -46 -37 Non-life risk (SF entities) 121 113 As shown in the table above, the Non-life risk SCR of the Business Units applying Standard Formula was relatively stable between 2021 (EUR 113 million) and 2022 (EUR 121 million). The additional (physical) impact of climate change on the regular Non-life Catastrophe risk is not quantified yet but is expected to be limited because of the shorter time horizon of one year used to define the Solvency Capital Requirements and the mitigating effect of the current external reinsurance programme. NN Group performs qualitative and quantitative risk assessments to assess the physical impact of climate change on various non-life product lines based on the latest IPCC Scenarios and taking into account various time horizons. We refer to paragraph Sustainability and climate change risk management in the section Managing our risks. 8.7.2 Risk mitigation Non-life risk is mitigated through appropriate pricing and underwriting policies and through risk transfer via reinsurance. Most of the Non-life risk comes from ABN AMRO Non-life and NN Insurance Services, and they manage the risk using various reinsurance contracts. Within our non-life business, Weather-related risks are managed through the use of Catastrophe risk modelling in underwriting and risk assessment. We use external vendor models to estimate the impact and damage caused by large natural catastrophes such as windstorms, considered to be the main natural peril for the NN Group portfolio. Reinsurance covers are placed with strongly capitalised external reinsurers. Natural catastrophic losses can become more severe and more frequent because of climate change. Although most of our non-life business is annually renewable, to accurately price our business it is essential that we monitor and understand linkages between natural disasters and climate change. NN Group therefore liaises with our external vendors and participates in industry initiatives to improve our knowledge, data and models to better prepare for changing weather patterns 53 Capital and liquidity management Objectives, policies and processes Objective The goal of NN Group\u2019s capital and liquidity management is to adequately capitalise NN Group and its operating entities at all times to meet the interests of our stakeholders, including our customers and shareholders. The balance sheet is assessed in line with our capital management framework which is based on regulatory, economic and rating agency requirements. NN Group closely monitors and manages the following metrics: Own Funds/Solvency Capital Requirement (SCR), cash capital at the holding company, financial leverage, fixed cost coverage, capital generation and liquidity. Governance The NN Group Capital Management and Corporate Treasury Department reports to the NN Group CFO. Activities of the department are executed on the basis of established policies, guidelines and procedures. Capital Management is responsible for the sufficient capitalisation of NN Group entities, which involves the management, planning and allocation of capital within NN Group. Corporate Treasury is responsible for the management and execution of debt capital market transactions, term (capital) funding, cash management and risk management transactions. Capital management and framework The capital framework takes into account regulatory, economic and rating agency requirements: \u2022 As a first principle, NN Group aims to capitalise its operating entities adequately at all times. Operating entities have to comply with the local statutory capital frameworks that are under supervision of local regulators. To ensure adequate capitalisation, they are managed to commercial capital target levels which are set in accordance with the risk associated with the business activities, commercial requirements and other relevant factors. The commercial capital target levels are set in local legal entity capital policies and approved by the Management Board of NN Group. Capital adequacy is ensured through the capital planning process which starts with the annual budgeting process in which a capital plan is prepared for NN Group and its operating entities with a time horizon of 5 years. NN Group\u2019s risk appetite statements, as further described in Note 52 \u2018Risk management\u2019, drive the target setting and are cascaded down to the operating entities in line with NN Group\u2019s risk management strategy. Other important factors which are considered in the capital plan are efficient capital allocation, the cost of capital and capital generation. Capital positions of operating entities are closely monitored and, if necessary, measures are taken to ensure capital adequacy. At the end of 2022, all operating entities were capitalised above their local regulatory requirements. NN Group defines a comfort zone between 150%-200% Group Solvency II ratio where NN Group intends to pay a progressive dividend per share and execute an annual share buyback of up to EUR 250 million. In the case of a ratio sustainably above 200% Group Solvency, there is an opportunity to increase the share buyback further. \u2022 In addition, cash capital is held at the holding company. The cash capital position is available to cover capital needs of the entities after a stress event and to cover financial leverage costs and holding company expenses for a period of at least 12 months. Stress tests are based on 1-in-20 year scenarios and specific stress scenarios that might change from time to time. The free cash flow to the holding is the cash made available to NN Group, which can be distributed to shareholders (reference is made to Note 14 \u2018Equity\u2019 for information on distributable reserves), used to reduce debt or for other corporate purposes. The free cash flow to the holding is closely monitored and forecasted on a regular basis. \u2022 NN Group assesses its corporate financing mix via the financial leverage and fixed-cost coverage ratio. Financial leverage measures the amount of debt that NN Group issued to capitalise its businesses. Debt used for funding of operating activities or liquidity needs is not considered financial leverage. The fixed-cost coverage ratio measures the ability of NN Group to pay its fixed financing expenses and is defined as the earnings before interest and tax (EBIT) divided by interest before tax on financial leverage. Special items, revaluations on derivatives that are non-eligible for hedge accounting, market and other impacts and amortisation of acquisition intangibles are excluded from EBIT . 53 Capital and liquidity management continued Liquidity management NN Group monitors and manages its liquidity risk based on certain severe stress scenarios, assessed by operating entities and aggregated at the group level. Liquidity positions are periodically reported and monitored both on an individual entity and on a consolidated basis. Liquidity risk is measured through the Required Sales Ratio, calculated as: (i) the difference between liquidity needs and liquidity sources in certain stress scenarios, divided by (ii) the available liquid assets for sale, subject to a reduction applied to the value of assets. This ratio is calculated for different time horizons and different levels of liquidity sources. The ratios of the entities should meet the predefined tolerance levels on a standalone entity basis. At 31 December 2022, the liquidity position of all entities was adequate and within the risk tolerance (reference is made to Note 52 \u2018Risk management\u2019 for more information on liquidity risk management). For the Banking business, the Dutch Central Bank (DNB) requires an annual internal evaluation of capital adequacy, liquidity position and the risk management framework, including stress testing. This internal evaluation is performed using an Internal Capital and Liquidity Adequacy Assessment Process (ICAAP and ILAAP) and reviewed by DNB in its Supervisory Review & Evaluation Process (SREP). The ICAAP, ILAAP, and SREP show that NN Bank has a robust capital and liquidity position. NN Group has a syndicated revolving credit facility in place with maximum size of EUR 1,896 billion which will mature in 2027. The revolving credit facility was renewed and the maturity was extended with two years in January 2023. Per year-end 2022 (and year-end 2021) the maximum size of the revolving credit facility was EUR 1,750 billion. There was no amount drawn from the facility in 2022 or 2021. Significant events of 2022 are listed below in chronological order On 31 January 2022, NN Group completed the acquisition of MetLife\u2019s businesses in Greece. On 15 February 2022, NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen (AAV) announced that they reached an agreement to sell the life insurance subsidiary of AAV to NN Life. The transaction was completed on 15 July 2022. The former life insurance subsidiary of AAV will be integrated into NN Life and is expected to legally merge with NN Life over the course of 2023. On 17 February 2022, NN Group announced an open market share buyback programme for an amount of EUR 250 million within 12 months, which commenced on 1 March 2022. This share buyback was executed by financial intermediaries under an open market share buyback programme and was completed on 20 December 2022. On 17 February 2022, NN Group announced an additional open market share buyback programme for an amount of EUR 750 million following the completion of the sale of NN IP. This additional share buyback programme commenced on 13 April 2022 and was completed on 20 December 2022. On 18 March 2022, NN Group repaid EUR 600 million senior unsecured notes that matured on 18 March 2022. The repayment followed the issuance of EUR 600 million senior unsecured notes on 23 November 2021 with a fixed coupon of 0.875% per annum and a maturity of 10 years. On 11 April 2022, NN Group announced the completion of the sale of NN IP to Goldman Sachs which generated cash proceeds of around EUR 1.7 billion. The completion of the transaction followed the fulfilment of the customary closing conditions, including receipt of all necessary regulatory approvals. The agreement on the sale of NN IP and a ten-year strategic partnership with Goldman Sachs Asset Management were announced on 19 August 2021. On 22 April 2022, NN Group announced the completion of the acquisition of MetLife\u2019s businesses in Poland, after obtaining regulatory approvals on 14 April 2022. On 15 June 2022, NN Group paid a 2021 final dividend of EUR 1.56 per ordinary share, equivalent to EUR 469 million in total. To neutralise the dilutive effect of the stock dividend on earnings per share, NN Group announced the repurchase of ordinary shares for a total amount of EUR 218 million. This share buyback was executed by financial intermediaries under an open market share buyback programme which was completed on 24 August 2022. On 29 August 2022, NN Life redeemed the outstanding EUR 500 million 9% Fixed to Floating Rate Subordinated Notes due 2042. The aforementioned notes were redeemed in full at their principal amount at their first call date, 29 August 2022
53 Capital and liquidity management continued
On 30 August 2022, NN Group announced that it had priced EUR 500 million of subordinated notes. It was the first issuance under
NN Group\u2019s Sustainability Bond Framework, which was established in February 2022 with the aim to finance green and social projects.
The EUR 500 million subordinated notes have a maturity of 20.5 years and are first callable after 10 years on 30 August 2032, subject to
redemption conditions. The coupon is fixed at 5.25% per annum until the first reset date on 1 March 2033 and will be floating thereafter.
The subordinated notes qualify as Tier 2 regulatory capital. The subordinated notes are rated by Standard & Poor\u2019s (BBB-) and Fitch (BBB+)
and listed on Euronext Amsterdam.
On 7 September 2022, NN Group paid a 2022 interim dividend of EUR 1.00 per ordinary share, equivalent to EUR 293 million. To neutralise
the dilutive effect of the stock dividend on earnings per share, NN Group announced the repurchase of ordinary shares for a total amount of
EUR 131 million. This share buyback was executed by financial intermediaries under an open market share buyback programme which was
completed on 12 October 2022.
On 13 September 2022, NN Group announced the sale of the former MetLife pension business in Poland to Generali. The pension business
is part of the former MetLife activities in Poland that were acquired by NN Group in April 2022. The transaction was completed in the first
quarter of 2023.
On 4 October 2022, NN Group announced that its subsidiary NN Insurance Belgium has completed the sale of a closed book life portfolio to
Athora Belgium. The completion follows the fulfilment of customary closing conditions, including receipt of all necessary regulatory approvals
and competition clearances.
On 11 October 2022, NN Group announced that it had reached an agreement with Rockbridge to sell the former MetLife asset management
business in Poland. The transaction was completed in December 2022.
On 2 January 2023, NN Group announced the completion of the legal mergers of the former MetLife businesses in Poland and Greece.
The legal mergers follow the completion of the acquisition process of the former MetLife business operations in both countries. In Greece,
the legal merger became effective on 29 December 2022. In Poland, the life insurance companies of Nationale-Nederlanden Poland and the
former MetLife Poland were legally merged on 2 January 2023.
On 13 January 2023, NN Group repaid EUR 500 million of unsecured senior notes that matured on 13 January 2023.
Solvency II
Solvency II is the regulatory framework for (re-)insurance undertakings and groups domiciled in the EU.
Under the Solvency II regime, required capital (Solvency Capital Requirement) is risk-based and calculated as the post-tax value-at-risk at
the confidence interval of 99.5% on a one-year horizon. Available capital (Own Funds) is determined as the excess of assets over liabilities,
both based on economic valuations, plus qualifying subordinated debt. The EU Solvency II directive requires that (re-)insurance undertakings
and groups hold sufficient Eligible Own Funds to cover the SCR.
NN Group is the holding company of licensed insurers and banking businesses. Regulated entities which from local regulatory perspective
are not subject to the Solvency II regime (e.g. pension funds in Central Europe, NN Bank, BeFrank and BeFrank PPI) are included in Own
Funds based on their local available capital and in SCR based on required capital defined by sectoral supervisory rules. NN Life Japan is
included in Own Funds and SCR based on its available and required capital determined according to the local solvency regime recognised by
the European Commission as provisionally equivalent.
NN Group uses the Partial Internal Model (PIM) to calculate capital requirements under Solvency II. The group capital model is named as
such due to the fact that an Internal Model is used to calculate the capital requirements for the Dutch insurance entities (namely NN Life, NN
Non-life and NN Re in the Netherlands), while the Standard Formula is used to calculate capital requirements for operational risk (across the
group), for the international insurance entities that fall under Solvency II, for ABN AMRO Non-life, and for ABN AMRO Life.
Further details on the NN Group capital requirements at 31 December 2022 are provided in Note 52 \u2018Risk management\u2019.
The Solvency II ratios of NN Group and its Dutch insurance entities do not include any contingent liability potentially arising from unit-linked
products sold, issued or advised on by NN Group\u2019s insurance entities (including ABN AMRO Life) in the past, as this potential liability cannot
be reliably estimated or quantified at this point. Reference is made to Note 45 \u2018Legal proceedings\u2019 for more information .
53 Capital and liquidity management continued
On 17 December 2020, EIOPA published its opinion to the European Commission (the \u2018Opinion\u2019). The Opinion, which consists of a proposed
package of measures, was used as input for the European Commission to draft a legislative proposal. On 22 September 2021, the European
Commission published its draft proposals on the Solvency II 2020 review. The proposal deviates in several areas from the EIOPA Opinion
which may have positive impact on the solvency of NN Group, e.g. regarding the Risk Margin, risk correction for credit spread and the
interest rate extrapolation. Some proposals with potential negative impact on NN Group and the wider industry are still part of the legislative
proposal and ongoing discussions. In June 2022, the European Council reached consensus on their view on the Opinion. In the first half of
2023 the European Parliament will negotiate on their position, followed by the trialogue negotiations. The proposed changes are currently
expected to be implemented at the earliest in 2026. Based on the draft proposals by the European Commission and current market
conditions, NN Group remains comfortable with its Solvency position and does not expect changes to its dividend policy caused by the
issuance of the Opinion, including proposed changes.
Eligible Own Funds and Solvency Capital Requirement
2022 2021
Shareholders\u2019 equity 16,005 32,888
Minority interest 63 266
Elimination of deferred acquisition costs and other intangible assets -2,530 -2,149
Valuation differences on assets -6,947 2,268
Valuation differences on liabilities, including insurance and investment contracts 9,554 -18,687
Deferred tax effect on valuation differences -129 4,649
Difference in treatment of non-Solvency II regulated entities -141 -951
Excess assets/liabilities 15,876 18,284
Qualifying subordinated debt 3,985 4,383
Foreseeable dividends and distributions -623 -646
Basic Own Funds 19,237 22,021
Non-available Own Funds 1,415 1,094
Eligible Own Funds to cover Solvency Capital Requirements (a) 17,822 20,927
\u2013 of which Tier 1 unrestricted 10,904 13,377
\u2013 of which Tier 1 restricted 1,716 1,875
\u2013 of which Tier 2 2,189 2,422
\u2013 of which Tier 3 910 848
\u2013 of which non-Solvency II regulated entities 2,104 2,404
Solvency Capital Requirements (b) 9,040 9,840
\u2013 of which from Solvency II entities 7,677 8,506
\u2013 of which from non-Solvency II entities 1,363 1,334
NN Group Solvency II ratio (a/b)
1
197% 213%
1 The Solvency II ratio is not final until filed with the regulator.
NN Group was adequately capitalised at 31 December 2022 with a Solvency II ratio of 197% based on the Partial Internal Model.
The Solvency II ratio of NN Group decreased to 197% at the end of 2022 from 213% at the end of 2021. The decrease mainly reflects
unfavourable market impacts, capital flows to shareholders as well as the impact of UFR reduction from 3.60% to 3.45%. This was partly
offset by operating capital generation, the net positive impact from the sale of NN IP and the acquisition of MetLife\u2019s businesses in Greece
and Poland, as well as other movements including model and assumption changes (reference is made to Note 52 \u2018Risk management\u2019 for more
information about model changes). Market impacts mainly reflect movements in credit spreads and negative equity revaluations, partly offset
by changes in interest rates.
53 Capital and liquidity management continued Eligible Own Funds decreased to EUR 17,822 million from EUR 20,927 million at 31 December 2021. The decrease was mainly driven by the capital flows to shareholders and the negative impact of equity revaluations and movements in credit spreads. This was partly offset by operating capital generation, the net positive impact from the sale of NN IP and the acquisition of MetLife\u2019s businesses in Greece and Poland, as well as model and assumption changes. The SCR of NN Group decreased to EUR 9,040 million from EUR 9,840 million at 31 December 2021 mainly driven by the impact of changes in interest rates and negative equity revaluations. Structure, amount and quality of Own Funds Subordinated liabilities included in NN Group Own Funds Solvency II value Interest rate Issue Year of issue Notional Due date First call date Own Funds tier 2022 2021 4.500% NN Group N.V. 2014 1,000 Perpetual 15 January 2026 Tier 1 969 1,078 4.375% NN Group N.V. 1 2014 750 Perpetual 13 June 2024 Tier 1 747 797 4.625% NN Group N.V. 2014 1,000 8 April 2044 8 April 2024 Tier 2 1,012 1,075 4.625% NN Group N.V. 2017 850 13 January 2048 13 January 2028 Tier 2 793 912 5.250% NN Group N.V. 2 2022 500 1 March 2043 30 August 2032 Tier 2 464 9.000% Nationale-Nederlanden Levensverzekering Maatschappij N.V. 3 2012 500 29 August 2042 29 August 2022 Tier 2 521 1 These securities were originally issued by Delta Lloyd N.V. which was merged into NN Group N.V. at the end of 2017. 2 These securities were issued on 30 August 2022. 3 These securities were originally issued by Delta Lloyd Levensverzekeringen N.V. which was merged into Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NN Life) on 1 January 2019. These notes were redeemed by Nationale-Nederlanden Levensverzekering Maatschappij N.V. at their first call date, 29 August 2022. The perpetual subordinated notes issued in 2014 with a notional amount of EUR 1 billion have a coupon of 4.50% and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 15 January 2026 or on any interest payment date thereafter. The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering). These subordinated notes are grandfathered for a maximum period of 10 years until 1 January 2026. The perpetual subordinated notes (originally issued by Delta Lloyd N.V. in 2014) with a notional amount of EUR 750 million have a coupon of 4.375% and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 June 2024 or on any interest payment date thereafter. The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering). These notes are grandfathered for a maximum period of 10 years until 1 January 2026. The dated subordinated notes issued in 2014 with a notional amount of EUR 1 billion have a coupon of 4.625% and maturity date on 8 April 2044 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 8 April 2024 or on any interest payment date thereafter. These subordinated notes are classified as Tier 2 capital based on the transitional provisions (grandfathering). The subordinated notes are grandfathered for a maximum period of 10 years until 1 January 2026. The dated subordinated notes issued in 2017 with a notional amount of EUR 850 million have a coupon of 4.625% with maturity date on 13 January 2048 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 January 2028 or on any interest payment date thereafter. These subordinated notes are classified as Tier 2 capital. On 30 August 2022, NN Group N.V. issued subordinated notes with a notional amount of EUR 500 million and a coupon of 5.25% with a maturity on 1 March 2043. NN Group N.V. has the right to redeem these notes on the first call date of 30 August 2032 or any other interest payment date thereafter. These subordinated notes are classified as Tier 2 capital. The dated subordinated notes of EUR 500 million originally issued by Delta Lloyd Levensverzekering N.V. in 2012 and assumed by Nationale-Nederlanden Levensverzekering Maatschappij N.V. following the legal merger effective as of 1 January 2019 were redeemed on 29 August 2022. 53 Capital and liquidity management continued Eligible Own Funds NN Group Own Funds are classified into three tiers as follows: \u2022 The excess of assets over liabilities on the basis of consolidated accounts excluding net Deferred Tax Asset is classified as (unrestricted) Tier 1 \u2022 The proportional share in the Own Funds of BeFrank, BeFrank PPI and pension funds in Central Europe is classified as (unrestricted) Tier 1 \u2022 The proportional share in the Eligible Own Funds of NN Life Japan is classified as (unrestricted) Tier 1 (European Commission recognised the solvency regime applied to the insurance undertakings in Japan as provisionally equivalent to Solvency II according to Commission Delegated Decision (EU) 2016/310 of 26 November 2015) \u2022 The proportional share in the Own Funds of NN Bank is classified as (unrestricted) Tier 1 with the exception of the subordinated loans which are classified as Tier 2 \u2022 Perpetual subordinated notes are classified as (restricted) Tier 1 based on the transitional provisions (grandfathering) \u2022 Dated subordinated debt is classified as Tier 2 including that based on the transitional provisions (grandfathering) \u2022 The Net Deferred Tax Asset (Deferred tax assets and liabilities are offset only where such assets and liabilities relate to taxes levied by the same tax authority on the same taxable undertaking) is classified as Tier 3 As at 31 December 2022 and 2021, NN Group had no ancillary Own Funds. There are a number of regulatory restrictions on the amounts classified as Restricted Tier 1, Tier 2 and Tier 3 capital. The following restrictions have to be taken into account: \u2022 Restricted Tier 1 capital cannot exceed 20% of the total Tier 1 amount \u2022 The proportion of Tier 1 items in the Eligible Own Funds should be higher than one third of the total amount of Eligible Own Funds \u2022 Tier 2 and Tier 3 capital together cannot exceed 50% of the SCR \u2022 Tier 3 capital cannot exceed 15% of the Solvency Capital Requirements \u2022 Tier 3 capital cannot exceed one third of the total amount of Eligible Own Funds The application of the regulatory restrictions as at 31 December 2022 is reflected in the table below. Eligible Own Funds to cover the Solvency Capital Requirement Available Own Funds 2022 Eligibility Own Funds 2022 Available Own Funds 2021 Eligibility Own Funds 2021 Eligibility restriction Tier 1 12,620 12,620 15,252 15,252 More than one third of total EOF Of which: \u2013 Unrestricted Tier 1 10,904 10,904 13,377 13,377 Not applicable \u2013 Restricted Tier 1 1,716 1,716 1,875 1,875 Less than 20% of Tier 1 Tier 2 + Tier 3 3,098 3,098 3,270 3,270 Less than 50% of SCR Tier 2 2,189 2,189 2,422 2,422 Tier 3 910 910 848 848 Less than 15% of SCR; Less than one third of total EOF Non-Solvency II regulated entities 2,104 2,104 2,404 2,404 Total Own Funds 17,822 17,822 20,927 20,927 53 Capital and liquidity management continued Transferability and fungibility of Own Funds NN Group adjusts the group Own Funds taking into account the value of own fund items that cannot effectively be made available to cover the group SCR. These are the own fund items of related undertakings subject to legal and regulatory constraints that restrict the ability of those items to absorb all types of loss within the group and/or transferability of assets. Based on NN Group\u2019s assessment these own fund items mainly include: \u2022 Differences between valuations of assets and liabilities based on Solvency II principles and according to principles that related undertakings use to prepare respective local annual accounts \u2022 For NN Life Japan, own fund items according to local rules but which are not part of shareholders\u2019 equity \u2022 For NN Bank, own funds covering pillar II guidance issued by regulator \u2022 The transitional measures on risk-free interest rates and technical provisions \u2022 Legal reserves set up according to local company law \u2022 Any minority interest in a related undertaking These own fund items are included in NN Group Own Funds to the extent they are eligible for covering contribution of the respective related undertaking to the NN Group\u2019s SCR. On 31 December 2022 excess non-available own funds amounted to EUR 1,415 million. On 31 December 2021, this amount was EUR 1,094 million. Cash capital position at the holding company NN Group holds a cash capital position in the holding company to cover stress events and to fund holding company expenses and interest expenses. Cash capital is defined as net current assets available at the holding company. A related metric is the free cash flow at the holding which is defined as the change in the cash capital position at the holding company over the period, excluding acquisitions, divestments, and capital transactions with shareholders and debtholders. Cash capital position at the holding company 2022 2021 Cash capital position \u2014 opening balance 1,998 1,170 Remittances from subsidiaries 1 1,753 1,835 Capital injections into subsidiaries 2 -545 -19 Other 3 -315 -344 Free cash flow to the holding 4 893 1,472 Cash divestment proceeds 1,626 76 Acquisitions -524 -358 Capital flow from/to shareholders -1,806 -960 Increase/decrease in debt and loans -106 597 Cash capital position \u2014 closing balance 2,081 1,998 1 Includes interest on intragroup subordinated loans provided to subsidiaries by the holding company. 2 Includes the change of subordinated loans provided to subsidiaries by the holding company. 3 Includes interest on subordinated loans and debt with external debtholders, holding company expenses and other cash flows. 4 Free cash flow to the holding company is defined as the change in cash capital position of the holding company over the period, excluding acquisitions, divestment proceeds and capital transactions with shareholders and debtholders. The cash capital position at the holding company increased to EUR 2,081 million at 31 December 2022 from EUR 1,998 million at 31 December 2021. The increase is mainly due to EUR 1,753 million of remittances from subsidiaries and EUR 1,626 million of proceeds from the sale of NN IP. These are partly offset by EUR 1,806 million of capital flows to shareholders, EUR 545 million injections into subsidiaries, EUR 524 million paid for acquisitions mainly reflecting the acquisition of MetLife\u2019s businesses in Poland and Greece, and other movements of EUR 315 million that include holding company expenses, interest on loans and debt and other holding company cash flows. NN Group issued EUR 500 million of subordinated notes on 30 August 2022 and used the proceeds of the issuance for providing an intercompany loan to NN Life for the repayment of its EUR 500 million external legacy Tier 2 debt that was redeemed on 29 August 2022. The intercompany loan is reflected in capital injections into subsidiaries. Adjusting for the EUR 500 million intercompany loan to NN Life, the free cash flow to the holding was EUR 1,393 million for full-year 2022. Capital flows to shareholders comprise the cash part of the 2021 final dividend and the 2022 interim dividend for a total amount of EUR 413 million and the repurchase of EUR 1,393 million of own shares. The debt position decreased with EUR 106 million which reflects the redemption of EUR 600 million of senior debt on 18 March 2022, partly offset by the proceeds of the issuance of EUR 500 million of subordinated notes on 30 August 53 Capital and liquidity management continued Financial leverage The financial leverage and fixed-cost coverage ratio are managed in accordance with a single A financial strength rating target. Financial leverage 2022 2021 Shareholders\u2019 equity 16,005 32,888 Adjustment for revaluation reserves 1 3,382 -11,730 Minority interests 63 266 Capital base for financial leverage (a) 19,450 21,424 \u2013 Undated subordinated notes 2 1,764 1,764 \u2013 Subordinated debt 2,334 2,356 Total subordinated debt 4,098 4,120 Debt securities issued 1,694 2,292 Financial leverage (b) 5,792 6,412 Total debt 5,792 6,412 Financial leverage ratio (b/(a+b)) 22.9% 23.0% Fixed-cost coverage ratio 3 7.6x 19.9x 1 Includes revaluations on debt securities, on the cash flow hedge reserve and on the reserves crediting to life policyholders. 2 The undated subordinated notes classified as equity are considered financial leverage in the calculation of the financial leverage ratio. The related interest is included on an accrual basis in the calculation of the fixed-cost coverage ratio. 3 Measures the ability of earnings before interest and tax (EBIT) to cover funding costs on financial leverage. Special items, revaluations on derivatives that are non-eligible for hedge accounting, market and other impacts and amortisation of acquisition intangibles are excluded from EBIT. The financial leverage ratio of NN Group decreased to 22.9% at 31 December 2022 from 23.0% at 31 December 2021, reflecting the decrease of the financial leverage, partly offset by the decrease of the capital base. The financial leverage decreased mainly driven by the redemption of EUR 600 million of senior debt on 18 March 2022. The capital base for financial leverage decreased with EUR 1,974 million mainly due to capital flows to shareholders of EUR 1,806 million and negative equity revaluations of EUR 1,475 million, partly offset by the 2022 net results of EUR 1,562 million. In January 2023, NN Group repaid EUR 500 million of unsecured senior notes that matured on 13 January 2023. NN Group will consider various options in the context of optimising the capital and leverage structure. The fixed-cost coverage ratio decreased to 7.6x at the end of 2022, from 19.9x at the end of 2021 (on a last 12-months basis), driven by the decrease of earnings before interest and tax due to lower capital gains on the sale of public equities and government bonds, impairments on equities and lower revaluations on real estate. 53 Capital and liquidity management continued Proposed 2022 final dividend At the annual general meeting on 2 June 2023, a final dividend will be proposed of EUR 1.79 per ordinary share, or approximately EUR 504 million in total based on the current number of outstanding shares (net of treasury shares). The final dividend will be paid either fully in cash, after deduction of withholding tax if applicable, or fully in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares will be delivered from NN Group treasury shares or issued at the expense of the share premium reserve. To neutralise the dilutive effect of the stock dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. If the proposed dividend is adopted by the General Meeting, NN Group ordinary shares will be quoted ex-dividend on 6 June 2023. The record date for the dividend will be 7 June 2023. The election period will run from 8 June 2023 up to and including 22 June 2023. The stock fraction for the stock dividend will be based on the volume weighted average price of NN Group ordinary shares on Euronext Amsterdam for the five trading days from 16 June through 22 June 2023. The dividend will be payable on 29 June 2023. (For more information: https://www.nn-group.com/ investors/share-information/dividend-policy-and-dividend-history.htm). On 7 September 2022, NN Group paid an interim dividend of EUR 1.00 per ordinary share, equivalent to EUR 293 million in total. The proposed 2022 final dividend of EUR 1.79 per ordinary share plus the 2022 interim dividend of EUR 1.00 per ordinary share gives a total dividend for 2022 of EUR 2.79 per ordinary share. On 15 June 2022, NN Group paid a 2021 final dividend of EUR 1.56 per ordinary share, equivalent to EUR 469 million in total. Share buyback On 16 February 2023, NN Group announced that it will execute an open market share buyback programme for an amount of EUR 250 million. The programme will be executed within 12 months and commenced on 1 March 2023. The share buyback will be deducted in full from Solvency II Own Funds in the first half of 2023 and is estimated to reduce NN Group\u2019s Solvency II ratio by approximately 3%-points. In addition to the announced share buyback programme, NN group intends to repurchase shares to neutralise the dilutive effect of any stock dividends. NN Group intends to cancel any repurchased NN Group shares under the programmes unless used to cover obligations under share-based remuneration arrangements or to deliver stock dividend. The share buyback programmes will be executed within the limitations of the existing authority granted by the General Meeting on 19 May 2022 and such authority to be granted by the General Meeting on 2 June 2023. The shares will be repurchased at a price that does not exceed the last independent trade or the highest current independent bid on the relevant trading platform. The programmes will be executed by financial intermediaries and will be performed in compliance with the safe harbour provisions for share buybacks. On 17 February 2022, NN Group announced an open market share buyback programme for an amount of EUR 250 million within 12 months, commencing on 1 March 2022. NN Group also announced an additional open market share buyback programme for an amount of EUR 750 million after completion of the sale of NN IP. This additional share buyback programme commenced on 13 April 2022. These share buyback programmes were completed on 20 December 2022. NN Group neutralised the dilutive effect of the 2021 final dividend that was paid in the form of ordinary shares for a total amount of EUR 218 million and the 2022 interim dividend that was paid in the form of ordinary shares for a total amount of EUR 131 million. These share buyback programmes were completed on 24 August 2022 and 12 October 2022, respectively. NN Group reports on the progress of the share buyback programmes on its corporate website (https://www.nn-group.com/investors/share- information/share-buyback-programme.htm) on a weekly basis 53 Capital and liquidity management continued Share capital On 4 May 2022 and 25 November 2022, respectively 7,878,210 and 15,000,000 NN Group treasury shares which were repurchased under the share buyback programmes were cancelled. In 2022, a total number of 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased (reference is made to Note 14 \u2018Equity\u2019 regarding the number of shares repurchased and the total amount in 2021). On 3 March 2023, the total number of NN Group shares outstanding (net 13,689,804 of treasury shares) was 281,310,196. Credit ratings On 18 May 2022, Standard & Poor\u2019s published a report affirming NN Group\u2019s \u2018A\u2019 financial strength rating and \u2018BBB+\u2019 credit rating with a positive outlook. On 3 March 2023, Fitch Ratings published a report affirming NN Group\u2019s \u2018AA-\u2019 financial strength rating and \u2018A+\u2019 credit rating with a stable outlook. Credit ratings on NN Group N.V. on 8 March 2023 Financial Strength Rating NN Group N.V. Counterparty Credit Rating Standard & Poor\u2019s A BBB+ Positive Positive Fitch AA- A+ Stable Stable Authorisation of the Consolidated annual accounts The Consolidated annual accounts of NN Group N.V. for the year ended 31 December 2022 were authorised for issue in accordance with a resolution of the Executive Board on 8 March 2023. The Executive Board may decide to amend the Consolidated annual accounts as long as these are not adopted by the General Meeting. The General Meeting may decide not to adopt the Consolidated annual accounts, but may not amend these during the meeting. The General Meeting can decide not to adopt the Consolidated annual accounts, propose amendments and then adopt the Consolidated annual accounts after a normal due process. The Hague, 8 March 2023 The Supervisory Board D.A. (David) Cole, chair H.M. (H\u00e9l\u00e8ne) Vletter-van Dort, vice-chair I.K. (Inga) Beale R.W. (Robert) Jenkins R.J.W. (Rob) Lelieveld P.F.M. (Pauline) van der Meer Mohr C.G. (Cecilia) Reyes J.W. (Hans) Schoen The Executive Board D.E. (David) Knibbe, CEO, chair A.T.J. 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(NN Group) is a public limited liability company (naamloze vennootschap) incorporated under Dutch law. NN Group has its official seat in Amsterdam, the Netherlands and its office address in The Hague, the Netherlands. NN Group is recorded in the Commercial Register no. 52387534. The principal activities of NN Group are described in the section \u2018About NN\u2019. Amounts in the annual accounts are in millions of euros, unless stated otherwise. NN Group prepares its Consolidated annual accounts in accordance with International Financial Reporting Standards as endorsed by the European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code. In the Consolidated annual accounts, the term IFRS-EU is used to refer to these standards, including the decisions NN Group made with regard to the options available under IFRS-EU. IFRS-EU provides a number of options in accounting policies. The key areas, in which IFRS-EU allows accounting policy choices and the related NN Group accounting policy, are summarised as follows: \u2022 Under IFRS 4, an insurer may continue to apply its existing pre-IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts. NN Group operates in different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group for example applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance liabilities. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policy under IFRS-EU. \u2022 NN Group\u2019s accounting policy for real estate investments is fair value, with changes in the fair value reflected immediately in the Consolidated profit and loss account. \u2022 NN Group\u2019s accounting policy for property in own use is fair value, with changes in the fair value reflected, after tax, in the \u2018Revaluation reserve\u2019 in \u2018Other comprehensive income\u2019 (equity). A net negative revaluation on individual properties is reflected immediately in the Consolidated profit and loss account. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. NN Group\u2019s accounting policies under IFRS-EU and its decision on the options available are included below. Except for the options included above, the principles are IFRS-EU and do not include other significant accounting policy choices made by NN Group. The accounting policies that are most significant to NN Group are included in the section \u2018Critical accounting policies and significant judgements\u2019. The preparation of the Consolidated annual accounts requires the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates . Upcoming changes in IFRS-EU Upcoming changes in IFRS-EU that are the most relevant for NN Group relate to IFRS 9 \u2018Financial Instruments\u2019 and IFRS 17 \u2018Insurance Contracts\u2019. IFRS 9 \u2018Financial Instruments\u2019 IFRS 9 \u2018Financial Instruments\u2019 was issued in 2014. IFRS 9 replaces most of IAS 39 \u2018Financial Instruments: Recognition and Measurement\u2019 and includes requirements for classification and measurement of financial assets and liabilities, impairment of financial assets and hedge accounting. Main features of IFRS 9 The classification and measurement of financial assets under IFRS 9 depends on NN Group\u2019s business model and the instrument\u2019s contractual cash flow characteristics. This results in financial assets being recognised at amortised cost, at fair value through other comprehensive income (equity) or at fair value through profit or loss. In many instances, the classification and measurement under IFRS 9 is similar to IAS 39, although changes in classification occur. For equity securities accounted for at fair value through other comprehensive income, realised gains and losses are no longer recognised in the profit and loss account but reclassified within equity and impairments are also no longer recognised. The classification and measurement of financial liabilities remains unchanged. The recognition and measurement of impairment under IFRS 9 is intended to be more forward-looking than under IAS 39. The impairment requirements of IFRS 9 apply to all financial assets measured at amortised cost and at fair value through other comprehensive income, except for equity securities. Initially, a provision is required for expected credit losses resulting from default events that are expected within the next twelve months. In the event of a significant increase in credit risk, a provision is required for expected credit losses resulting from all possible default events over the expected life of the financial assets The hedge accounting requirements of IFRS 9 aim to simplify hedge accounting. IFRS 9 includes the option to continue applying IAS 39 for hedge accounting. Effective date of IFRS 9 and comparative information IFRS 9 is effective as of 2018. However, for entities with activities that are predominantly connected with insurance, amongst which NN Group qualifies, there is a temporary exemption to align the effective date with that of IFRS 17, i.e. 1 January 2023. NN Group applies this temporary exemption. Usage of this exemption requires certain additional disclosures on whether financial assets that remain accounted for under IAS 39 meet the definition of \u2018solely payments of principal and interest on the principal amount outstanding\u2019 in IFRS 9 as well as additional information on the credit rating of such assets and whether such assets are \u2018low credit risk\u2019. In this context, \u2018low credit risk\u2019 is equivalent to \u2018investment grade\u2019 as defined by ratings agencies (generally a rating of BBB- or better). These additional disclosures are included in Note 36 \u2018Fair value of financial assets and liabilities\u2019 and in Note 52 \u2018Risk management\u2019 in the 2022 Annual Accounts of NN Group. Certain subsidiaries within NN Group (mainly NN Bank) do not qualify for the temporary exemption. Therefore, the financial information of these entities is based on IFRS 9 in the statutory IFRS reporting of these entities, but not in the consolidated financial reporting of NN Group. The impact of applying IFRS 9 for these entities is not significant to NN Group. NN Group does not have associates or joint ventures for which IFRS 9 has a significant impact. IFRS 9 includes an option to restate the comparative information for the financial year 2022, except for assets that have been disposed of in 2022. IFRS 17 includes an option to apply a \u2018classification overlay approach\u2019 for assets of entities of which the activities are predominantly connected with insurance, amongst which NN Group qualifies. Based on this overlay approach in IFRS 17, also the comparative information for assets that are or will be disposed of in 2022 may be restated. NN Group intends to apply both options, which is expected to result in comparative information for 2022 as if IFRS 9 had always been applied. As a result, the transition date for IFRS 9 for NN Group is 1 January 2022. NN Group\u2019s implementation of IFRS 9 For classification and measurement, NN Group intends to align the accounting for financial assets under IFRS 9 as much as possible to the accounting for insurance liabilities under IFRS 17. As a result, NN Group accounts for financial assets of the insurance operations at fair value through other comprehensive income (equity) where allowed under IFRS 9. This mainly impacts the accounting for (mortgage) loans in the insurance operations (currently accounted for at amortised cost). Accounting for (mortgage) loans in the banking operations remains unchanged at amortised cost. Measurement of investments in equity securities will remain unchanged at fair value through OCI, but realised gains and losses and impairments will no longer be recognised in the profit and loss account. For hedge accounting, NN Group continues applying the hedge accounting requirements in IAS 39. IFRS 17 \u2018Insurance Contracts\u2019 IFRS 17 \u2018Insurance Contracts\u2019 was issued in 2017 and revised in 2020. IFRS 17 covers the recognition and measurement, presentation and disclosure of insurance contracts and replaces the current IFRS 4. IFRS 17 fundamentally changes the accounting for insurance liabilities and deferred acquisition costs (DAC) for all insurance companies, including NN Group and its subsidiaries. IFRS 17 is endorsed in the EU and is effective as of 1 January 2023. Main features of IFRS 17 The main features of IFRS 17 are: \u2022 Measurement of the insurance liabilities in the balance sheet at current fulfilment value, being the sum of the present value of estimated future cash flows and a risk adjustment. \u2022 Remeasurement of the current fulfilment value every reporting period using current assumptions and discount rates. \u2022 A Contractual Service Margin (CSM ) is recognised in the balance sheet, which is equal to the unearned expected profit in a group of insurance contracts at issue date and which is subsequently recognised in the profit and loss account over the remaining duration of the group of contracts. Losses on onerous contracts are recognised immediately in the profit and loss account. \u2022 Insurance contracts are aggregated per CSM group under IFRS 17. A CSM group consists of contracts within the same portfolio, the same profitability bucket and issued in the same annual period. Contracts are in the same portfolio if these are managed together and have similar risks. NN Group uses three profitability buckets: onerous contracts, contracts that have no possibility of becoming onerous and remaining contracts. Contract issued in the same annual period are referred to as an annual cohort. \u2022 Certain changes in the insurance liability are adjusted against the CSM and thereby recognised in the profit and loss account over the remaining duration of the group of contracts \u2022 The effect of changes in discount rates is, depending on the choice made per portfolio of insurance contracts, recognised either in the profit and loss account or in Other Comprehensive Income (OCI) in equity. When recognised in OCI, the effect of these changes is recognised in the profit and loss account over the duration of the portfolio. \u2022 The presentation of the balance sheet, profit and loss account, other primary statements and the disclosures in the notes will change fundamentally. The profit and loss account will have a margin-type of presentation (with insurance result, investment result and other result). Premium income will no longer be used to determine revenue under the General Measurement Model and the Variable Fee Approach. \u2022 IFRS 17 is implemented retrospectively with amendment of comparative figures. Key measurement differences between IFRS 17 and NN Group\u2019s current IFRS accounting The main differences for measuring the insurance liability between the requirements in IFRS 17 and the currently applicable IFRS 4 relate to the following: \u2022 IFRS 17 requires insurance liabilities to be measured using current best estimate assumptions and current market data for all actuarial and financial assumptions. IFRS 4 allows the use of locked-in assumptions that are set at issue of the policies, in combination with a reserve adequacy test at current assumptions. \u2022 The insurance liability under IFRS 17 includes an explicit risk adjustment for non-financial risk and an explicit contractual service margin, representing the unamortised part of the updated profit margin. These elements are not explicitly recognised under IFRS 4. \u2022 IFRS 17 allows certain changes in assumptions to be absorbed in the contractual service margin or in other comprehensive income in equity. Under IFRS 4, changes in assumptions are, to the extent relevant, recognised in the profit and loss account. \u2022 In applying IFRS 4, directly attributable acquisition costs (Deferred Acquisition Costs, DAC) and the Value Of Business Acquired (VOBA) are recognised as assets which are amortised in the profit and loss account over time. In applying IFRS 17, DAC and VOBA are (implicitly) accounted for as part of the insurance liability. \u2022 Deferred interest credited to policyholders is no longer separately accounted for but is (implicitly) part of the insurance liability under IFRS 17. Key measurement differences between IFRS 17 and Solvency II Both IFRS 17 and Solvency II require insurance liabilities to be measured on the basis of the net present value of the best estimate of future expected cash flows and an explicit allowance for non-financial risk. There are however significant differences in the following areas: \u2022 In Solvency II, the initial margin in the premium over the insurance liability is recognised immediately in Own Funds. In IFRS 17, such initial margin (when positive) is recognised as contractual service margin (CSM) in the insurance liability and amortised and adjusted over time. \u2022 In Solvency II the discount rate is prescribed by the prudential regulator, whereas the discount rate under IFRS 17 is set by NN Group taking into account the specific characteristics of NN Group\u2019s portfolios. \u2022 In Solvency II the cost of capital rate and the level of diversification in determining the risk adjustment is prescribed by the regulator, whereas under IFRS 17 these are set by NN Group taking into account the specific characteristics of NN Group\u2019s portfolios. \u2022 There are differences in the best estimate of future cash flows, for example, caused by different requirements for contract boundaries in Solvency II and IFRS 17. NN Group\u2019s implementation of IFRS 17 IFRS 17 allows certain accounting policy choices and requires judgement in setting certain assumptions. The most important choices and assumptions that are relevant to NN Group are set out below. \u2022 NN Group applies each of the three accounting models in IFRS 17. The General Measurement Model (GMM) is the default model and is applied to traditional life insurance portfolios. The Variable Fee Approach (VFA) is applied to most unit-linked portfolios, except for unit linked acquired in a business combination for which the guarantees were in the money at the acquisition date. The Premium Allocation Approach (PAA) is applied to the P&C contracts in Netherlands Non-life with a coverage period of 12 months or less. \u2022 NN Group determines per portfolio of insurance contracts whether changes in financial assumptions are reflected in other comprehensive income (the \u2018OCI option\u2019) or directly in the profit and loss account. For contracts accounted for under the GMM and PAA, in principle the OCI option is used, unless accounting for the impact of changes in financial assumptions directly in the profit and loss account resolves accounting mismatches or is otherwise preferred. For contracts accounted for under the VFA, the OCI option is, in principle, not applied. \u2022 For the level of aggregation, under the EU-endorsed version of IFRS 17 (IFRS-EU), certain specific insurance contracts may be aggregated on the level of a profitability group within a portfolio and do not need to be further disaggregated by the year in which these contracts were issued (\u2018annual cohorts\u2019). NN Group does not currently apply this IFRS-EU exemption. \u2022 Estimates of future cash flows reflect mortality rate assumptions that are derived from recent credible national mortality tables published by relevant actuarial or statistical bodies; where needed, these tables are adjusted so as to reflect NN Group\u2019s experience of its own portfolio. Lapse rates are set by major product line based on NN Group\u2019s own experience. Estimates of future cash flows include NN Group\u2019s projection of future expenses to the extent that these relate to the fulfilment of contracts. \u2022 Discount rates to discount the expected future fulfilment cash flows are determined using a liquid risk free curve to which an illiquidity premium is added. For the Euro currency, the most prominent currency within the group, the risk-free curve is based on the swap rate and includes a last liquid point (LLP) of 30 years and a long-term forward rate (LTFR) of 3.35%. The illiquidity premium is derived from NN Group\u2019s own asset portfolio, where the asset yield is adjusted for expected and unexpected credit losses. \u2022 The risk adjustment for non-financial risk is determined using the Cost of Capital methodology based on the Solvency II internal model or standard formula, depending on the entity within the Group. The risk adjustment reflects diversification with market risks within the entity and diversification with other entities within NN Group (\u2018Group diversification\u2019). The Cost of Capital rate represents NN Group\u2019s view on the compensation required for bearing risk; the rate used at 1 January 2022 in the fulfilment value of insurance liabilities was 4%. \u2022 NN Group uses each of the transition approaches in IFRS 17. In the modified retrospective transition approach, NN Group uses mainly the modifications for historical cash flows and the historical release of the risk adjustment. The modified retrospective approach is applied for certain portfolios in the Insurance Europe segment. In the fair value transition approach, the contractual service margin is determined by reference to the fair value of insurance liabilities. Fair value is determined similar to fulfilment value, except that no group diversification is reflected in the risk adjustment, the cost of capital rate in the risk adjustment is set at 6% and expenses also include non-directly attributable expenses. The fair value transition approach is applied to most portfolios in Netherlands Life. Impact of IFRS 9 and IFRS 17 on NN Group NN Group implements IFRS 17 together with IFRS 9. The implementation of IFRS 9 and IFRS 17 will result in significant changes to NN Group\u2019s accounting policies and may have a significant impact on total equity, net result, presentation and disclosures. Total equity under IFRS 9 and IFRS 17 was significantly lower at the 1 January 2022 transition date as a result of the measurement of insurance liabilities at current assumptions (including a current discount rate). The table below provides a reconciliation between total equity at 31 December 2021 in the current balance sheet to total equity in the preliminary balance sheet at 1 January 2022 (the \u2018Transition date\u2019) after implementation of IFRS 9 and IFRS 17. The impact is preliminary and reflects the status at the date of these Annual Accounts. The final impact may deviate from the below and will be included in the 2023 Annual Accounts. Impact of IFRS 9 and IFRS 17 on Total equity 31 December 2021/1 January 2022 Share capital and premium Revaluation reserves Other reserves Minority interest Undated subordinated notes Total equity Total equity as reported at 31 December 2021 12,613 14,422 5,853 266 1,764 34,918 Impact (net of tax) of IFRS 9: - Loans to Fair value through OCI 2,607 38 2,645 - Available-for-sale to Fair value through profit or loss -680 680 - Impairments -511 489 -22 Impact (net of tax) of IFRS 17: - Remeasurement of (re)insurance liabilities -4,658 -9,229 -13,887 Impact (net of tax) on minority interest -22 -22 Preliminary Total equity at 1 January 2022 12,613 11,180 -2,169 244 1,764 23,632 The decrease in equity at the transition date mainly reflects the remeasurement of insurance liabilities to current discount rates and other current assumptions. Under the IFRS accounting policies applied by NN Group to date, only the revaluation of assets is recognised in equity, whilst the offsetting effect of revaluation on insurance liabilities is not recognised. Under IFRS 9 and IFRS 17 the revaluation on both assets and liabilities will be recognised in equity. Shareholders\u2019 equity under IFRS 9 and IFRS 17 at the 1 January 2022 transition date was significantly lower as a result of the measurement of insurance liabilities at current assumptions. However, with the increase of market interest rates during 2022, the reported shareholders\u2019 equity under current IFRS decreased from EUR 32,888 million at 31 December 2021 to EUR 16,005 million at 31 December 2022, and, therefore, the difference with shareholders\u2019 equity under IFRS 9 and IFRS 17 largely reversed in 2022. The table below provides a reconciliation between the carrying amounts at 31 December 2021 in the current balance sheet to the amounts in the preliminary balance sheet at 1 January 2022 after implementation of IFRS 9 and IFRS 17 . Acquisition accounting, goodwill and other intangible assets NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors, including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known. Insurance liabilities and deferred acquisition costs (DAC) The determination of insurance liabilities and DAC is an inherently uncertain process, involving assumptions about factors such as social, economic and demographic trends, inflation, investment returns, policyholder behaviour, court decisions, changes in laws and other factors and, in the life insurance business, assumptions concerning mortality and morbidity trends. Specifically, assumptions that could have a significant impact on financial results include interest rates, mortality, morbidity, property and casualty claims, investment yields on equity and real estate and foreign currency exchange rates. Insurance liabilities also include the impact of minimum guarantees which are contained within certain products. This impact is dependent upon the difference between the potential minimum benefits payable and the total account balance, expected mortality and surrender rates. The determination of the potential minimum benefits payable also involves the use of assumptions about factors such as inflation, investment returns, policyholder behaviour, mortality and morbidity trends and other factors. The use of different assumptions could have a significant effect on insurance liabilities, DAC and underwriting expenditure. Changes in assumptions may lead to changes in insurance liabilities over time. The adequacy of the insurance liabilities, net of DAC, is evaluated each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability with current best estimate actuarial assumptions. The use of different assumptions in this test could lead to a different outcome. Fair value of real estate Real estate investments are reported at fair value. The fair value of real estate investments is based on regular appraisals by external, qualified valuers. The fair value is established using valuation methods such as comparable market transactions, capitalisation of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that appropriately reflect the risk characteristics of real estate investments Reference is made to Note 37 \u2018Fair value of non-financial assets\u2019 for more disclosure on fair value of real estate investments at the balance sheet date. The use of different assumptions and techniques could produce significantly different valuations. Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date. Impairments All debt and equity securities and loans (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred. Evaluation for impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may be unlikely to pay amounts when due. Equity securities are impaired when management believes that, based on a significant or prolonged decline of the fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities. Generally, 25% and six months are used as triggers. Upon impairment of available-for-sale debt and equity securities, the full difference between the (acquisition) cost and fair value is removed from equity and recognised in net result. Impairments on debt securities may be reversed if there is a decrease in the amount of the impairment which can be objectively related to an observable event after the impairment. Impairments on equity securities cannot be reversed. The identification of impairments is an inherently uncertain process involving various assumptions and factors, including financial condition of the counterparty, expected future cash flows, statistical loss data, discount rates, observable market prices, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known. General accounting policies Consolidation NN Group comprises NN Group N.V. and all its subsidiaries. The Consolidated annual accounts of NN Group comprise the accounts of NN Group N.V. and all entities over which NN Group has control. NN Group has control over an entity when NN Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assessment of control is based on the substance of the relationship between NN Group and the entity and considers existing and potential voting rights that are substantive. For a right to be substantive, the holder must have the practical ability to exercise that right. For interests in investment entities, the existence of control is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the \u2018power\u2019) and assume all risks and benefits of these investments (i.e. the policyholder assumes the variable returns The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the date control is obtained until the date control is lost. Minority interests are initially measured at their proportionate share of the subsidiaries\u2019 identifiable net assets at the date of acquisition. On disposal, the difference between the sales proceeds, net of directly attributable transaction costs, and the net assets is included in net result. A subsidiary which NN Group has agreed to sell but is still legally owned by NN Group may still be controlled by NN Group at the balance sheet date and, therefore, still be included in the consolidation. Such a subsidiary may be presented as held for sale if certain conditions are met. All intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Where necessary, the accounting policies used by subsidiaries are changed to ensure consistency with NN Group policies. In general, the reporting dates of subsidiaries are the same as the reporting date of NN Group N.V. A list of principal subsidiaries is included in Note 34 \u2018Principal subsidiaries and geographical information\u2019 . Foreign currency translation Functional and presentation currency Items included in the annual accounts of each NN Group entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is NN Group\u2019s functional and presentation currency . Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. Exchange rate differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except when deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges. Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported as part of the \u2018Fair value gain or loss\u2019. Exchange rate differences on non-monetary items measured at fair value through other comprehensive income (equity) are included in the \u2018Revaluation reserve\u2019 in equity. Exchange rate differences in the profit and loss account are generally included in \u2018Foreign currency results and net trading income\u2019. Exchange rate differences relating to the disposal of available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in \u2018Investment income\u2019. As mentioned below in Group companies, on disposal of group companies, any exchange rate difference deferred in equity is recognised in the profit and loss account in \u2018Result on disposals of group companies\u2019. Group companies The results and financial positions of all group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: \u2022 Assets and liabilities included in each balance sheet are translated at the closing rate at the date of that balance sheet \u2022 Income and expenses included in each profit and loss account are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) \u2022 All resulting exchange rate differences are recognised in a separate component of equity in \u2018Currency translation reserve\u2019 On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a foreign operation and of borrowings and other instruments designated as hedges of such investments are taken to shareholders\u2019 equity. When a foreign operation is sold the corresponding exchange rate differences are recognised in the profit and loss account as part of the gain or loss on sale. Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet date. Recognition and derecognition of financial instruments Financial assets and liabilities are generally (de)recognised at trade date, which is the date on which NN Group commits to purchase or sell the asset. Loans and receivables are recognised at settlement date, which is the date on which NN Group receives or delivers the asset Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where NN Group has transferred substantially all risks and rewards of ownership. If NN Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset. Realised gains and losses on investments are determined as the difference between the sales proceeds and (amortised) cost. For equity securities, the cost is determined using a weighted average per portfolio. For debt securities, the cost is determined by specific identification (generally FIFO) . Fair value of financial assets and liabilities The fair values of financial instruments are based on unadjusted quoted market prices at the balance sheet date where available. The quoted market price used for financial assets held by NN Group is the current bid price; the quoted market price used for financial liabilities is the current offer price. The fair values of financial instruments that are not traded in an active market are determined using valuation techniques, based on market conditions existing at each balance sheet date. An active market for the financial instrument is a market in which transactions for the asset or liability take place with sufficient frequency and volume to provide pricing information on an ongoing basis. Assessing whether a market is active requires judgement, considering factors specific to the financial instrument. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for the basis of determination of the fair value of financial instruments. Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when NN Group has a current legally enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability at the same time. Impairments of financial assets NN Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but before the balance sheet date, (a \u2018loss event\u2019) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the specific case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities; generally, 25% and six months are used as triggers. In certain circumstances NN Group may grant borrowers postponement and/or reduction of loan principal and/or interest payments for a temporary period of time to maximise collection opportunities and, if possible, avoid default, foreclosure or repossession. When such postponement and/or reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to as \u2018forbearance\u2019. In general, forbearance represents an impairment trigger under IFRS-EU. In such cases, the net present value of the postponement and/or reduction of loan principal and/or interest payments is taken into account in the determination of the appropriate level of loan loss provisioning as described below. If the forbearance results in a substantial modification of the terms of the loan, the original loan is derecognised and a new loan is recognised at its fair value at the modification date. In determining the impairment loss, expected future cash flows are estimated on the basis of the contractual cash flows of the assets in the portfolio. NN Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and then individually or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss on an asset carried at amortised cost has occurred, the amount of the loss is measured as the difference between the asset\u2019s carrying value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset\u2019s original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account (loan loss provisions) and the amount of the loss is recognised in the profit and loss account in \u2018Investment income\u2019. If the asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. When a loan is uncollectable, it is written off against the related loan loss provision. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor\u2019s credit rating), the previously recognised impairment loss is reversed by adjusting the provision. The amount of the reversal is recognised in the profit and loss account. If there is objective evidence that an impairment loss on available-for-sale debt and equity investments has occurred, the cumulative loss \u2013 measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in net result \u2013 is removed from equity and recognised in the profit and loss account. Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent period, the impairment loss on a loan or a debt instrument classified as available-for-sale reverses, which can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the profit and loss account. Maximum credit risk exposure The maximum credit risk exposure for items on the balance sheet is generally the carrying value for the relevant financial assets. For the off- balance sheet items, the maximum credit exposure is the maximum amount that could be required to be paid. Reference is made to Note 44 \u2018Contingent liabilities and commitments\u2019 for these off-balance sheet items. Collateral received is not taken into account when determining the maximum credit risk exposure. The manner in which NN Group manages credit risk and determines credit risk exposures is explained in Note 52 \u2018Risk management\u2019. Leases The leases entered into by NN Group as a lessee are primarily operating leases. At inception of a contract, NN Group assesses whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The net present value of operating lease commitments is recognised on the balance sheet as a \u2018right of use asset\u2019 under Property and equipment or Real estate investments and a lease liability is recognised under Other liabilities. NN Group does not recognise a right of use asset and a lease liability for short-term leases that have a lease term of 12 months or less and for leases of low value assets. The lease payments associated with these leases are recognised as an expense. Taxation Income tax on the result for the year comprises current and deferred tax. Income tax is generally recognised in the profit and loss account, but is recognised directly in equity if the tax relates to items that are recognised directly in equity. Current tax consists of the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date. Deferred tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the balance sheet. Deferred tax is determined using tax rates (and laws) applicable in the jurisdictions in which NN Group is liable to taxation, that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses carried forward where it is probable that future taxable profits will be available against which the temporary differences can be used. Unrecognised deferred tax assets are reassessed periodically and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by NN Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is probable that future taxable profits will be available against which these losses can be used. Offsetting deferred tax assets with deferred tax liabilities is allowed as long as there is a legally enforceable right to offset current tax assets against current tax liabilities together with the intention to do so and the deferred taxes relate to income taxes levied by the same taxation authority on the same entity or on the same fiscal unity Employee benefits Defined benefit pension plans The net defined benefit asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the fair value of the plan assets less the present value of the defined benefit obligation at the balance sheet date. Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the expected return on plan assets is determined using a high quality corporate bond rate identical to the discount rate used in determining the defined benefit obligation. Defined contribution pension plans For defined contribution plans, NN Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual or voluntary basis. NN Group has no further payment obligations once the contributions have been paid. The contributions are recognised as staff expenses in the profit and loss account when they are due. Other post-employment obligations Some NN Group companies provide post-employment benefits to certain employees and former employees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans. Share-based payments Share-based payment expenses are recognised as staff expenses over the vesting period. A corresponding increase in equity is recognised for equity-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions is measured at the grant date. For cash-settled share-based payment transactions, a liability is recognised at fair value; this fair value is remeasured at every balance sheet date . Interest income and expenses Interest income and expenses are recognised in the profit and loss account using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts throughout the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the financial asset or financial liability. When calculating the effective interest rate, NN Group estimates cash flows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income and expenses from non-trading derivatives are classified as interest income and interest expenses in the profit and loss account, except for interest income/expense on derivatives for which no hedge accounting is applied. The latter is classified in \u2018Valuation results on non-trading derivatives\u2019, together with the changes in the (clean) fair value of these derivatives. Fiduciary activities NN Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions when conducting asset management activities. The assets and income arising thereof are excluded from these annual accounts, as they are not assets or income of NN Group. Fees received acting as trustee and in other fiduciary capacities are recognised as income. Statement of cash flows The Consolidated statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year. Cash and cash equivalents comprise balances with less than three months\u2019 maturity from the date of acquisition. Investments qualify as a cash equivalent if they are readily convertible into a known amount of cash and are not subject to significant risk of changes in value. Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of the cash flows The difference between the net cash flow in accordance with the statement of cash flows and the change in \u2018Cash and cash equivalents\u2019 in the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash flow and the balance sheet change in \u2018Cash and cash equivalents\u2019. Cash flows arising from the issue of mortgage loans held in the banking operations are recognised under Net cash flows from operating activities, whereas cash flows related to mortgage loans held as investment in the insurance operations are recognised under Net cash flow from investing activities. Cash flows on collateral related to derivatives (presented in the balance sheet in Other assets and Other liabilities) is presented in the Consolidated statement of cash flows as part of Net cash flow from operating activities, consistent with the cash flows of the related derivatives. Accounting policies for specific items Financial assets and liabilities at fair value through profit or loss (Notes 4 and 20) A financial asset or liability is classified as at fair value through profit or loss if it is acquired principally for the purpose of selling in the short- term or if designated by management as such. Management will make this designation only if this eliminates a measurement inconsistency or if the related assets and liabilities are managed on a fair value basis. Transaction costs on initial recognition are expensed as incurred. Interest income from debt securities and loans and receivables classified as at fair value through profit or loss is recognised in the profit and loss account using the effective interest method. Dividend income from equity instruments classified as at fair value through profit or loss is recognised in the profit and loss account when the dividend has been declared. Investments for risk of policyholders Investments for risk of policyholders are investments against insurance liabilities for which all changes in the fair value of invested assets are offset by similar changes in insurance liabilities. Investments for risk of policyholders are recognised at fair value; changes in fair value are recognised in the profit and loss account. Derivatives and hedge accounting Derivatives are recognised at fair value. Derivatives are presented as assets when the fair value is positive and as liabilities when the fair value is negative. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. NN Group designates certain derivatives as hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for derivatives designated in this way provided certain criteria are met. At the inception of the hedge transaction NN Group documents the relationship between hedging instruments and hedged items, its risk management objectives, together with the methods selected to assess hedge effectiveness. In addition, NN Group documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of the hedged items. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging deposits and under-hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income (equity) in \u2018Cash flow hedge reserve\u2019. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recycled to the profit and loss account in the periods in which the hedged item affects Net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously reported in equity is transferred immediately to the profit and loss account Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the profit and loss account over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non- interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the profit and loss account only when the hedged item is derecognised. Net investment hedges Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income (equity) and the gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Gains and losses in equity are included in the profit and loss account when the foreign operation is disposed. Non-trading derivatives that do not qualify for hedge accounting Derivatives that are used by NN Group as part of its risk management strategies, that do not qualify for hedge accounting under NN Group\u2019s accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to \u2018Valuation results on non-trading derivatives\u2019 in the profit and loss account. Certain derivatives embedded in other contracts are measured as separate derivatives if: \u2022 Their economic characteristics and risks are not closely related to those of the host contract \u2022 The host contract is not carried at fair value through profit or loss \u2022 A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative (unless the embedded derivative meets the definition of an insurance contract) These embedded derivatives are measured at fair value with changes in fair value recognised in the profit and loss account. An assessment is carried out when NN Group first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of the contract that significantly modifies the expected cash flows. Available-for-sale investments (Note 5) Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and redemption value is amortised. Interest income is recognised using the effective interest method. Available-for-sale financial assets are subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019. Dividend income from equity instruments classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019 when the dividend has been declared. Unrealised gains and losses arising from changes in the fair value are recognised in other comprehensive income (equity). On disposal, the related accumulated fair value adjustments are included in the profit and loss account as \u2018Investment income\u2019. For impairments of available- for-sale financial assets reference is made to the section \u2018Impairments of financial assets\u2019. Loans (Note 6) Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs. Subsequently, they are carried at amortised cost using the effective interest method less any impairment losses. Interest income from loans is recognised in the profit and loss account in \u2018Investment income\u2019 using the effective interest method. Associates and joint ventures (Note 7) Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to, one or more of the following: \u2022 Representation on the board of directors \u2022 Participation in the policy-making process \u2022 Interchange of managerial personnel Joint ventures are all entities in which NN Group has joint control . Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method of accounting. Subsequently, NN Group\u2019s share of profits or losses is recognised in the profit and loss account and its share of changes in reserves is recognised in other comprehensive income (equity). The cumulative changes are adjusted against the carrying value of the investment. When NN Group\u2019s share of losses in an associate or joint venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of NN Group\u2019s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. For interests in investment entities the existence of significant influence is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for similar entities quoted in an active market. Valuations of private equity investments are mainly based on an \u2018adjusted multiple of earnings\u2019 methodology on the following basis: \u2022 Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and, in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest, tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable estimate of maintainable earnings. \u2022 Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies. \u2022 Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and NN Group\u2019s investment rights in the deal structure. Real estate investments (Note 8) Real estate investments under construction are included in \u2018Real estate investments\u2019. Real estate investments are held for long-term rental yields and are not occupied by NN Group. Real estate investments are initially measured at cost, including transaction cost and are subsequently measured at fair value. Changes in the carrying value resulting from revaluations are recognised in the profit and loss account. On disposal the difference between the sales proceeds and carrying value is recognised in the profit and loss account. The fair value of real estate investments is based on regular appraisals by independent qualified valuers. For each reporting period every property is valued by an external valuer. Market transactions and disposals made by NN Group are monitored as part of the validation procedures to test the valuations. Valuations performed earlier in the year are updated if necessary to reflect the situation at the year-end. All real estate investments are appraised externally at least annually. The fair value represents the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer and willing seller in an at-arm\u2019s-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and without compulsion. The fair value is based on appraisals using valuation methods such as comparable market transactions, capitalisation of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that reflect appropriately the risk characteristics of real estate. The valuation of real estate investments takes (expected) vacancies into account. Occupancy rates differ significantly from investment to investment. For real estate investments held through (minority shares in) real estate investment funds, the valuations are performed under the responsibility of the funds\u2019 asset manager. Subsequent expenditures are recognised as part of the asset\u2019s carrying value only when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of an item can be measured reliably. All other repairs and maintenance costs are recognised immediately in the profit and loss account. Borrowing costs on real estate investments under construction are capitalised until completion. Property and equipment (Note 9) Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying value are recognised in other comprehensive income (equity). Decreases in the carrying value that offset previous increases of the same asset are charged against other comprehensive income (equity); all other decreases are recognised in the profit and loss account. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised in the profit and loss account. Depreciation is recognised based on the fair value and the estimated useful life (in general 20\u201350 years). On disposal, the related revaluation reserve in equity is transferred within equity to \u2018Retained earnings\u2019. The fair value of land and buildings is based on regular appraisals by independent, qualified valuers or internally, similar to appraisals of real estate investments. All significant holdings of land and buildings are appraised at least annually. Subsequent expenditure is included in the asset\u2019s carrying value when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of the item can be measured reliably. Equipment is stated at cost less accumulated depreciation and any impairment losses. The estimated useful lives are generally as follows: two to five years for data processing equipment and four to ten years for fixtures and fittings. Expenditure incurred on maintenance and repairs is recognised in the profit and loss account as incurred. Expenditure incurred on major improvements is capitalised and depreciated. The difference between the proceeds on disposal and net carrying value is recognised in the profit and loss account in \u2018Other income\u2019. Methods of depreciation and amortisation Items of property and equipment are depreciated, intangible assets with finite useful lives are amortised. The carrying values of the assets are depreciated/amortised on a straight-line basis over the estimated useful lives. Methods of depreciation and amortisation, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate. Intangible assets (Note 10) Goodwill NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets given, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. Negative goodwill is recognised immediately in the profit and loss account as income. The results of the operations of the acquired companies are included in the profit and loss account from the date control is obtained. Where a business combination is achieved in stages, NN Group\u2019s previously held interests in the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the date NN Group obtains control) and the resulting gain or loss, if any, is recognised in the profit and loss account. Amounts arising from interests in the acquiree before the acquisition date that have previously been recognised in other comprehensive income (equity) are reclassified to the profit and loss account, where such treatment would be appropriate if that interest were disposed of. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. Until 2009, before IFRS 3 \u2018Business Combinations\u2019 was revised, the accounting of previously held interests in the assets and liabilities of the acquired entity were not remeasured at the acquisition date and the acquisition-related costs were considered to be part of the total consideration. Goodwill is only capitalised on acquisitions after the implementation date of IFRS-EU (1 January 2004). Accounting for acquisitions before that date has not been restated; goodwill and internally generated intangibles on these acquisitions were recognised directly in shareholders\u2019 equity. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Computer software Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. The expected useful life of computer software will generally not exceed three years. Amortisation is included in \u2018Other operating expenses\u2019. Value of business acquired (VOBA) VOBA is an asset that represents the present value of estimated net cash flows embedded in the insurance contracts of an acquired company, which exists at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and their carrying value. VOBA is amortised in a similar manner to the amortisation of the deferred acquisition costs as described in the section \u2018Deferred acquisition costs\u2019. Other intangible assets Other intangible assets include brand names, client relationships and distribution channels. These assets are stated at cost less amortisation and any impairment losses. The expected useful life is between 2 and 17 years. Impairment Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset. Deferred acquisition costs (Note 11) Deferred acquisition costs (DAC) represent costs of acquiring insurance and investment contracts that are deferred and amortised. The deferred costs, all of which vary with (and are primarily related to) the production of new and renewal business, consist principally of commissions, certain underwriting and contract issuance expenses and certain agency expenses. For traditional life insurance contracts, certain types of flexible life insurance contracts and non-life contracts, DAC is amortised over the premium payment period in proportion to the premium revenue recognised. For other types of flexible life insurance contracts DAC is amortised over the lives of the policies in relation to the emergence of estimated profits. Amortisation is adjusted when estimates of current or future profits, to be realised from a group of products, are revised. DAC amortisation is included in the Underwriting expenditure in the profit and loss account. DAC is evaluated for recoverability at issue. Subsequently it is tested on a regular basis together with the life insurance liabilities. The test for recoverability is described in the section \u2018Insurance and investment contracts, reinsurance contracts\u2019. For certain products DAC is adjusted for the impact of unrealised results on allocated investments through equity. Assets and liabilities held for sale (Note 12) Assets and liabilities of a business are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable, the business is available for immediate sale in its present condition and management is committed to the sale, which is expected to occur within one year from the date of classification as held for sale. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet Subordinated debt, debt securities issued and other borrowed funds (Notes 15, 16 and 17) Subordinated debt, debt securities issued and other borrowed funds are recognised initially at their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between proceeds, net of transaction costs and the redemption value is recognised in the profit and loss account over the period of the borrowings using the effective interest method. If NN Group purchases its own debt, it is derecognised from the balance sheet and the difference between the carrying value of the liability and the consideration paid is recognised in the profit and loss account. Financial liabilities include only instruments of which the terms and conditions represent a contractual obligation to pay interest and/or principal. Instruments that are similar in substance, but of which the terms and conditions do not include a contractual obligation to pay interest and principal, are classified as equity. Insurance and investment contracts, reinsurance contracts (Note 18) Insurance liabilities are established in accordance with IFRS 4 \u2018Insurance Contracts\u2019. Under IFRS 4, an insurer may continue its existing pre- IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS-EU in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts under IFRS-EU. NN Group operates in many different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance contracts. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policies under IFRS-EU. In addition, for certain specific products or components thereof, NN Group applies the option in IFRS 4 to measure (components of) insurance liabilities using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees embedded in insurance contracts in Japan. Insurance contracts Insurance policies which bear significant insurance risk and/or contain discretionary participation features (including investment contracts with discretionary participation features) are presented as insurance contracts. Insurance liabilities represent estimates of future pay-outs that will be required for life and non-life insurance claims, including expenses relating to such claims. For some insurance contracts the measurement reflects current market assumptions. Unless indicated otherwise below, changes in the insurance liabilities are recognised in the profit and loss account. Life insurance liabilities The life insurance liabilities are generally calculated on the basis of a prudent prospective actuarial method. Specific methodologies may differ between business units as they may reflect local regulatory requirements and local practices for specific product features in the local markets. Insurance liabilities on traditional life policies are calculated using various assumptions, including assumptions on mortality, morbidity, expenses, investment returns and surrenders. Assumptions for insurance liabilities for traditional life insurance contracts, including traditional whole-life and term-life insurance contracts, are based on best estimate assumptions including margins for adverse deviations. Generally, these assumptions are set initially at the policy issue date and remain constant throughout the life of the policy. For the insurance liabilities that were taken over in the Delta Lloyd acquisition, these assumptions are set as at the date of acquisition, 1 April 2017. Insurance liabilities for universal life, variable life and annuity contracts, unit-linked contracts, etc. are generally set equal to the balance that accrues to the benefit of the policyholders. Certain contracts contain minimum (interest) guarantees on the amounts payable upon death and/or maturity. The insurance liabilities include the impact of these minimum (interest) guarantees, taking into account the difference between the potential minimum benefit payable and the total account balance, expected mortality and surrender rates. Unamortised interest rate rebates on periodic and single premium contracts are deducted from the life insurance contract liabilities. Interest rate rebates granted during the year are amortised in conformity with the anticipated recovery pattern and are recognised in the profit and loss account Liabilities for unearned premiums and unexpired insurance risks The liabilities are calculated in proportion to the unexpired periods of risk. For insurance policies covering a risk increasing during the term of the policy at premium rates independent of age, this risk is taken into account when determining the liability. Further liabilities are formed to cover claims under unexpired insurance contracts, which may exceed the unearned premiums and the premiums due in respect of these contracts. Claims liabilities Claims liabilities are calculated either on a case-by-case basis or by approximation on the basis of experience. Liabilities have also been recognised for claims incurred but not reported (IBNR) and for future claims handling expenses. IBNR liabilities are set to recognise the estimated cost of losses that have occurred but which have not yet been notified to NN Group. The adequacy of the claims liabilities is evaluated each year using standard actuarial techniques. Deferred interest credited to policyholders For insurance contracts and investment contracts with discretionary participation features, \u2018Deferred interest credited to policyholders\u2019 is recognised for the full amount of the unrealised revaluations on allocated investments. Upon realisation, the \u2018Deferred interest credited to policyholders\u2019 regarding unrealised revaluations is reversed and a deferred profit sharing amount is recognised for the share of realised results on allocated investments that is expected to be shared with policyholders. The amount of deferred profit sharing is reduced by the actual allocation to individual policyholders. The change in the amount of \u2018Deferred interest credited to policyholders\u2019 on unrealised revaluations (net of tax) is recognised in the \u2018Revaluation reserve\u2019 in other comprehensive income (equity). Liabilities for life insurance for risk of policyholders Liabilities for life insurance for risk of policyholders are generally shown at the balance sheet value of the related investments. Reinsurance contracts Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of insurance contracts are accounted for in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations, NN Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are recognised for receivables on reinsurance contracts which are deemed uncollectable. Both reinsurance premiums and reinsurance recoveries are included in \u2018Underwriting expenditure\u2019 in the profit and loss account. Adequacy test The adequacy of the insurance liabilities is evaluated at each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability (gross of reinsurance and net of DAC and VOBA) to a liability based on current best estimate actuarial assumptions. The assumed investment returns are a combination of the run-off of current portfolio yields on existing assets and reinvestment rates in relation to maturing assets and anticipated new premiums, as a result, (part of) the revaluation reserve in shareholders equity is taken into account in assessing the adequacy of insurance liabilities. If, for any business unit, the established insurance liability is lower than the liability based on current best estimate actuarial assumptions the shortfall is recognised immediately in the profit and loss account. If the insurance liabilities are determined to be more than adequate no reduction in the insurance liabilities is recognised. Investment contracts Insurance policies without discretionary participation features which do not bear significant insurance risk are presented as Investment contracts. Investment contract liabilities are determined at amortised cost, using the effective interest method (including certain initial acquisition expenses), or at fair value. Other liabilities (Note 21) Provisions Other liabilities include reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions include employee termination benefits when NN Group is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Provisions are discounted when the effect of the time value of money is significant, using a before tax discount rate. The determination of provisions is an inherently uncertain process involving estimates regarding amounts and timing of cash flows Gross premium income (Note 22) Premiums from insurance policies are recognised as income when due from the policyholder. Receipts under investment contracts are not recognised as gross premium income; instead, deposit accounting is applied. When applying deposit accounting, the amounts contributed by policyholders are recognised as direct increases in the provision for investment contracts, not as premium income and payments are deducted directly from the provision. Net fee and commission income (Note 24) Fees and commissions are generally recognised as the service is provided. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time. Earnings per ordinary share (Note 32) Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue. Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if these changes occurred after the reporting date but before the annual accounts are authorised for issue. Diluted earnings per share data are computed as if all convertible instruments outstanding at the year-end were exercised at the beginning of the period. It is also assumed that NN Group uses the assumed proceeds received to buy its own shares against the average market price in the financial year. The net increase in the number of shares resulting from the exercise is added to the average number of shares used to calculate diluted earnings per share. Segments and Principal subsidiaries and geographical information (Notes 33 and 34) A segment is a distinguishable component of NN Group, engaged in providing products or services, subject to risks and returns that are different from those of other segments. A geographical area is a distinguishable component of NN Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The geographical analysis is based on the location of the business unit from which the transactions are originated Further details on Insurance contracts under IFRS 17 are presented below: Insurance contract by component Insurance contracts (IFRS 17) by component 1 January 2022 Premium Allocation Approach (PAA) 2,872 General Measurement Model and Variable Fee Approach: - Estimates of the present value of future cash flows 170,499 - Risk Adjustment 2,857 - Contractual Service Margin (CSM) - determined retrospectively 1,098 - determined under the modified retrospective approach 1,194 - determined under the fair value approach 3,935 Total Insurance contracts 182,455 Insurance contracts, presented as assets 125 Insurance contracts, presented as liabilities 182,580 Total Insurance contracts 182,455 Approximately 90% of the Total insurance contracts was determined using the fair value transition approach. NN Group intends to continue using Operating result as an Alternative Performance Measure. The definition of Operating result will be amended to reflect the impact of IFRS 9 and IFRS 17. NN Group also intends to continue using the financial leverage ratio. The current leverage ratio is based on equity excluding the revaluation on (only) assets; NN Group also intends to amend the leverage ratio by including net revaluations and CSM. The implementation of IFRS 9 and IFRS 17 will not impact NN Group\u2019s Own Funds and the Solvency Capital Requirement under Solvency II, nor its Operating Capital Generation (OCG). Changes in presentation The presentation of, and certain terms used in, the Consolidated balance sheet, Consolidated profit and loss account, Consolidated statement of cash flows, Consolidated statement of changes in equity and the notes was changed to provide additional and more relevant information or (for changes in comparative information) to better align with the current period presentation. The impact of these changes is explained in the respective notes when significant. Critical accounting policies and significant judgements NN Group has identified the accounting policies that are most critical to its business operations and to the understanding of its results. These critical accounting policies are those which involve the most complex or subjective judgements and assumptions and relate to insurance contracts, acquisition accounting, deferred acquisition costs, the determination of the fair value of real estate and financial assets and liabilities and impairments. In each case, the determination of these items is fundamental to the financial condition and results of operations and requires management to make complex judgements based on information and financial data that may change in future periods. As a result, determinations regarding these items necessarily involve the use of assumptions and subjective judgements as to future events and are subject to change, as the use of different assumptions or data could produce significantly different results. All valuation techniques used are subject to internal review and approval. For further details on the application of these accounting policies, reference is made to the applicable notes to the Consolidated annual accounts and the information below. Reference is made to Note 52 \u2018Risk management\u2019 for a sensitivity analysis of certain assumptions as mentioned below Reconciliaton of balance sheet IFRS 9 IFRS 17 Preliminary balance sheet item Balance sheet item - current balance sheet IAS 39 and IFRS 4 Reported amount 1. Remeasurement 2. Reclassification 3. Reclassification 4. Remeasurement Adjusted amount - with IFRS 9 and IFRS 17 Cash and cash equivalents 6,929 6,929 Cash and cash equivalents Available-for-sale investments 107,883 49,279 -7,212 149,950 Investments at FV through OCI Loans 68,200 -45,880 -944 21,376 Investments at cost Financial assets designated at fair value through profit or loss 991 123 46,473 47,587 Investments at fair value through profit or loss Real estate investments 2,719 2,719 Investments in real estate Associates and joint ventures 6,919 6,919 Investment in associates and joint ventures Investments for risk of policyholders 39,261 -39,261 125 125 Insurance contracts Reinsurance contracts 954 -247 707 Reinsurance contracts Non-trading derivatives 6,419 6,419 Derivatives Property and equipment 414 414 Property and equipment Intangible assets 1,129 -197 932 Intangible assets Deferred acquisition costs 1,893 -1,893 Deferred tax assets 47 -60 44 31 Deferred tax assets Other assets 3,706 -506 3,200 Other assets Assets held for sale 4,121 14 4,135 Assets held for sale Total assets 251,585 3,462 \u2013 -3,540 -64 251,443 Total assets Insurance and investment contracts 168,812 -1,863 15,631 182,580 Insurance contracts 325 325 Reinsurance contracts 2,698 2,698 Investment contracts Debt securities issued 2,292 2,292 Debt securities issued Subordinated debt 2,356 2,356 Subordinated debt Other borrowed funds 7,301 7,301 Other borrowed funds Customer deposits and other funds on deposit 15,945 15,945 Customer deposits Non-trading derivatives 1,904 1,904 Derivatives Deferred tax liabilities 4,817 839 -4,875 781 Deferred tax liabilities Other liabilities 9,776 -1,677 8,099 Other liabilities Liabilities held for sale 3,464 66 3,530 Liabilities held for sale Total liabilities 216,667 839 \u2013 -3,540 13,845 227,811 Total liabilities Total equity 34,918 2,623 \u2013 \u2013 -13,909 23,632 Total equity The references in the columns above are explained as follows: 1. Loans held by insurance entities within NN Group are remeasured from amortised cost to fair value and mostly presented and measured as Investments at fair value through OCI; these are subject to an expected credit loss provision. 2. Available-for-sale investments that do not qualify for measurement at fair value through OCI are presented as Investments at fair value through profit or loss. Investments for risk of policyholders are presented as Investments at fair value through profit or loss. 3. DAC (deferred acquisition costs), VOBA (value of business acquired), policy loans and insurance receivables and payables are derecognised and form part of the liability for insurance contracts 4. Measurement differences on (re)insurance assets and liabilities; Reinsurance and Investment contracts are presented separately ", "dimensions": { "concept": "ifrs-full:DisclosureOfSummaryOfSignificantAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-426": { "value": "1 Accounting policies Basis of preparation NN Group N.V. (NN Group) is a public limited liability company (naamloze vennootschap) incorporated under Dutch law. NN Group has its official seat in Amsterdam, the Netherlands and its office address in The Hague, the Netherlands. NN Group is recorded in the Commercial Register no. 52387534. The principal activities of NN Group are described in the section \u2018About NN\u2019. Amounts in the annual accounts are in millions of euros, unless stated otherwise", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-427": { "value": "NN Group N.V. (NN Group)", "dimensions": { "concept": "ifrs-full:NameOfReportingEntityOrOtherMeansOfIdentification", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-428": { "value": "public limited liability company (naamloze vennootschap)", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-429": { "value": "Amsterdam", "dimensions": { "concept": "ifrs-full:DomicileOfEntity", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-430": { "value": "the Netherlands", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-431": { "value": "NN Group prepares its Consolidated annual accounts in accordance with International Financial Reporting Standards as endorsed by the European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code. In the Consolidated annual accounts, the term IFRS-EU is used to refer to these standards, including the decisions NN Group made with regard to the options available under IFRS-EU. IFRS-EU provides a number of options in accounting policies. The key areas, in which IFRS-EU allows accounting policy choices and the related NN Group accounting policy, are summarised as follows: \u2022 Under IFRS 4, an insurer may continue to apply its existing pre-IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts. NN Group operates in different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group for example applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance liabilities. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policy under IFRS-EU. \u2022 NN Group\u2019s accounting policy for real estate investments is fair value, with changes in the fair value reflected immediately in the Consolidated profit and loss account. \u2022 NN Group\u2019s accounting policy for property in own use is fair value, with changes in the fair value reflected, after tax, in the \u2018Revaluation reserve\u2019 in \u2018Other comprehensive income\u2019 (equity). A net negative revaluation on individual properties is reflected immediately in the Consolidated profit and loss account. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. NN Group\u2019s accounting policies under IFRS-EU and its decision on the options available are included below. Except for the options included above, the principles are IFRS-EU and do not include other significant accounting policy choices made by NN Group. The accounting policies that are most significant to NN Group are included in the section \u2018Critical accounting policies and significant judgements\u2019. The preparation of the Consolidated annual accounts requires the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-432": { "value": "NN Group prepares its Consolidated annual accounts in accordance with International Financial Reporting Standards as endorsed by the European Union (IFRS-EU) and Part 9 of Book 2 of the Dutch Civil Code. In the Consolidated annual accounts, the term IFRS-EU is used to refer to these standards, including the decisions NN Group made with regard to the options available under IFRS-EU. IFRS-EU provides a number of options in accounting policies. The key areas, in which IFRS-EU allows accounting policy choices and the related NN Group accounting policy, are summarised as follows: \u2022 Under IFRS 4, an insurer may continue to apply its existing pre-IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts. NN Group operates in different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group for example applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance liabilities. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policy under IFRS-EU. \u2022 NN Group\u2019s accounting policy for real estate investments is fair value, with changes in the fair value reflected immediately in the Consolidated profit and loss account. \u2022 NN Group\u2019s accounting policy for property in own use is fair value, with changes in the fair value reflected, after tax, in the \u2018Revaluation reserve\u2019 in \u2018Other comprehensive income\u2019 (equity). A net negative revaluation on individual properties is reflected immediately in the Consolidated profit and loss account. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-433": { "value": "The preparation of the Consolidated annual accounts requires the use of estimates and assumptions. These estimates and assumptions affect the reported amounts of the assets and liabilities and the amounts of the contingent liabilities at the balance sheet date, as well as reported income and expenses for the year. The actual outcome may differ from these estimates . ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-434": { "value": "Changes in presentation The presentation of, and certain terms used in, the Consolidated balance sheet, Consolidated profit and loss account, Consolidated statement of cash flows, Consolidated statement of changes in equity and the notes was changed to provide additional and more relevant information or (for changes in comparative information) to better align with the current period presentation. The impact of these changes is explained in the respective notes when significant", "dimensions": { "concept": "ifrs-full:DisclosureOfReclassificationsOrChangesInPresentationExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-435": { "value": "Acquisition accounting, goodwill and other intangible assets NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors, including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-436": { "value": "Acquisition accounting, goodwill and other intangible assets NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors, including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-437": { "value": "Acquisition accounting, goodwill and other intangible assets NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets acquired, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Assets acquired include intangible assets such as brand names, client relationships and distribution channels. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. In case there is a negative difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, this is referred to as negative goodwill and is recognised in profit and loss in the reporting period the acquisition is finalised. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing of goodwill and other intangible assets. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. The identification of cash generating units and impairments is an inherently uncertain process involving various assumptions and factors, including expected future cash flows, discount rates, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes known", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBusinessCombinationsAndGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-438": { "value": "Insurance liabilities and deferred acquisition costs (DAC) The determination of insurance liabilities and DAC is an inherently uncertain process, involving assumptions about factors such as social, economic and demographic trends, inflation, investment returns, policyholder behaviour, court decisions, changes in laws and other factors and, in the life insurance business, assumptions concerning mortality and morbidity trends. Specifically, assumptions that could have a significant impact on financial results include interest rates, mortality, morbidity, property and casualty claims, investment yields on equity and real estate and foreign currency exchange rates. Insurance liabilities also include the impact of minimum guarantees which are contained within certain products. This impact is dependent upon the difference between the potential minimum benefits payable and the total account balance, expected mortality and surrender rates. The determination of the potential minimum benefits payable also involves the use of assumptions about factors such as inflation, investment returns, policyholder behaviour, mortality and morbidity trends and other factors. The use of different assumptions could have a significant effect on insurance liabilities, DAC and underwriting expenditure. Changes in assumptions may lead to changes in insurance liabilities over time. The adequacy of the insurance liabilities, net of DAC, is evaluated each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability with current best estimate actuarial assumptions. The use of different assumptions in this test could lead to a different outcomeDeferred acquisition costs (Note 11) Deferred acquisition costs (DAC) represent costs of acquiring insurance and investment contracts that are deferred and amortised. The deferred costs, all of which vary with (and are primarily related to) the production of new and renewal business, consist principally of commissions, certain underwriting and contract issuance expenses and certain agency expenses. For traditional life insurance contracts, certain types of flexible life insurance contracts and non-life contracts, DAC is amortised over the premium payment period in proportion to the premium revenue recognised. For other types of flexible life insurance contracts DAC is amortised over the lives of the policies in relation to the emergence of estimated profits. Amortisation is adjusted when estimates of current or future profits, to be realised from a group of products, are revised. DAC amortisation is included in the Underwriting expenditure in the profit and loss account. DAC is evaluated for recoverability at issue. Subsequently it is tested on a regular basis together with the life insurance liabilities. The test for recoverability is described in the section \u2018Insurance and investment contracts, reinsurance contracts\u2019. For certain products DAC is adjusted for the impact of unrealised results on allocated investments through equity. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredAcquisitionCostsArisingFromInsuranceContractsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-439": { "value": "Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-440": { "value": "Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-441": { "value": "Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-442": { "value": "Fair value of financial assets and liabilities The fair value of financial assets and liabilities is based on unadjusted quoted market prices at the balance sheet date where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available, market prices may be obtained from external market vendors, brokers or market makers. In general, positions are valued taking the bid price for a long position and the offer price for a short position. In some cases, positions are marked at mid-market prices. When markets are less liquid there may be a range of prices for the same security from different price sources; selecting the most appropriate price requires judgement and could result in different estimates of the fair value. For certain financial assets and liabilities quoted market prices are not available. For these financial assets and liabilities, fair value is determined using valuation techniques, based on market conditions existing at each balance sheet date. These valuation techniques range from discounting of cash flows to valuation models, where relevant pricing factors including the market price of underlying reference instruments, market parameters (volatilities, correlations and credit ratings) and customer behaviour are taken into account. Valuation techniques are subjective in nature and significant judgement is involved in establishing the fair value for certain financial assets and liabilities. Valuation techniques involve various assumptions regarding pricing factors. The use of different valuation techniques and assumptions could produce significantly different estimates of the fair value. Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more disclosure on fair value of financial assets and liabilities at the balance sheet date", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-443": { "value": "Impairments All debt and equity securities and loans (other than those carried at fair value through profit or loss) are subject to impairment testing every reporting period. The carrying value is reviewed in order to determine whether an impairment loss has been incurred. Evaluation for impairment includes both quantitative and qualitative considerations. For debt securities, such considerations include actual and estimated incurred credit losses indicated by payment default, market data on (estimated) incurred losses and other current evidence that the issuer may be unlikely to pay amounts when due. Equity securities are impaired when management believes that, based on a significant or prolonged decline of the fair value below the acquisition price, there is sufficient reason to believe that the acquisition cost may not be recovered. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities. Generally, 25% and six months are used as triggers. Upon impairment of available-for-sale debt and equity securities, the full difference between the (acquisition) cost and fair value is removed from equity and recognised in net result. Impairments on debt securities may be reversed if there is a decrease in the amount of the impairment which can be objectively related to an observable event after the impairment. Impairments on equity securities cannot be reversed. The identification of impairments is an inherently uncertain process involving various assumptions and factors, including financial condition of the counterparty, expected future cash flows, statistical loss data, discount rates, observable market prices, etc. Estimates and assumptions are based on management\u2019s judgement and other information available. Significantly different results can occur as circumstances change and additional information becomes knownImpairments of financial assets NN Group assesses periodically and at each balance sheet date whether there is objective evidence that a financial asset or group of financial assets is impaired. A financial asset or a group of financial assets is impaired and impairment losses are recognised if, and only if, there is objective evidence of impairment as a result of one or more events that occurred after the initial recognition of the asset, but before the balance sheet date, (a \u2018loss event\u2019) and that loss event (or events) has an impact on the estimated future cash flows of the financial asset or group of financial assets that can be reliably estimated. In the specific case of equity investments classified as available-for-sale, a significant or prolonged decline in the fair value of the security below its cost is considered in determining whether the assets are impaired. \u2018Significant\u2019 and \u2018prolonged\u2019 are interpreted on a case-by-case basis for specific equity securities; generally, 25% and six months are used as triggers. In certain circumstances NN Group may grant borrowers postponement and/or reduction of loan principal and/or interest payments for a temporary period of time to maximise collection opportunities and, if possible, avoid default, foreclosure or repossession. When such postponement and/or reduction of loan principal and/or interest payments is executed based on credit concerns it is also referred to as \u2018forbearance\u2019. In general, forbearance represents an impairment trigger under IFRS-EU. In such cases, the net present value of the postponement and/or reduction of loan principal and/or interest payments is taken into account in the determination of the appropriate level of loan loss provisioning as described below. If the forbearance results in a substantial modification of the terms of the loan, the original loan is derecognised and a new loan is recognised at its fair value at the modification date. In determining the impairment loss, expected future cash flows are estimated on the basis of the contractual cash flows of the assets in the portfolio. NN Group first assesses whether objective evidence of impairment exists individually for financial assets that are individually significant and then individually or collectively for financial assets that are not individually significant. If there is objective evidence that an impairment loss on an asset carried at amortised cost has occurred, the amount of the loss is measured as the difference between the asset\u2019s carrying value and the present value of estimated future cash flows (excluding future credit losses that have not been incurred) discounted at the financial asset\u2019s original effective interest rate. The carrying value of the asset is reduced through the use of an allowance account (loan loss provisions) and the amount of the loss is recognised in the profit and loss account in \u2018Investment income\u2019. If the asset has a variable interest rate, the discount rate for measuring any impairment loss is the current effective interest rate determined under the contract. When a loan is uncollectable, it is written off against the related loan loss provision. Such loans are written off after all the necessary procedures have been completed and the amount of the loss has been determined . If, in a subsequent period, the amount of the impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised (such as an improvement in the debtor\u2019s credit rating), the previously recognised impairment loss is reversed by adjusting the provision. The amount of the reversal is recognised in the profit and loss account. If there is objective evidence that an impairment loss on available-for-sale debt and equity investments has occurred, the cumulative loss \u2013 measured as the difference between the acquisition cost and the current fair value, less any impairment loss on that asset previously recognised in net result \u2013 is removed from equity and recognised in the profit and loss account. Impairment losses recognised on equity instruments can never be reversed. If, in a subsequent period, the impairment loss on a loan or a debt instrument classified as available-for-sale reverses, which can be objectively related to an event occurring after the impairment loss was recognised in the profit and loss account, the impairment loss is reversed through the profit and loss account", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-444": { "value": "Consolidation NN Group comprises NN Group N.V. and all its subsidiaries. The Consolidated annual accounts of NN Group comprise the accounts of NN Group N.V. and all entities over which NN Group has control. NN Group has control over an entity when NN Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The assessment of control is based on the substance of the relationship between NN Group and the entity and considers existing and potential voting rights that are substantive. For a right to be substantive, the holder must have the practical ability to exercise that right. For interests in investment entities, the existence of control is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the \u2018power\u2019) and assume all risks and benefits of these investments (i.e. the policyholder assumes the variable returns ). The results of the operations and the net assets of subsidiaries are included in the profit and loss account and the balance sheet from the date control is obtained until the date control is lost. Minority interests are initially measured at their proportionate share of the subsidiaries\u2019 identifiable net assets at the date of acquisition. On disposal, the difference between the sales proceeds, net of directly attributable transaction costs, and the net assets is included in net result. A subsidiary which NN Group has agreed to sell but is still legally owned by NN Group may still be controlled by NN Group at the balance sheet date and, therefore, still be included in the consolidation. Such a subsidiary may be presented as held for sale if certain conditions are met. All intercompany transactions, balances and unrealised gains and losses on transactions between group companies are eliminated. Where necessary, the accounting policies used by subsidiaries are changed to ensure consistency with NN Group policies. In general, the reporting dates of subsidiaries are the same as the reporting date of NN Group N.V. A list of principal subsidiaries is included in Note 34 \u2018Principal subsidiaries and geographical information\u2019 ", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-445": { "value": "Foreign currency translation Functional and presentation currency Items included in the annual accounts of each NN Group entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is NN Group\u2019s functional and presentation currency . Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rate prevailing at the date of the transactions. Exchange rate differences resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the profit and loss account, except when deferred in equity as part of qualifying cash flow hedges or qualifying net investment hedges. Exchange rate differences on non-monetary items, measured at fair value through profit or loss, are reported as part of the \u2018Fair value gain or loss\u2019. Exchange rate differences on non-monetary items measured at fair value through other comprehensive income (equity) are included in the \u2018Revaluation reserve\u2019 in equity. Exchange rate differences in the profit and loss account are generally included in \u2018Foreign currency results and net trading income\u2019. Exchange rate differences relating to the disposal of available-for-sale debt and equity securities are considered to be an inherent part of the capital gains and losses recognised in \u2018Investment income\u2019. As mentioned below in Group companies, on disposal of group companies, any exchange rate difference deferred in equity is recognised in the profit and loss account in \u2018Result on disposals of group companies\u2019. Group companies The results and financial positions of all group companies that have a functional currency different from the presentation currency are translated into the presentation currency as follows: \u2022 Assets and liabilities included in each balance sheet are translated at the closing rate at the date of that balance sheet \u2022 Income and expenses included in each profit and loss account are translated at average exchange rates (unless this average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated at the dates of the transactions) \u2022 All resulting exchange rate differences are recognised in a separate component of equity in \u2018Currency translation reserve\u2019 On consolidation, exchange rate differences arising from the translation of a monetary item that forms part of the net investment in a foreign operation and of borrowings and other instruments designated as hedges of such investments are taken to shareholders\u2019 equity. When a foreign operation is sold the corresponding exchange rate differences are recognised in the profit and loss account as part of the gain or loss on sale. Goodwill and fair value adjustments arising from the acquisition of a foreign operation are treated as assets and liabilities of the foreign operation and translated at the exchange rate prevailing at the balance sheet date", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-446": { "value": "Functional and presentation currency Items included in the annual accounts of each NN Group entity are measured using the currency of the primary economic environment in which the entity operates (the functional currency). The Consolidated annual accounts are presented in euros, which is NN Group\u2019s functional and presentation currency ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-447": { "value": "Recognition and derecognition of financial instruments Financial assets and liabilities are generally (de)recognised at trade date, which is the date on which NN Group commits to purchase or sell the asset. Loans and receivables are recognised at settlement date, which is the date on which NN Group receives or delivers the asset . Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where NN Group has transferred substantially all risks and rewards of ownership. If NN Group neither transfers nor retains substantially all the risks and rewards of ownership of a financial asset, it derecognises the financial asset if it no longer has control over the asset. Realised gains and losses on investments are determined as the difference between the sales proceeds and (amortised) cost. For equity securities, the cost is determined using a weighted average per portfolio. For debt securities, the cost is determined by specific identification (generally FIFO) ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-448": { "value": "Offsetting of financial assets and financial liabilities Financial assets and financial liabilities are offset and the net amount reported in the balance sheet when NN Group has a current legally enforceable right to set off the recognised amounts and intends to either settle on a net basis or to realise the asset and settle the liability at the same time", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-449": { "value": "Leases The leases entered into by NN Group as a lessee are primarily operating leases. At inception of a contract, NN Group assesses whether a contract is, or contains, a lease. A contract is or contains a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. The net present value of operating lease commitments is recognised on the balance sheet as a \u2018right of use asset\u2019 under Property and equipment or Real estate investments and a lease liability is recognised under Other liabilities. NN Group does not recognise a right of use asset and a lease liability for short-term leases that have a lease term of 12 months or less and for leases of low value assets. The lease payments associated with these leases are recognised as an expense. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-450": { "value": "Taxation Income tax on the result for the year comprises current and deferred tax. Income tax is generally recognised in the profit and loss account, but is recognised directly in equity if the tax relates to items that are recognised directly in equity. Current tax consists of the expected tax payable or receivable on the taxable income or loss for the year and any adjustment to the tax payable or receivable in respect of previous years. The amount of current tax payable or receivable is the best estimate of the tax amount expected to be paid or received that reflects uncertainty related to income taxes, if any. It is measured using tax rates enacted or substantively enacted at the reporting date", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-451": { "value": "Deferred tax is provided in full, using the liability method, on all temporary differences arising between the tax bases of assets and liabilities and their carrying values in the balance sheet. Deferred tax is determined using tax rates (and laws) applicable in the jurisdictions in which NN Group is liable to taxation, that have been enacted or substantively enacted at the balance sheet date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled. Deferred tax assets and liabilities are not discounted. Deferred tax assets are recognised for all deductible temporary differences and unused tax losses carried forward where it is probable that future taxable profits will be available against which the temporary differences can be used. Unrecognised deferred tax assets are reassessed periodically and recognised to the extent that it has become probable that future taxable profits will be available against which they can be used. Deferred tax is provided on temporary differences arising from investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference is controlled by NN Group and it is probable that the difference will not reverse in the foreseeable future. The tax effects of income tax losses available for carry forward are recognised as an asset where it is probable that future taxable profits will be available against which these losses can be used. Offsetting deferred tax assets with deferred tax liabilities is allowed as long as there is a legally enforceable right to offset current tax assets against current tax liabilities together with the intention to do so and the deferred taxes relate to income taxes levied by the same taxation authority on the same entity or on the same fiscal unity .", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-452": { "value": "Employee benefits Defined benefit pension plans The net defined benefit asset or liability recognised in the balance sheet in respect of defined benefit pension plans is the fair value of the plan assets less the present value of the defined benefit obligation at the balance sheet date. Plan assets are measured at fair value at the balance sheet date. For determining the pension expense, the expected return on plan assets is determined using a high quality corporate bond rate identical to the discount rate used in determining the defined benefit obligation. Defined contribution pension plans For defined contribution plans, NN Group pays contributions to publicly or privately administered pension plans on a mandatory, contractual or voluntary basis. NN Group has no further payment obligations once the contributions have been paid. The contributions are recognised as staff expenses in the profit and loss account when they are due. Other post-employment obligations Some NN Group companies provide post-employment benefits to certain employees and former employees. The entitlement to these benefits is usually conditional on the employee remaining in service up to retirement age and the completion of a minimum service period. The expected costs of these benefits are accrued over the period of employment using an accounting methodology similar to that for defined benefit pension plans. Share-based payments Share-based payment expenses are recognised as staff expenses over the vesting period. A corresponding increase in equity is recognised for equity-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions is measured at the grant date. For cash-settled share-based payment transactions, a liability is recognised at fair value; this fair value is remeasured at every balance sheet date . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-453": { "value": "Share-based payments Share-based payment expenses are recognised as staff expenses over the vesting period. A corresponding increase in equity is recognised for equity-settled share-based payment transactions. The fair value of equity-settled share-based payment transactions is measured at the grant date. For cash-settled share-based payment transactions, a liability is recognised at fair value; this fair value is remeasured at every balance sheet date ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-454": { "value": "Interest income and expenses Interest income and expenses are recognised in the profit and loss account using the effective interest method. The effective interest method is a method of calculating the amortised cost of a financial asset or a financial liability and of allocating the interest income or interest expenses over the relevant period. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts throughout the expected life of the financial instrument or, when appropriate, a shorter period to the net carrying value of the financial asset or financial liability. When calculating the effective interest rate, NN Group estimates cash flows considering all contractual terms of the financial instrument (for example prepayment options) but does not consider future credit losses. The calculation includes all fees and points paid or received between parties to the contract that are an integral part of the effective interest rate, transaction costs and all other premiums or discounts. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Interest income and expenses from non-trading derivatives are classified as interest income and interest expenses in the profit and loss account, except for interest income/expense on derivatives for which no hedge accounting is applied. The latter is classified in \u2018Valuation results on non-trading derivatives\u2019, together with the changes in the (clean) fair value of these derivatives", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-455": { "value": "Fiduciary activities NN Group commonly acts as trustee and in other fiduciary capacities that result in the holding or placing of assets on behalf of individuals, trusts, retirement benefit plans and other institutions when conducting asset management activities. The assets and income arising thereof are excluded from these annual accounts, as they are not assets or income of NN Group. Fees received acting as trustee and in other fiduciary capacities are recognised as income", "dimensions": { "concept": "ifrs-full:DescriptionOfOtherAccountingPoliciesRelevantToUnderstandingOfFinancialStatements", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-456": { "value": "Statement of cash flows The Consolidated statement of cash flows is prepared in accordance with the indirect method, classifying cash flows as cash flows from operating, investing and financing activities. In the net cash flow from operating activities, the result before tax is adjusted for those items in the profit and loss account and changes in balance sheet items, which do not result in actual cash flows during the year. Cash and cash equivalents comprise balances with less than three months\u2019 maturity from the date of acquisition. Investments qualify as a cash equivalent if they are readily convertible into a known amount of cash and are not subject to significant risk of changes in value. Cash flows arising from foreign currency transactions are translated into the functional currency using the exchange rates at the date of the cash flows . The difference between the net cash flow in accordance with the statement of cash flows and the change in \u2018Cash and cash equivalents\u2019 in the balance sheet is due to exchange rate differences and is accounted for separately as part of the reconciliation of the net cash flow and the balance sheet change in \u2018Cash and cash equivalents\u2019. Cash flows arising from the issue of mortgage loans held in the banking operations are recognised under Net cash flows from operating activities, whereas cash flows related to mortgage loans held as investment in the insurance operations are recognised under Net cash flow from investing activities. Cash flows on collateral related to derivatives (presented in the balance sheet in Other assets and Other liabilities) is presented in the Consolidated statement of cash flows as part of Net cash flow from operating activities, consistent with the cash flows of the related derivatives", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCashFlowsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-457": { "value": "Financial assets and liabilities at fair value through profit or loss (Notes 4 and 20) A financial asset or liability is classified as at fair value through profit or loss if it is acquired principally for the purpose of selling in the short- term or if designated by management as such. Management will make this designation only if this eliminates a measurement inconsistency or if the related assets and liabilities are managed on a fair value basis. Transaction costs on initial recognition are expensed as incurred. Interest income from debt securities and loans and receivables classified as at fair value through profit or loss is recognised in the profit and loss account using the effective interest method. Dividend income from equity instruments classified as at fair value through profit or loss is recognised in the profit and loss account when the dividend has been declared. Investments for risk of policyholders Investments for risk of policyholders are investments against insurance liabilities for which all changes in the fair value of invested assets are offset by similar changes in insurance liabilities. Investments for risk of policyholders are recognised at fair value; changes in fair value are recognised in the profit and loss account", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-458": { "value": "Derivatives and hedge accounting Derivatives are recognised at fair value. Derivatives are presented as assets when the fair value is positive and as liabilities when the fair value is negative. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. NN Group designates certain derivatives as hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for derivatives designated in this way provided certain criteria are met. At the inception of the hedge transaction NN Group documents the relationship between hedging instruments and hedged items, its risk management objectives, together with the methods selected to assess hedge effectiveness. In addition, NN Group documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of the hedged items. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging deposits and under-hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income (equity) in \u2018Cash flow hedge reserve\u2019. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recycled to the profit and loss account in the periods in which the hedged item affects Net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously reported in equity is transferred immediately to the profit and loss account . Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the profit and loss account over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non- interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the profit and loss account only when the hedged item is derecognised. Net investment hedges Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income (equity) and the gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Gains and losses in equity are included in the profit and loss account when the foreign operation is disposed. Non-trading derivatives that do not qualify for hedge accounting Derivatives that are used by NN Group as part of its risk management strategies, that do not qualify for hedge accounting under NN Group\u2019s accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to \u2018Valuation results on non-trading derivatives\u2019 in the profit and loss account. Certain derivatives embedded in other contracts are measured as separate derivatives if: \u2022 Their economic characteristics and risks are not closely related to those of the host contract \u2022 The host contract is not carried at fair value through profit or loss \u2022 A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative (unless the embedded derivative meets the definition of an insurance contract) These embedded derivatives are measured at fair value with changes in fair value recognised in the profit and loss account. An assessment is carried out when NN Group first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of the contract that significantly modifies the expected cash flows", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-459": { "value": "Derivatives and hedge accounting Derivatives are recognised at fair value. Derivatives are presented as assets when the fair value is positive and as liabilities when the fair value is negative. The method of recognising the resulting fair value gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. NN Group designates certain derivatives as hedges of highly probable future cash flows attributable to a recognised asset or liability or a forecast transaction (cash flow hedge), hedges of the fair value of recognised assets or liabilities or firm commitments (fair value hedge), or hedges of a net investment in a foreign operation. Hedge accounting is used for derivatives designated in this way provided certain criteria are met. At the inception of the hedge transaction NN Group documents the relationship between hedging instruments and hedged items, its risk management objectives, together with the methods selected to assess hedge effectiveness. In addition, NN Group documents its assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in offsetting changes in fair value or cash flows of the hedged items. NN Group applies fair value hedge accounting to portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging deposits and under-hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. Cash flow hedges The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are recognised in other comprehensive income (equity) in \u2018Cash flow hedge reserve\u2019. The gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Amounts accumulated in equity are recycled to the profit and loss account in the periods in which the hedged item affects Net result. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the profit and loss account. When a forecast transaction is no longer expected to occur, the cumulative gain or loss previously reported in equity is transferred immediately to the profit and loss account Fair value hedges Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recognised in the profit and loss account, together with fair value adjustments to the hedged item attributable to the hedged risk. If the hedge relationship no longer meets the criteria for hedge accounting, the cumulative adjustment of the hedged item is, in the case of interest bearing instruments, amortised through the profit and loss account over the remaining term of the original hedge or recognised directly when the hedged item is derecognised. For non- interest bearing instruments, the cumulative adjustment of the hedged item is recognised in the profit and loss account only when the hedged item is derecognised. Net investment hedges Hedges of net investments in foreign operations are accounted for in a similar way to cash flow hedges. Any gain or loss on the hedging instrument relating to the effective portion of the hedge is recognised in other comprehensive income (equity) and the gain or loss relating to the ineffective portion is recognised immediately in the profit and loss account. Gains and losses in equity are included in the profit and loss account when the foreign operation is disposed", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-460": { "value": "Non-trading derivatives that do not qualify for hedge accounting Derivatives that are used by NN Group as part of its risk management strategies, that do not qualify for hedge accounting under NN Group\u2019s accounting policies, are presented as non-trading derivatives. Non-trading derivatives are measured at fair value with changes in the fair value taken to \u2018Valuation results on non-trading derivatives\u2019 in the profit and loss account. Certain derivatives embedded in other contracts are measured as separate derivatives if: \u2022 Their economic characteristics and risks are not closely related to those of the host contract \u2022 The host contract is not carried at fair value through profit or loss \u2022 A separate instrument with the same terms as the embedded derivative would meet the definition of a derivative (unless the embedded derivative meets the definition of an insurance contract) These embedded derivatives are measured at fair value with changes in fair value recognised in the profit and loss account. An assessment is carried out when NN Group first becomes party to the contract. A reassessment is carried out only when there is a change in the terms of the contract that significantly modifies the expected cash flows. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-461": { "value": "Available-for-sale investments (Note 5) Available-for-sale financial assets include available-for-sale debt securities and available-for-sale equity securities. Available-for-sale financial assets are initially recognised at fair value plus transaction costs. For available-for-sale debt securities, the difference between cost and redemption value is amortised. Interest income is recognised using the effective interest method. Available-for-sale financial assets are subsequently measured at fair value. Interest income from debt securities classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019. Dividend income from equity instruments classified as available-for-sale is recognised in the profit and loss account in \u2018Investment income\u2019 when the dividend has been declared. Unrealised gains and losses arising from changes in the fair value are recognised in other comprehensive income (equity). On disposal, the related accumulated fair value adjustments are included in the profit and loss account as \u2018Investment income\u2019. For impairments of available- for-sale financial assets reference is made to the section \u2018Impairments of financial assets\u2019. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForAvailableforsaleFinancialAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-462": { "value": "Loans (Note 6) Loans are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are initially recognised at fair value plus transaction costs. Subsequently, they are carried at amortised cost using the effective interest method less any impairment losses. Interest income from loans is recognised in the profit and loss account in \u2018Investment income\u2019 using the effective interest method", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLoansAndReceivablesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-463": { "value": "Associates and joint ventures (Note 7) Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to, one or more of the following: \u2022 Representation on the board of directors \u2022 Participation in the policy-making process \u2022 Interchange of managerial personnel Joint ventures are all entities in which NN Group has joint control . Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method of accounting. Subsequently, NN Group\u2019s share of profits or losses is recognised in the profit and loss account and its share of changes in reserves is recognised in other comprehensive income (equity). The cumulative changes are adjusted against the carrying value of the investment. When NN Group\u2019s share of losses in an associate or joint venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of NN Group\u2019s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. For interests in investment entities the existence of significant influence is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for similar entities quoted in an active market. Valuations of private equity investments are mainly based on an \u2018adjusted multiple of earnings\u2019 methodology on the following basis: \u2022 Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and, in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest, tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable estimate of maintainable earnings. \u2022 Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies. \u2022 Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and NN Group\u2019s investment rights in the deal structure", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociatesAndJointVenturesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-464": { "value": "Associates and joint ventures (Note 7) Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to, one or more of the following: \u2022 Representation on the board of directors \u2022 Participation in the policy-making process \u2022 Interchange of managerial personnel Joint ventures are all entities in which NN Group has joint control . Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method of accounting. Subsequently, NN Group\u2019s share of profits or losses is recognised in the profit and loss account and its share of changes in reserves is recognised in other comprehensive income (equity). The cumulative changes are adjusted against the carrying value of the investment. When NN Group\u2019s share of losses in an associate or joint venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of NN Group\u2019s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. For interests in investment entities the existence of significant influence is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for similar entities quoted in an active market. Valuations of private equity investments are mainly based on an \u2018adjusted multiple of earnings\u2019 methodology on the following basis: \u2022 Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and, in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest, tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable estimate of maintainable earnings. \u2022 Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies. \u2022 Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and NN Group\u2019s investment rights in the deal structure", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsInJointVentures", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-465": { "value": "Associates and joint ventures (Note 7) Associates are all entities over which NN Group has significant influence but not control. Significant influence generally results from a shareholding of 20% or more of the voting rights, but also the ability to participate in the financial and operating policies through situations including, but not limited to, one or more of the following: \u2022 Representation on the board of directors \u2022 Participation in the policy-making process \u2022 Interchange of managerial personnel Joint ventures are all entities in which NN Group has joint control . Associates and joint ventures are initially recognised at cost (including goodwill) and subsequently accounted for using the equity method of accounting. Subsequently, NN Group\u2019s share of profits or losses is recognised in the profit and loss account and its share of changes in reserves is recognised in other comprehensive income (equity). The cumulative changes are adjusted against the carrying value of the investment. When NN Group\u2019s share of losses in an associate or joint venture equals or exceeds the book value of the associate or joint venture, NN Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or joint venture. Unrealised gains and losses on transactions between NN Group and its associates and joint ventures are eliminated to the extent of NN Group\u2019s interest. Accounting policies of associates and joint ventures have been changed where necessary to ensure consistency with the policies of NN Group. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. For interests in investment entities the existence of significant influence is determined taking into account both NN Group\u2019s financial interests for own risk and its role as asset manager. Associates include interests in real estate funds and private equity funds. The underlying assets of both the real estate and the private equity funds are measured at fair value through profit or loss (i.e. no revaluations in other comprehensive income). The fair value of underlying real estate in real estate funds is determined as set out below for Real estate investments. The fair value of underlying private equity investments in private equity funds is generally based on a forward-looking market approach. This approach uses a combination of company financials and quoted market multiples. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and by reference to market valuations for similar entities quoted in an active market. Valuations of private equity investments are mainly based on an \u2018adjusted multiple of earnings\u2019 methodology on the following basis: \u2022 Earnings: reported earnings are adjusted for non-recurring items, such as restructuring expenses, for significant corporate actions and, in exceptional cases, for run-rate adjustments to arrive at maintainable earnings. The most common measure is earnings before interest, tax, depreciation and amortisation (EBITDA). Earnings used are usually management forecasts for the current year, unless data from management accounts for the 12 months preceding the reporting period or the latest audited annual accounts provide a more reliable estimate of maintainable earnings. \u2022 Earnings multiples: earnings multiples are derived from comparable listed companies or relevant market transaction multiples for companies in the same industry and, where possible, with a similar business model and profile in terms of size, products, services and customers, growth rates and geographic focus. Adjustments are made for differences in the relative performance in the group of comparable companies. \u2022 Adjustments: a marketability or liquidity discount is applied based on factors such as alignment with management and other investors and NN Group\u2019s investment rights in the deal structure", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentInAssociates", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-466": { "value": "Real estate investments (Note 8) Real estate investments under construction are included in \u2018Real estate investments\u2019. Real estate investments are held for long-term rental yields and are not occupied by NN Group. Real estate investments are initially measured at cost, including transaction cost and are subsequently measured at fair value. Changes in the carrying value resulting from revaluations are recognised in the profit and loss account. On disposal the difference between the sales proceeds and carrying value is recognised in the profit and loss account. The fair value of real estate investments is based on regular appraisals by independent qualified valuers. For each reporting period every property is valued by an external valuer. Market transactions and disposals made by NN Group are monitored as part of the validation procedures to test the valuations. Valuations performed earlier in the year are updated if necessary to reflect the situation at the year-end. All real estate investments are appraised externally at least annually. The fair value represents the estimated amount for which the property could be exchanged on the date of valuation between a willing buyer and willing seller in an at-arm\u2019s-length transaction after proper marketing wherein the parties each acted knowledgeably, prudently and without compulsion. The fair value is based on appraisals using valuation methods such as comparable market transactions, capitalisation of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that reflect appropriately the risk characteristics of real estate. The valuation of real estate investments takes (expected) vacancies into account. Occupancy rates differ significantly from investment to investment. For real estate investments held through (minority shares in) real estate investment funds, the valuations are performed under the responsibility of the funds\u2019 asset manager. Subsequent expenditures are recognised as part of the asset\u2019s carrying value only when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of an item can be measured reliably. All other repairs and maintenance costs are recognised immediately in the profit and loss account. Borrowing costs on real estate investments under construction are capitalised until completionFair value of real estate Real estate investments are reported at fair value. The fair value of real estate investments is based on regular appraisals by external, qualified valuers. The fair value is established using valuation methods such as comparable market transactions, capitalisation of income methods or discounted cash flow calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. The discounted cash flow analysis and capitalisation of income method are based on calculations of the future rental income in accordance with the terms in existing leases and estimations of the rental values for new leases when leases expire and incentives like rent-free periods. The cash flows are discounted using market-based interest rates that appropriately reflect the risk characteristics of real estate investments .", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-467": { "value": "Property and equipment (Note 9) Land and buildings held for own use are stated at fair value at the balance sheet date. Increases in the carrying value are recognised in other comprehensive income (equity). Decreases in the carrying value that offset previous increases of the same asset are charged against other comprehensive income (equity); all other decreases are recognised in the profit and loss account. Increases that reverse a revaluation decrease on the same asset previously recognised in net result are recognised in the profit and loss account. Depreciation is recognised based on the fair value and the estimated useful life (in general 20\u201350 years). On disposal, the related revaluation reserve in equity is transferred within equity to \u2018Retained earnings\u2019. The fair value of land and buildings is based on regular appraisals by independent, qualified valuers or internally, similar to appraisals of real estate investments. All significant holdings of land and buildings are appraised at least annually. Subsequent expenditure is included in the asset\u2019s carrying value when it is probable that future economic benefits associated with the item will flow to NN Group and the cost of the item can be measured reliably. Equipment is stated at cost less accumulated depreciation and any impairment losses. The estimated useful lives are generally as follows: two to five years for data processing equipment and four to ten years for fixtures and fittings. Expenditure incurred on maintenance and repairs is recognised in the profit and loss account as incurred. Expenditure incurred on major improvements is capitalised and depreciated. The difference between the proceeds on disposal and net carrying value is recognised in the profit and loss account in \u2018Other income\u2019. Methods of depreciation and amortisation Items of property and equipment are depreciated, intangible assets with finite useful lives are amortised. The carrying values of the assets are depreciated/amortised on a straight-line basis over the estimated useful lives. Methods of depreciation and amortisation, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-468": { "value": "Intangible assets (Note 10) Goodwill NN Group\u2019s acquisitions are accounted for using the acquisition method of accounting. The consideration for each acquisition is measured at the aggregate of the fair value (at the date of acquisition) of assets given, liabilities incurred or assumed and equity instruments issued in exchange for control of the acquiree. Where applicable, the consideration for the acquisition includes any asset or liability resulting from a contingent consideration arrangement, measured at its acquisition-date fair value. Goodwill, being the positive difference between the cost of the acquisition (including assumed debt) and NN Group\u2019s interest in the fair value of the acquired assets, liabilities and contingent liabilities as at the date of acquisition, is capitalised as an intangible asset. Negative goodwill is recognised immediately in the profit and loss account as income. The results of the operations of the acquired companies are included in the profit and loss account from the date control is obtained. Where a business combination is achieved in stages, NN Group\u2019s previously held interests in the assets and liabilities of the acquired entity are remeasured to fair value at the acquisition date (i.e. the date NN Group obtains control) and the resulting gain or loss, if any, is recognised in the profit and loss account. Amounts arising from interests in the acquiree before the acquisition date that have previously been recognised in other comprehensive income (equity) are reclassified to the profit and loss account, where such treatment would be appropriate if that interest were disposed of. Acquisition-related costs are recognised in the profit and loss account as incurred and presented in the profit and loss account as \u2018Other operating expenses\u2019. Until 2009, before IFRS 3 \u2018Business Combinations\u2019 was revised, the accounting of previously held interests in the assets and liabilities of the acquired entity were not remeasured at the acquisition date and the acquisition-related costs were considered to be part of the total consideration. Goodwill is only capitalised on acquisitions after the implementation date of IFRS-EU (1 January 2004). Accounting for acquisitions before that date has not been restated; goodwill and internally generated intangibles on these acquisitions were recognised directly in shareholders\u2019 equity. The initial accounting for the fair value of the net assets of the companies acquired during the year may be determined only provisionally as the determination of the fair value can be complex and the time between the acquisition and the preparation of the annual accounts can be limited. The initial accounting shall be completed within a year after acquisition . Goodwill is allocated to cash generating units (reporting units) for the purpose of impairment testing. These cash generating units (reporting units) represent the lowest level at which goodwill is monitored for internal management purposes, which is generally the segment level. This test is performed annually or more frequently if there are indicators of impairment. Under the impairment tests, the carrying value of the cash generating units (reporting units including goodwill) is compared to its recoverable amount, which is the higher of its fair value less costs to sell and its value in use. Computer software Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. The expected useful life of computer software will generally not exceed three years. Amortisation is included in \u2018Other operating expenses\u2019. Value of business acquired (VOBA) VOBA is an asset that represents the present value of estimated net cash flows embedded in the insurance contracts of an acquired company, which exists at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and their carrying value. VOBA is amortised in a similar manner to the amortisation of the deferred acquisition costs as described in the section \u2018Deferred acquisition costs\u2019. Other intangible assets Other intangible assets include brand names, client relationships and distribution channels. These assets are stated at cost less amortisation and any impairment losses. The expected useful life is between 2 and 17 years. Impairment Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-469": { "value": "Computer software Computer software that has been purchased or generated internally for own use is stated at cost less amortisation and any impairment losses. The expected useful life of computer software will generally not exceed three years. Amortisation is included in \u2018Other operating expenses\u2019. Value of business acquired (VOBA) VOBA is an asset that represents the present value of estimated net cash flows embedded in the insurance contracts of an acquired company, which exists at the time the company was acquired. It represents the difference between the fair value of insurance liabilities and their carrying value. VOBA is amortised in a similar manner to the amortisation of the deferred acquisition costs as described in the section \u2018Deferred acquisition costs\u2019. Other intangible assets Other intangible assets include brand names, client relationships and distribution channels. These assets are stated at cost less amortisation and any impairment losses. The expected useful life is between 2 and 17 years. Impairment Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-470": { "value": "Impairment Impairment reviews with respect to goodwill and intangible assets are performed at least annually and more frequently if events indicate that impairments may have occurred. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to which the goodwill was allocated to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU net asset value including goodwill and acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. A cash generating unit (reporting unit) is the lowest level at which goodwill is monitored. Other intangible assets are tested for impairment by comparing the carrying value with the best estimate of the recoverable amount of the individual intangible asset. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-471": { "value": "Assets and liabilities held for sale (Note 12) Assets and liabilities of a business are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable, the business is available for immediate sale in its present condition and management is committed to the sale, which is expected to occur within one year from the date of classification as held for sale. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-472": { "value": "Subordinated debt, debt securities issued and other borrowed funds (Notes 15, 16 and 17) Subordinated debt, debt securities issued and other borrowed funds are recognised initially at their issue proceeds (fair value of consideration received) net of transaction costs incurred. Borrowings are subsequently measured at amortised cost. Any difference between proceeds, net of transaction costs and the redemption value is recognised in the profit and loss account over the period of the borrowings using the effective interest method. If NN Group purchases its own debt, it is derecognised from the balance sheet and the difference between the carrying value of the liability and the consideration paid is recognised in the profit and loss account. Financial liabilities include only instruments of which the terms and conditions represent a contractual obligation to pay interest and/or principal. Instruments that are similar in substance, but of which the terms and conditions do not include a contractual obligation to pay interest and principal, are classified as equity", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-473": { "value": "Insurance and investment contracts, reinsurance contracts (Note 18) Insurance liabilities are established in accordance with IFRS 4 \u2018Insurance Contracts\u2019. Under IFRS 4, an insurer may continue its existing pre- IFRS accounting policies for insurance contracts, provided that certain minimum requirements are met. Upon adoption of IFRS-EU in 2005, NN Group decided to continue the then existing accounting principles for insurance contracts under IFRS-EU. NN Group operates in many different countries and the accounting principles for insurance contracts follow local practice in these countries. For NN Group\u2019s businesses in the Netherlands, NN Group applies accounting standards generally accepted in the Netherlands (Dutch GAAP) for its insurance contracts. Changes in those local accounting standards (including Dutch GAAP) subsequent to the adoption of IFRS-EU are considered for adoption on a case-by-case basis. If adopted, the impact thereof is accounted for as a change in accounting policies under IFRS-EU. In addition, for certain specific products or components thereof, NN Group applies the option in IFRS 4 to measure (components of) insurance liabilities using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees embedded in insurance contracts in Japan. Insurance contracts Insurance policies which bear significant insurance risk and/or contain discretionary participation features (including investment contracts with discretionary participation features) are presented as insurance contracts. Insurance liabilities represent estimates of future pay-outs that will be required for life and non-life insurance claims, including expenses relating to such claims. For some insurance contracts the measurement reflects current market assumptions. Unless indicated otherwise below, changes in the insurance liabilities are recognised in the profit and loss account. Life insurance liabilities The life insurance liabilities are generally calculated on the basis of a prudent prospective actuarial method. Specific methodologies may differ between business units as they may reflect local regulatory requirements and local practices for specific product features in the local markets. Insurance liabilities on traditional life policies are calculated using various assumptions, including assumptions on mortality, morbidity, expenses, investment returns and surrenders. Assumptions for insurance liabilities for traditional life insurance contracts, including traditional whole-life and term-life insurance contracts, are based on best estimate assumptions including margins for adverse deviations. Generally, these assumptions are set initially at the policy issue date and remain constant throughout the life of the policy. For the insurance liabilities that were taken over in the Delta Lloyd acquisition, these assumptions are set as at the date of acquisition, 1 April 2017. Insurance liabilities for universal life, variable life and annuity contracts, unit-linked contracts, etc. are generally set equal to the balance that accrues to the benefit of the policyholders. Certain contracts contain minimum (interest) guarantees on the amounts payable upon death and/or maturity. The insurance liabilities include the impact of these minimum (interest) guarantees, taking into account the difference between the potential minimum benefit payable and the total account balance, expected mortality and surrender rates. Unamortised interest rate rebates on periodic and single premium contracts are deducted from the life insurance contract liabilities. Interest rate rebates granted during the year are amortised in conformity with the anticipated recovery pattern and are recognised in the profit and loss account . Liabilities for unearned premiums and unexpired insurance risks The liabilities are calculated in proportion to the unexpired periods of risk. For insurance policies covering a risk increasing during the term of the policy at premium rates independent of age, this risk is taken into account when determining the liability. Further liabilities are formed to cover claims under unexpired insurance contracts, which may exceed the unearned premiums and the premiums due in respect of these contracts. Claims liabilities Claims liabilities are calculated either on a case-by-case basis or by approximation on the basis of experience. Liabilities have also been recognised for claims incurred but not reported (IBNR) and for future claims handling expenses. IBNR liabilities are set to recognise the estimated cost of losses that have occurred but which have not yet been notified to NN Group. The adequacy of the claims liabilities is evaluated each year using standard actuarial techniques. Deferred interest credited to policyholders For insurance contracts and investment contracts with discretionary participation features, \u2018Deferred interest credited to policyholders\u2019 is recognised for the full amount of the unrealised revaluations on allocated investments. Upon realisation, the \u2018Deferred interest credited to policyholders\u2019 regarding unrealised revaluations is reversed and a deferred profit sharing amount is recognised for the share of realised results on allocated investments that is expected to be shared with policyholders. The amount of deferred profit sharing is reduced by the actual allocation to individual policyholders. The change in the amount of \u2018Deferred interest credited to policyholders\u2019 on unrealised revaluations (net of tax) is recognised in the \u2018Revaluation reserve\u2019 in other comprehensive income (equity). Liabilities for life insurance for risk of policyholders Liabilities for life insurance for risk of policyholders are generally shown at the balance sheet value of the related investments. Reinsurance contracts Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of insurance contracts are accounted for in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations, NN Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are recognised for receivables on reinsurance contracts which are deemed uncollectable. Both reinsurance premiums and reinsurance recoveries are included in \u2018Underwriting expenditure\u2019 in the profit and loss account. Adequacy test The adequacy of the insurance liabilities is evaluated at each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability (gross of reinsurance and net of DAC and VOBA) to a liability based on current best estimate actuarial assumptions. The assumed investment returns are a combination of the run-off of current portfolio yields on existing assets and reinvestment rates in relation to maturing assets and anticipated new premiums, as a result, (part of) the revaluation reserve in shareholders equity is taken into account in assessing the adequacy of insurance liabilities. If, for any business unit, the established insurance liability is lower than the liability based on current best estimate actuarial assumptions the shortfall is recognised immediately in the profit and loss account. If the insurance liabilities are determined to be more than adequate no reduction in the insurance liabilities is recognised. Investment contracts Insurance policies without discretionary participation features which do not bear significant insurance risk are presented as Investment contracts. Investment contract liabilities are determined at amortised cost, using the effective interest method (including certain initial acquisition expenses), or at fair value", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInsuranceContracts", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-474": { "value": "Reinsurance contracts Reinsurance premiums, commissions and claim settlements, as well as the reinsurance element of insurance contracts are accounted for in the same way as the original contracts for which the reinsurance was concluded. If the reinsurers are unable to meet their obligations, NN Group remains liable to its policyholders for the portion reinsured. Consequently, provisions are recognised for receivables on reinsurance contracts which are deemed uncollectable. Both reinsurance premiums and reinsurance recoveries are included in \u2018Underwriting expenditure\u2019 in the profit and loss account. Adequacy test The adequacy of the insurance liabilities is evaluated at each reporting period by each business unit for the business originated in that business unit. The test involves comparing the established insurance liability (gross of reinsurance and net of DAC and VOBA) to a liability based on current best estimate actuarial assumptions. The assumed investment returns are a combination of the run-off of current portfolio yields on existing assets and reinvestment rates in relation to maturing assets and anticipated new premiums, as a result, (part of) the revaluation reserve in shareholders equity is taken into account in assessing the adequacy of insurance liabilities. If, for any business unit, the established insurance liability is lower than the liability based on current best estimate actuarial assumptions the shortfall is recognised immediately in the profit and loss account. If the insurance liabilities are determined to be more than adequate no reduction in the insurance liabilities is recognised", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForReinsuranceExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-475": { "value": "Other liabilities (Note 21) Provisions Other liabilities include reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions include employee termination benefits when NN Group is demonstrably committed to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy. Provisions are discounted when the effect of the time value of money is significant, using a before tax discount rate. The determination of provisions is an inherently uncertain process involving estimates regarding amounts and timing of cash flows .", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-476": { "value": "Net fee and commission income (Note 24) Fees and commissions are generally recognised as the service is provided. Portfolio and other management advisory and service fees are recognised based on the applicable service contracts as the service is provided. Asset management fees related to investment funds and investment contract fees are recognised on a pro-rata basis over the period the service is provided. The same principle is applied for wealth management, financial planning and custody services that are continuously provided over an extended period of time", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-477": { "value": "Earnings per ordinary share (Note 32) Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue. Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if these changes occurred after the reporting date but before the annual accounts are authorised for issue. Diluted earnings per share data are computed as if all convertible instruments outstanding at the year-end were exercised at the beginning of the period. It is also assumed that NN Group uses the assumed proceeds received to buy its own shares against the average market price in the financial year. The net increase in the number of shares resulting from the exercise is added to the average number of shares used to calculate diluted earnings per share. ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-478": { "value": "Segments and Principal subsidiaries and geographical information (Notes 33 and 34) A segment is a distinguishable component of NN Group, engaged in providing products or services, subject to risks and returns that are different from those of other segments. A geographical area is a distinguishable component of NN Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The geographical analysis is based on the location of the business unit from which the transactions are originated . ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-479": { "value": "Segments and Principal subsidiaries and geographical information (Notes 33 and 34) A segment is a distinguishable component of NN Group, engaged in providing products or services, subject to risks and returns that are different from those of other segments. A geographical area is a distinguishable component of NN Group engaged in providing products or services within a particular economic environment that is subject to risks and returns that are different from those of segments operating in other economic environments. The geographical analysis is based on the location of the business unit from which the transactions are originated ", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-480": { "value": "2 The war in Ukraine In February 2022, the Russian military build-up on the border of Ukraine escalated tensions between Russia and Ukraine. At the date of this report, Russian troops continue to invade Ukraine and millions of Ukrainians have fled their homes. NN Group does not have business activities in Ukraine or Russia, and NN Group\u2019s direct financial exposure to these countries is limited. However, the Russian military actions and the resulting sanctions have adversely affected the global economy and financial markets. Any possible further escalation thereof, might have further adverse impact on the global economy and financial markets and, therefore, NN Group\u2019s financial results. More detailed information is provided in Note 52 \u2018Risk management Sensitivities Significant increases (decreases) in the estimated rental value and rent growth in isolation would result in a significantly higher (lower) fair value of the real estate investments. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would result in a significantly lower (higher) fair value of the real estate investments. During 2022, the number of transactions in relevant real estate markets has decreased, resulting in larger uncertainties around the inputs to the valuations and, therefore, increased uncertainty in the fair value of real estate investments", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-481": { "value": "2 The war in Ukraine In February 2022, the Russian military build-up on the border of Ukraine escalated tensions between Russia and Ukraine. At the date of this report, Russian troops continue to invade Ukraine and millions of Ukrainians have fled their homes. NN Group does not have business activities in Ukraine or Russia, and NN Group\u2019s direct financial exposure to these countries is limited. However, the Russian military actions and the resulting sanctions have adversely affected the global economy and financial markets. Any possible further escalation thereof, might have further adverse impact on the global economy and financial markets and, therefore, NN Group\u2019s financial results. More detailed information is provided in Note 52 \u2018Risk management \u2019Sensitivities Significant increases (decreases) in the estimated rental value and rent growth in isolation would result in a significantly higher (lower) fair value of the real estate investments. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would result in a significantly lower (higher) fair value of the real estate investments. During 2022, the number of transactions in relevant real estate markets has decreased, resulting in larger uncertainties around the inputs to the valuations and, therefore, increased uncertainty in the fair value of real estate investments. ", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-482": { "value": "3 Cash and cash equivalents Cash and cash equivalents 2022 2021 Cash and bank balances 4,148 4,203 Money market funds 1,744 1,965 Short-term deposits 778 761 Cash and cash equivalents 6,670 6,929 Cash and cash equivalents classified as assets held for sale 226 Cash and cash equivalents at the end of the year 6,670 7,155 As at 31 December 2022, NN Group held EUR 2,183 million (2021: EUR 1,325 million) at central banks. NN Group invests in several types of money market funds, some qualifying as cash equivalents and some as investments. Short-term investments in money market funds are presented as cash equivalents only if these are highly liquid and quoted in an active market and have low investment risk . 3 Cash and cash equivalents continued Changes in Cash and cash equivalents 2022 2021 Cash and cash equivalents at beginning of the year 7,155 12,390 Net cash flow -343 -5,161 Effect of exchange rate changes on cash and cash equivalents -142 -74 Cash and cash equivalents at the end of the year 6,670 7,155 The change in market interest rates in 2022 significantly impacted cash collateral amounts paid and received as well as other assets and liabilities which are components of the net cash flow. Consequently, the net cash flow for 2022 increased by EUR 4,818 million to EUR -343 million", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-483": { "value": "4 Financial assets at fair value through profit or loss Financial assets at fair value through profit or loss 2022 2021 Investments for risk of policyholders 34,562 39,261 Non-trading derivatives 2,452 6,419 Designated as at fair value through profit or loss 681 991 Financial assets at fair value through profit or loss 37,695 46,671 Investments for risk of policyholders 2022 2021 Equity securities 31,687 37,010 Debt securities 1,758 1,368 Loans and receivables 1,117 883 Investments for risk of policyholders 34,562 39,261 Investments in investment funds (with underlying investments in debt and equity securities, real estate and derivatives) are included in equity securities. Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 62 29 \u2013 cash flow hedges 256 4,622 \u2013 hedges of net investments in foreign operations 23 Other non-trading derivatives 2,111 1,768 Non-trading derivatives 2,452 6,419 The fair value of derivatives was impacted significantly in 2022 by the change (increase) in market interest rates. This change in market interest rates also significantly impacted other balance sheet items, including Available-for-sale investments and Other liabilities \u2013 Cash collateral amounts received as well as other liabilities in the consolidated statement of cash flows. Other non-trading derivatives includes derivatives for which no hedge accounting is applied . Designated as at fair value through profit or loss 2022 2021 Equity securities 371 415 Debt securities 27 28 Money market funds 283 548 Designated as at fair value through profit or loss 681 991 20 Financial liabilities at fair value through profit or loss Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 4 \u2013 cash flow hedges 3,242 904 \u2013 hedges of net investments in foreign operations 10 Other non-trading derivatives 3,220 986 Non-trading derivatives 6,462 1,904 Other non-trading derivatives includes derivatives for which no hedge accounting is applied. Reference is made to Note 38 \u2018Derivatives and hedge accounting\u2019. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-484": { "value": "Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 62 29 \u2013 cash flow hedges 256 4,622 \u2013 hedges of net investments in foreign operations 23 Other non-trading derivatives 2,111 1,768 Non-trading derivatives 2,452 6,419 The fair value of derivatives was impacted significantly in 2022 by the change (increase) in market interest rates. This change in market interest rates also significantly impacted other balance sheet items, including Available-for-sale investments and Other liabilities \u2013 Cash collateral amounts received as well as other liabilities in the consolidated statement of cash flows. Other non-trading derivatives includes derivatives for which no hedge accounting is applied 20 Financial liabilities at fair value through profit or loss Non-trading derivatives 2022 2021 Derivatives used in: \u2013 fair value hedges 4 \u2013 cash flow hedges 3,242 904 \u2013 hedges of net investments in foreign operations 10 Other non-trading derivatives 3,220 986 Non-trading derivatives 6,462 1,904 Other non-trading derivatives includes derivatives for which no hedge accounting is applied. Reference is made to Note 38 \u2018Derivatives and hedge accounting38 Derivatives and hedge accounting Use of derivatives and hedge accounting NN Group uses derivatives for effective portfolio management and the management of its asset and liability portfolios. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure. The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and reported in accordance with the nature of the hedged item and the type of IFRS-EU hedge model that is applicable. The three models applicable under IFRS-EU are: cash flow hedge accounting, fair value hedge accounting and net investment hedge accounting. The company\u2019s detailed accounting policies for these three hedge models are set out in Note 1 \u2018Accounting policies\u2019 in the section on \u2018Accounting policies for specific items\u2019. To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non- qualifying hedges are taken to the profit and loss account. However, in certain cases, NN Group mitigates the profit and loss account volatility by designating hedged assets and liabilities at fair value through profit or loss. If hedge accounting is applied under IFRS-EU, it is possible that a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot be continued, even if the hedge remains economically effective. As a result, the volatility arising from undertaking economic hedging in the profit and loss account may be higher than would be expected from an economic point of view. With respect to exchange rate and interest rate derivative contracts, the notional or contractual amount of these instruments is indicative of the nominal value of transactions outstanding at the balance sheet date; however, they do not represent amounts at risk. In 2017, NN Group entered into a longevity hedge, based on a general index of Dutch mortality. The maximum pay-out of the hedge amounts to EUR 100 million, payable after 20 years. The hedge is financed by annual premium payments to the counterparty. The longevity hedge is accounted for as derivative. The hedge reduces the impact of longevity trend scenarios implying more improvement in life expectancy. The regulator gave approval to include the effects of this specific hedge on the SCR. The purpose of the hedge is to reduce the longevity risk. Cash flow hedge accounting NN Group\u2019s hedge accounting consists mainly of cash flow hedge accounting. NN Group\u2019s cash flow hedges principally consist of Euribor based (forward) interest rate swaps and cross-currency interest rate swaps that are used to protect against its exposure to variability in future interest cash flows on assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors including estimates of prepayments and defaults. Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders\u2019 equity. Interest income and expenses on these derivatives are recognised in the profit and loss account consistent with the manner in which the forecast cash flows affect Net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the profit and loss account. For the year ended 31 December 2022, NN Group recognised EUR -5,942 million (2021: EUR -3,383 million) in equity as effective fair value changes on derivatives under cash flow hedge accounting. The balance of the cash flow hedge reserve in equity as at 31 December 2022 is EUR 3,901 million (2021: EUR 11,906 million) gross and EUR 2,895 million (2021: EUR 8,837 million) after deferred tax. This cash flow hedge reserve will fluctuate with the fair value of the underlying derivatives and will be reflected in the profit and loss account under Interest income/expenses over the remaining term of the underlying hedged items. The cash flow hedge reserve relates to a large number of derivatives and hedged items with varying maturities up to 48 years with the largest concentrations in the range 1 year to 13 years. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in EUR 75 million loss (2021: EUR 10 million loss) which was recognised in the profit and loss account As at 31 December 2022, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR -2,986 million (2021: EUR 3,718 million), presented in the balance sheet as EUR 256 million (2021: EUR 4,622 million) positive fair value under assets and EUR 3,242 million (2021: EUR 904 million) negative fair value under liabilities. As at 31 December 2022 and 2021, there were no non-derivatives designated as hedging instruments for cash flow hedge accounting purposes. Included in \u2018Interest income and Interest expenses on non-trading derivatives\u2019 is EUR 137 million (2021: EUR 164 million) and EUR 127 million (2021: EUR 98 million), respectively, relating to derivatives used in cash flow hedges. Fair value hedge accounting NN Group\u2019s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments due to movements in market interest rates. Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting ineffectiveness has an impact on the net result. For the year ended 31 December 2022, NN Group recognised EUR 1,701 million (2021: EUR 481 million) of fair value changes on derivatives designated under fair value hedge accounting in the profit and loss account. This amount was offset by EUR -1,692 million (2021: EUR\u2219-486 million) fair value changes recognised on hedged items. This resulted in EUR 9 million income (2021: EUR 5 million loss) net accounting ineffectiveness recognised in the profit and loss account. As at 31 December 2022, the fair value of outstanding derivatives designated under fair value hedge accounting was EUR 62 million (2021: EUR 25 million), presented in the balance sheet as EUR 62 million (2021: EUR 29 million) positive fair value under assets and EUR 0 million (2021: EUR 4 million) negative fair value under liabilities. NN Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 for macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under- hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to core deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. NN Group applies the IFRS-EU \u2018carve-out\u2019 to hedge the interest rate risk of mortgage loans. The hedging activities are designated under a portfolio fair value hedge on the mortgages, under IFRS-EU", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-485": { "value": "Designated as at fair value through profit or loss 2022 2021 Equity securities 371 415 Debt securities 27 28 Money market funds 283 548 Designated as at fair value through profit or loss 681 991 ", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsDesignatedAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-486": { "value": "5 Available-for-sale investments Available-for-sale investments 2022 2021 Equity securities: \u2013 shares in NN Group managed investment funds 2,459 \u2013 shares in third-party managed investment funds 7,370 3,970 \u2013 other 3,645 5,537 Equity securities 11,015 11,966 Debt securities 70,595 95,917 Available-for-sale investments 81,610 107,883 Since the transfer of the NN Investment Partners (NN IP) activities to Goldman Sachs has been finalised in April 2022 the amount of shares in NN Group managed investment funds as at 31 December 2022 is nil and all shares of the investment funds are managed by third-parties as of April 2022. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Changes in Available-for-sale investments Equity securities Debt securities Total 2022 2021 2022 2021 2022 2021 Available-for-sale investments \u2013 opening balance 11,966 11,299 95,917 106,876 107,883 118,175 Additions 2,339 2,375 22,363 24,378 24,702 26,753 Amortisation -222 -379 -222 -379 Transfers and reclassifications 132 -2 132 -2 Changes in unrealised revaluations -1,157 1,093 -19,226 -5,462 -20,383 -4,369 Impairments -735 -44 -24 -759 -44 Disposals and redemptions -1,473 -2,797 -29,436 -26,474 -30,909 -29,271 Changes in the composition of the group and other changes 3 -6 1,680 -3,111 1,683 -3,117 Exchange rate differences -60 46 -457 91 -517 137 Available-for-sale investments \u2013 closing balance 11,015 11,966 70,595 95,917 81,610 107,883 Changes in composition of the group and other changes includes in 2022 the impact of the acquisition of MetLife\u2019s businesses in Poland and Greece. NN Group\u2019s total exposure to debt securities is included in the following balance sheet lines: Total exposure to debt securities 2022 2021 Available-for-sale investments 70,595 95,917 Loans 145 281 Available-for-sale investments and loans 70,740 96,198 Investments for risk of policyholders 1,758 1,368 Designated as at fair value through profit or loss 27 28 Financial assets at fair value through profit or loss 1,785 1,396 Total exposure to debt securities 72,525 97,594 NN Group\u2019s total exposure to debt securities (excluding debt securities presented as held for sale) is included in \u2018Available-for-sale investments\u2019 and \u2018Loans\u2019 is specified as follows by type of exposure : 5 Available-for-sale investments continued Debt securities by type Available-for-sale investments Loans Total 2022 2021 2022 2021 2022 2021 Government bonds 43,432 61,587 43,432 61,587 Corporate bonds 16,203 20,427 16,203 20,427 Financial institutions and Covered bonds 7,930 10,454 7,930 10,454 Bond portfolio (excluding ABS) 67,565 92,468 \u2013 \u2013 67,565 92,468 US RMBS 420 464 420 464 Non-US RMBS 2,039 2,107 74 198 2,113 2,305 CDO/CLO 479 444 479 444 Other ABS 92 434 71 83 163 517 ABS portfolio 3,030 3,449 145 281 3,175 3,730 Debt securities \u2013 Available-for-sale investments and Loans 70,595 95,917 145 281 70,740 96,198 For more details, reference is made to Note 52 \u2018Risk management\u2019. Available-for-sale equity securities 2022 2021 Listed 3,633 5,579 Unlisted 7,382 6,387 Available-for-sale equity securities 11,015 11,966 ", "dimensions": { "concept": "ifrs-full:DisclosureOfAvailableforsaleAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-487": { "value": "6 Loans Loans 2022 2021 Loans secured by mortgages 59,899 59,283 Loans related to savings mortgages 1,293 1,426 Loans to or guaranteed by public authorities 1,379 1,478 Asset-backed securities 145 281 Policy loans 753 937 Other loans 4,710 4,954 Loans \u2013 before loan loss provisions 68,179 68,359 Loan loss provisions -135 -159 Loans 68,044 68,200 Changes in Loans secured by mortgages 2022 2021 Loans secured by mortgages \u2013 opening balance 59,283 55,310 Additions/origination 8,195 10,509 Amortisation -109 -160 Redemption -4,807 -5,231 Disposals -673 -686 Fair value changes recognised on hedged items -1,947 -453 Changes in the composition of the group and other changes -43 -6 Loans secured by mortgages \u2013 closing balance 59,899 59,283 NN Group has sold mortgage loans to securitisation entities that, in turn, issued notes to investors that are collateralised by the purchased assets. These mortgage loans continue to be recognised on NN Group\u2019s balance sheet as NN Group retained all or substantially all of the risks and rewards of the mortgage loans. Reference is made to Note 47 \u2018Structured entities\u2019 . Changes in Loan loss provisions 2022 2021 Loan loss provisions \u2013 opening balance 159 182 Write-offs -50 -7 Increase/decrease in loan loss provisions 35 -13 Changes in the composition of the group and other changes -9 -3 Loan loss provisions \u2013 closing balance 135 159 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToCustomersExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-488": { "value": "6 Loans continued Changes in Loan loss provisions 2022 2021 Loan loss provisions \u2013 opening balance 159 182 Write-offs -50 -7 Increase/decrease in loan loss provisions 35 -13 Changes in the composition of the group and other changes -9 -3 Loan loss provisions \u2013 closing balance 135 159 ", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-489": { "value": "
7 Associates and joint ventures
Associates and joint ventures (2022)
2022
Interest
held
Balance
sheet value
Total
assets
Total
liabilities
Total
income
Total
expenses
Vesteda Residential Fund FGR 24% 1,771 9,403 2,100 -7 -1
CBRE Dutch Office Fund FGR 19% 364 2,693 733 -84 83
Macquarie European Infrastructure Debt Fund 48% 360 757
Rivage Euro Debt Infrastructure 3 34% 297 870 2
Lazora S.I.I. S.A. 22% 241 1,636 545 122 40
CBRE Dutch Residential Fund FGR 8% 238 3,301 139 125 40
Ardstone Residential Income Fund 33% 226 892 203 54 10
CBRE Retail Industrial Fund Iberica FGR 50% 221 986 544 63 17
NRP Nordic Logistic Fund SA 42% 201 509 32 10 5
CBRE UK Property Fund PAIF 10% 174 1,697 19 -85 13
CBRE Dutch Retail Fund FGR 20% 170 1,181 342 -8 43
Healthcare Activos SOCIMI S.A. 38% 164 784 350 42 11
Dutch Student and Young Professional Housing fund
FGR 49% 143 372 82 39 3
Dutch Urban Living Venture FGR 45% 142 469 157 -5 10
Allee center Kft 50% 117 259 25 24 14
Hayfin Amber GP S.A R.L. 100% 106 185 79
Fiumaranuova s.r.l. 50% 105 216 7 12 9
Parcom Buy-Out Fund V CV 21% 88 534 114 173 5
The Fizz Student Housing Fund SCS 50% 88 259 82 7 6
Robeco Bedrijfsleningen FGR 26% 81 314 0 12 1
Delta Mainlog Holding GmbH & Co. KG 50% 79 164 7 -21 2
Octopus Commercial Real Estate Debt Fund III LP 46% 78 190 21
Rivage Hopitaux Publics Euro 34% 75 249 30
DPE Deutschland III (Parallel) GmbH & Co 17% 74 554 110 -11 9
Parquest Capital II B FPCI 29% 71 251 8 7
Prime Ventures V C.V. 20% 69 378 27 8 4
Boccaccio - Closed-end Real Estate Mutual Investment
Fund 50% 69 193 55 5 8
NL Boompjes Property 5 C.V. 50% 68 141 4 11 1
Rivage Euro Debt Infrastructure High Return 2 34% 62 183
CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 46 18 8
CBRE Dutch Retail Fund II FGR 10% 57 585 11 -50 11
Other 498
Associates and joint ventures 6,556
The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity.
Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group\u2019s financial
interest for own risk and other arrangements, such as participation in the relevant boards.
NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these
are classified as associates and are not consolidated .
7 Associates and joint ventures continued
Other includes EUR 413 million of associates and joint ventures with an individual balance sheet value of less than EUR 50 million and
EUR 85 million of receivables from associates and joint ventures.
The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the
individual amounts have been brought in line with NN Group\u2019s accounting principles.
The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group.
The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can
be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends
or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures
operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed.
These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time.
Associates and joint ventures (2021)
2021
Interest
held
Balance sheet
value
Total
assets
Total
liabilities
Total
income
Total
expenses
Vesteda Residential Fund FGR 24% 1,840 9,464 1,909 1,588 132
CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68
CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39
CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34
Rivage Euro Debt Infrastructure 3 34% 226 665 2
CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26
NRP Nordic Logistic Fund SA 42% 222 532 3 100 5
Lazora S.I.I. S.A. 22% 212 1,542 583 72 43
CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2
CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37
Ardstone Residential Income Fund 45% 178 540 147 28 1
Dutch Urban Living Venture FGR 45% 152 447 112 53 5
Macquarie European Infrastructure Debt Fund 77% 152 198 1
DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3
Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8
Dutch Student and Young Professional
Housing fund FGR 49% 127 339 80 30 5
Allee center Kft 50% 124 275 27 14 11
Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5
Fiumaranuova s.r.l. 50% 110 229 9 13 10
Parcom Buy-Out Fund V CV 21% 107 584 81 127 6
Siresa House S.L. 49% 98 484 282 61 54
Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2
The Fizz Student Housing Fund SCS 50% 91 259 74 20 6
Boccaccio - Closed-end Real Estate Mutual
Investment Fund 50% 79 189 31 11 4
Parquest Capital II B FPCI 26% 78 308 14 8
Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23
CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13
NL Boompjes Property 5 C.V. 50% 65 133 4 14 3
Rivage Hopitaux Publics Euro 34% 61 178
CBRE Property Fund Central and Eastern
Europe FGR 50% 59 163 44 14 8
Prime Ventures V C.V. 19% 57 306 3 4
Siresa House 2 S.L. 49% 55 199 86 11 8
DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3
Other 588
Associates and joint ventures 6,919
Changes in Associates and joint ventures 2022 2021 Associates and joint ventures \u2013 opening balance 6,919 5,673 Additions 766 719 Transfers to/from available-for-sale investments -130 Share in changes in equity (Revaluations) 11 Share of result 269 899 Dividends received -276 -223 Disposals -971 -156 Exchange rate differences -32 7 Associates and joint ventures \u2013 closing balance 6,556 6,919 ", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInAssociatesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-490": { "value": "7 Associates and joint ventures Associates and joint ventures (2022) 2022 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,771 9,403 2,100 -7 -1 CBRE Dutch Office Fund FGR 19% 364 2,693 733 -84 83 Macquarie European Infrastructure Debt Fund 48% 360 757 Rivage Euro Debt Infrastructure 3 34% 297 870 2 Lazora S.I.I. S.A. 22% 241 1,636 545 122 40 CBRE Dutch Residential Fund FGR 8% 238 3,301 139 125 40 Ardstone Residential Income Fund 33% 226 892 203 54 10 CBRE Retail Industrial Fund Iberica FGR 50% 221 986 544 63 17 NRP Nordic Logistic Fund SA 42% 201 509 32 10 5 CBRE UK Property Fund PAIF 10% 174 1,697 19 -85 13 CBRE Dutch Retail Fund FGR 20% 170 1,181 342 -8 43 Healthcare Activos SOCIMI S.A. 38% 164 784 350 42 11 Dutch Student and Young Professional Housing fund FGR 49% 143 372 82 39 3 Dutch Urban Living Venture FGR 45% 142 469 157 -5 10 Allee center Kft 50% 117 259 25 24 14 Hayfin Amber GP S.A R.L. 100% 106 185 79 Fiumaranuova s.r.l. 50% 105 216 7 12 9 Parcom Buy-Out Fund V CV 21% 88 534 114 173 5 The Fizz Student Housing Fund SCS 50% 88 259 82 7 6 Robeco Bedrijfsleningen FGR 26% 81 314 0 12 1 Delta Mainlog Holding GmbH & Co. KG 50% 79 164 7 -21 2 Octopus Commercial Real Estate Debt Fund III LP 46% 78 190 21 Rivage Hopitaux Publics Euro 34% 75 249 30 DPE Deutschland III (Parallel) GmbH & Co 17% 74 554 110 -11 9 Parquest Capital II B FPCI 29% 71 251 8 7 Prime Ventures V C.V. 20% 69 378 27 8 4 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 69 193 55 5 8 NL Boompjes Property 5 C.V. 50% 68 141 4 11 1 Rivage Euro Debt Infrastructure High Return 2 34% 62 183 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 46 18 8 CBRE Dutch Retail Fund II FGR 10% 57 585 11 -50 11 Other 498 Associates and joint ventures 6,556 The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity. Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group\u2019s financial interest for own risk and other arrangements, such as participation in the relevant boards. NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these are classified as associates and are not consolidated 7 Associates and joint ventures continued Other includes EUR 413 million of associates and joint ventures with an individual balance sheet value of less than EUR 50 million and EUR 85 million of receivables from associates and joint ventures. The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the individual amounts have been brought in line with NN Group\u2019s accounting principles. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time. Associates and joint ventures (2021) 2021 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,840 9,464 1,909 1,588 132 CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68 CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39 CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34 Rivage Euro Debt Infrastructure 3 34% 226 665 2 CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26 NRP Nordic Logistic Fund SA 42% 222 532 3 100 5 Lazora S.I.I. S.A. 22% 212 1,542 583 72 43 CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2 CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37 Ardstone Residential Income Fund 45% 178 540 147 28 1 Dutch Urban Living Venture FGR 45% 152 447 112 53 5 Macquarie European Infrastructure Debt Fund 77% 152 198 1 DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3 Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8 Dutch Student and Young Professional Housing fund FGR 49% 127 339 80 30 5 Allee center Kft 50% 124 275 27 14 11 Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5 Fiumaranuova s.r.l. 50% 110 229 9 13 10 Parcom Buy-Out Fund V CV 21% 107 584 81 127 6 Siresa House S.L. 49% 98 484 282 61 54 Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2 The Fizz Student Housing Fund SCS 50% 91 259 74 20 6 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 79 189 31 11 4 Parquest Capital II B FPCI 26% 78 308 14 8 Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23 CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13 NL Boompjes Property 5 C.V. 50% 65 133 4 14 3 Rivage Hopitaux Publics Euro 34% 61 178 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 44 14 8 Prime Ventures V C.V. 19% 57 306 3 4 Siresa House 2 S.L. 49% 55 199 86 11 8 DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3 Other 588 Associates and joint ventures 6,919
7 Associates and joint ventures continued
Changes in Associates and joint ventures
2022 2021
Associates and joint ventures \u2013 opening balance 6,919 5,673
Additions 766 719
Transfers to/from available-for-sale investments -130
Share in changes in equity (Revaluations) 11
Share of result 269 899
Dividends received -276 -223
Disposals -971 -156
Exchange rate differences -32 7
Associates and joint ventures \u2013 closing balance 6,556 6,919
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-491": { "value": "7 Associates and joint ventures Associates and joint ventures (2022) 2022 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,771 9,403 2,100 -7 -1 CBRE Dutch Office Fund FGR 19% 364 2,693 733 -84 83 Macquarie European Infrastructure Debt Fund 48% 360 757 Rivage Euro Debt Infrastructure 3 34% 297 870 2 Lazora S.I.I. S.A. 22% 241 1,636 545 122 40 CBRE Dutch Residential Fund FGR 8% 238 3,301 139 125 40 Ardstone Residential Income Fund 33% 226 892 203 54 10 CBRE Retail Industrial Fund Iberica FGR 50% 221 986 544 63 17 NRP Nordic Logistic Fund SA 42% 201 509 32 10 5 CBRE UK Property Fund PAIF 10% 174 1,697 19 -85 13 CBRE Dutch Retail Fund FGR 20% 170 1,181 342 -8 43 Healthcare Activos SOCIMI S.A. 38% 164 784 350 42 11 Dutch Student and Young Professional Housing fund FGR 49% 143 372 82 39 3 Dutch Urban Living Venture FGR 45% 142 469 157 -5 10 Allee center Kft 50% 117 259 25 24 14 Hayfin Amber GP S.A R.L. 100% 106 185 79 Fiumaranuova s.r.l. 50% 105 216 7 12 9 Parcom Buy-Out Fund V CV 21% 88 534 114 173 5 The Fizz Student Housing Fund SCS 50% 88 259 82 7 6 Robeco Bedrijfsleningen FGR 26% 81 314 0 12 1 Delta Mainlog Holding GmbH & Co. KG 50% 79 164 7 -21 2 Octopus Commercial Real Estate Debt Fund III LP 46% 78 190 21 Rivage Hopitaux Publics Euro 34% 75 249 30 DPE Deutschland III (Parallel) GmbH & Co 17% 74 554 110 -11 9 Parquest Capital II B FPCI 29% 71 251 8 7 Prime Ventures V C.V. 20% 69 378 27 8 4 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 69 193 55 5 8 NL Boompjes Property 5 C.V. 50% 68 141 4 11 1 Rivage Euro Debt Infrastructure High Return 2 34% 62 183 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 46 18 8 CBRE Dutch Retail Fund II FGR 10% 57 585 11 -50 11 Other 498 Associates and joint ventures 6,556 The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity. Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group\u2019s financial interest for own risk and other arrangements, such as participation in the relevant boards. NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these are classified as associates and are not consolidated Other includes EUR 413 million of associates and joint ventures with an individual balance sheet value of less than EUR 50 million and EUR 85 million of receivables from associates and joint ventures. The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the individual amounts have been brought in line with NN Group\u2019s accounting principles. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time. Associates and joint ventures (2021) 2021 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,840 9,464 1,909 1,588 132 CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68 CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39 CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34 Rivage Euro Debt Infrastructure 3 34% 226 665 2 CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26 NRP Nordic Logistic Fund SA 42% 222 532 3 100 5 Lazora S.I.I. S.A. 22% 212 1,542 583 72 43 CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2 CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37 Ardstone Residential Income Fund 45% 178 540 147 28 1 Dutch Urban Living Venture FGR 45% 152 447 112 53 5 Macquarie European Infrastructure Debt Fund 77% 152 198 1 DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3 Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8 Dutch Student and Young Professional Housing fund FGR 49% 127 339 80 30 5 Allee center Kft 50% 124 275 27 14 11 Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5 Fiumaranuova s.r.l. 50% 110 229 9 13 10 Parcom Buy-Out Fund V CV 21% 107 584 81 127 6 Siresa House S.L. 49% 98 484 282 61 54 Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2 The Fizz Student Housing Fund SCS 50% 91 259 74 20 6 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 79 189 31 11 4 Parquest Capital II B FPCI 26% 78 308 14 8 Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23 CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13 NL Boompjes Property 5 C.V. 50% 65 133 4 14 3 Rivage Hopitaux Publics Euro 34% 61 178 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 44 14 8 Prime Ventures V C.V. 19% 57 306 3 4 Siresa House 2 S.L. 49% 55 199 86 11 8 DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3 Other 588 Associates and joint ventures 6,919 Changes in Associates and joint ventures 2022 2021 Associates and joint ventures \u2013 opening balance 6,919 5,673 Additions 766 719 Transfers to/from available-for-sale investments -130 Share in changes in equity (Revaluations) 11 Share of result 269 899 Dividends received -276 -223 Disposals -971 -156 Exchange rate differences -32 7 Associates and joint ventures \u2013 closing balance 6,556 6,919 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-492": { "value": "7 Associates and joint ventures Associates and joint ventures (2022) 2022 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,771 9,403 2,100 -7 -1 CBRE Dutch Office Fund FGR 19% 364 2,693 733 -84 83 Macquarie European Infrastructure Debt Fund 48% 360 757 Rivage Euro Debt Infrastructure 3 34% 297 870 2 Lazora S.I.I. S.A. 22% 241 1,636 545 122 40 CBRE Dutch Residential Fund FGR 8% 238 3,301 139 125 40 Ardstone Residential Income Fund 33% 226 892 203 54 10 CBRE Retail Industrial Fund Iberica FGR 50% 221 986 544 63 17 NRP Nordic Logistic Fund SA 42% 201 509 32 10 5 CBRE UK Property Fund PAIF 10% 174 1,697 19 -85 13 CBRE Dutch Retail Fund FGR 20% 170 1,181 342 -8 43 Healthcare Activos SOCIMI S.A. 38% 164 784 350 42 11 Dutch Student and Young Professional Housing fund FGR 49% 143 372 82 39 3 Dutch Urban Living Venture FGR 45% 142 469 157 -5 10 Allee center Kft 50% 117 259 25 24 14 Hayfin Amber GP S.A R.L. 100% 106 185 79 Fiumaranuova s.r.l. 50% 105 216 7 12 9 Parcom Buy-Out Fund V CV 21% 88 534 114 173 5 The Fizz Student Housing Fund SCS 50% 88 259 82 7 6 Robeco Bedrijfsleningen FGR 26% 81 314 0 12 1 Delta Mainlog Holding GmbH & Co. KG 50% 79 164 7 -21 2 Octopus Commercial Real Estate Debt Fund III LP 46% 78 190 21 Rivage Hopitaux Publics Euro 34% 75 249 30 DPE Deutschland III (Parallel) GmbH & Co 17% 74 554 110 -11 9 Parquest Capital II B FPCI 29% 71 251 8 7 Prime Ventures V C.V. 20% 69 378 27 8 4 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 69 193 55 5 8 NL Boompjes Property 5 C.V. 50% 68 141 4 11 1 Rivage Euro Debt Infrastructure High Return 2 34% 62 183 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 46 18 8 CBRE Dutch Retail Fund II FGR 10% 57 585 11 -50 11 Other 498 Associates and joint ventures 6,556 The above associates and joint ventures mainly consist of non-listed investment entities investing in real estate and private equity. Significant influence exists for certain associates in which the interest held is below 20%, based on the combination of NN Group\u2019s financial interest for own risk and other arrangements, such as participation in the relevant boards. NN Group holds associates over which it cannot exercise control despite holding more than 50% of the share capital. For this reason, these are classified as associates and are not consolidated . Other includes EUR 413 million of associates and joint ventures with an individual balance sheet value of less than EUR 50 million and EUR 85 million of receivables from associates and joint ventures. The amounts presented in the table above could differ from the individual annual accounts of the associates due to the fact that the individual amounts have been brought in line with NN Group\u2019s accounting principles. The reporting dates of all significant associates and joint ventures are consistent with the reporting date of NN Group. The associates and joint ventures of NN Group are subject to legal and regulatory restrictions regarding the amount of dividends that can be paid to NN Group. These restrictions are, for example, dependent on the laws in the country of incorporation for declaring dividends or as a result of minimum capital requirements imposed by industry regulators in the countries in which the associates and joint ventures operate. In addition, the associates and joint ventures also consider other factors in determining the appropriate levels of equity needed. These factors and limitations include, but are not limited to, rating agency and regulatory views, which can change over time. Associates and joint ventures (2021) 2021 Interest held Balance sheet value Total assets Total liabilities Total income Total expenses Vesteda Residential Fund FGR 24% 1,840 9,464 1,909 1,588 132 CBRE Dutch Office Fund FGR 19% 402 2,883 721 279 68 CBRE European Industrial Fund FGR 27% 322 1,729 544 343 39 CBRE Dutch Residential Fund FGR 8% 235 3,075 134 413 34 Rivage Euro Debt Infrastructure 3 34% 226 665 2 CBRE Retail Industrial Fund Iberica FGR 50% 223 520 73 43 26 NRP Nordic Logistic Fund SA 42% 222 532 3 100 5 Lazora S.I.I. S.A. 22% 212 1,542 583 72 43 CBRE UK Property Fund PAIF 10% 201 1,992 16 306 2 CBRE Dutch Retail Fund FGR 20% 185 1,298 384 -9 37 Ardstone Residential Income Fund 45% 178 540 147 28 1 Dutch Urban Living Venture FGR 45% 152 447 112 53 5 Macquarie European Infrastructure Debt Fund 77% 152 198 1 DPE Deutschland III (Parallel) GmbH & Co 17% 149 970 88 289 3 Achmea Dutch Health Care Property Fund 23% 128 580 15 47 8 Dutch Student and Young Professional Housing fund FGR 49% 127 339 80 30 5 Allee center Kft 50% 124 275 27 14 11 Robeco Bedrijfsleningen FGR 26% 112 432 1 51 5 Fiumaranuova s.r.l. 50% 110 229 9 13 10 Parcom Buy-Out Fund V CV 21% 107 584 81 127 6 Siresa House S.L. 49% 98 484 282 61 54 Delta Mainlog Holding GmbH & Co. KG 50% 96 192 1 70 2 The Fizz Student Housing Fund SCS 50% 91 259 74 20 6 Boccaccio - Closed-end Real Estate Mutual Investment Fund 50% 79 189 31 11 4 Parquest Capital II B FPCI 26% 78 308 14 8 Parcom Buy Out Fund IV B.V. 100% 68 80 12 54 23 CBRE Dutch Retail Fund II FGR 10% 65 667 15 -10 13 NL Boompjes Property 5 C.V. 50% 65 133 4 14 3 Rivage Hopitaux Publics Euro 34% 61 178 CBRE Property Fund Central and Eastern Europe FGR 50% 59 163 44 14 8 Prime Ventures V C.V. 19% 57 306 3 4 Siresa House 2 S.L. 49% 55 199 86 11 8 DPE Deutschland II B GmbH & Co KG 37% 52 182 40 3 Other 588 Associates and joint ventures 6,919 Changes in Associates and joint ventures 2022 2021 Associates and joint ventures \u2013 opening balance 6,919 5,673 Additions 766 719 Transfers to/from available-for-sale investments -130 Share in changes in equity (Revaluations) 11 Share of result 269 899 Dividends received -276 -223 Disposals -971 -156 Exchange rate differences -32 7 Associates and joint ventures \u2013 closing balance 6,556 6,919 ", "dimensions": { "concept": "ifrs-full:DisclosureOfJointVenturesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-493": { "value": "8 Real estate investments Changes in Real estate investments 2022 2021 Real estate investments \u2013 opening balance 2,719 2,444 Additions 136 156 Transfers to/from property in own use 10 Transfers to/from other assets -3 2 Fair value gains/losses -8 241 Disposals -100 -124 Real estate investments \u2013 closing balance 2,754 2,719 The total amount of rental income recognised in the profit and loss account for the year ended 31 December 2022 is EUR 169 million (2021: EUR 161 million). The Real estate investments include properties that are leased (ground lease). At 31 December 2022, the corresponding right of use assets amount to EUR 45 million (2021: EUR 38 million). The total amount of direct operating expenses (including repairs and maintenance) in relation to real estate investments recognised in rental income for the year ended 31 December 2022 is EUR 60 million (2021: EUR 57 million). Real estate investments by year of most recent appraisal 2022 2021 Most recent appraisal in current year 100% 100% 100% 100% NN Group\u2019s total exposure to real estate is included in the following balance sheet lines: Real estate exposure 2022 2021 Real estate investments 2,754 2,719 Available-for-sale investments 2,909 2,415 Associates and joint ventures 4,915 5,612 Property and equipment - property in own use 97 71 Real estate exposure 10,675 10,817 Furthermore, the exposure is impacted by third-party interests, leverage in funds and off-balance commitments. Reference is made to Note 52 \u2018Risk management\u2019 .", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentPropertyExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-494": { "value": "9 Property and equipment Property and equipment 2022 2021 Property in own use 97 71 Equipment 100 101 Property and equipment owned 197 172 Right of use assets 202 242 Property and equipment total 399 414 Changes in Property in own use 2022 2021 Property in own use \u2013 opening balance 71 74 Additions 1 Transfers to/from real estate investments -10 Revaluations 5 -1 Disposals -1 -2 Depreciation -2 -2 Changes in the composition of the group and other changes 33 2 Property in own use \u2013 closing balance 97 71 Gross carrying value 142 118 Accumulated depreciation, revaluations and (reversal of) impairments -45 -47 Net carrying value 97 71 Revaluation surplus \u2013 opening balance 11 12 Revaluation in year 5 -1 Revaluation surplus \u2013 closing balance 16 11 Changes in Equipment Data processing equipment Fixtures and fittings and other equipment Total 2022 2021 2022 2021 2022 2021 Equipment \u2013 opening balance 33 26 68 67 101 93 Additions 16 26 21 20 37 46 Disposals -3 -6 -1 -3 -7 Depreciation -15 -13 -19 -16 -34 -29 Exchange rate differences -1 -2 -1 -2 Equipment \u2013 closing balance 30 33 70 68 100 101 Gross carrying value 179 167 267 246 446 413 Accumulated depreciation -149 -134 -197 -178 -346 -312 Net carrying value 30 33 70 68 100 101 9 Property and equipment continued Changes in Right of use assets Property Equipment Total 2022 2021 2022 2021 2022 2021 Right of use assets \u2013 opening balance 220 257 22 24 242 281 Additions 5 21 11 10 16 31 Disposals -5 -5 -5 -1 -10 -6 Depreciation -33 -42 -10 -11 -43 -53 Changes in the composition of the group and other changes 2 -8 1 3 -8 Exchange rate differences -6 -3 -6 -3 Right of use assets \u2013 closing balance 183 220 19 22 202 242 Gross carrying value 343 346 65 58 408 404 Accumulated depreciation -160 -126 -46 -36 -206 -162 Net carrying value 183 220 19 22 202 242 ", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-495": { "value": "Property and equipment 2022 2021 Property in own use 97 71 Equipment 100 101 Property and equipment owned 197 172 Right of use assets 202 242 Property and equipment total 399 414 Changes in Property in own use 2022 2021 Property in own use \u2013 opening balance 71 74 Additions 1 Transfers to/from real estate investments -10 Revaluations 5 -1 Disposals -1 -2 Depreciation -2 -2 Changes in the composition of the group and other changes 33 2 Property in own use \u2013 closing balance 97 71 Gross carrying value 142 118 Accumulated depreciation, revaluations and (reversal of) impairments -45 -47 Net carrying value 97 71 Revaluation surplus \u2013 opening balance 11 12 Revaluation in year 5 -1 Revaluation surplus \u2013 closing balance 16 11 Changes in Equipment Data processing equipment Fixtures and fittings and other equipment Total 2022 2021 2022 2021 2022 2021 Equipment \u2013 opening balance 33 26 68 67 101 93 Additions 16 26 21 20 37 46 Disposals -3 -6 -1 -3 -7 Depreciation -15 -13 -19 -16 -34 -29 Exchange rate differences -1 -2 -1 -2 Equipment \u2013 closing balance 30 33 70 68 100 101 Gross carrying value 179 167 267 246 446 413 Accumulated depreciation -149 -134 -197 -178 -346 -312 Net carrying value 30 33 70 68 100 101 Changes in Right of use assets Property Equipment Total 2022 2021 2022 2021 2022 2021 Right of use assets \u2013 opening balance 220 257 22 24 242 281 Additions 5 21 11 10 16 31 Disposals -5 -5 -5 -1 -10 -6 Depreciation -33 -42 -10 -11 -43 -53 Changes in the composition of the group and other changes 2 -8 1 3 -8 Exchange rate differences -6 -3 -6 -3 Right of use assets \u2013 closing balance 183 220 19 22 202 242 Gross carrying value 343 346 65 58 408 404 Accumulated depreciation -160 -126 -46 -36 -206 -162 Net carrying value 183 220 19 22 202 242 ", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-496": { "value": "10 Intangible assets Intangible assets (2022) 2022 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 549 196 75 309 1,129 Additions 324 43 32 399 Amortisation -41 -36 -33 -110 Changes in the composition of the group and other changes 185 6 16 207 Exchange rate differences -2 3 -2 -1 Intangible assets \u2013 closing balance 871 343 86 324 1,624 Gross carrying value 1,844 497 968 832 4,141 Accumulated amortisation -154 -816 -460 -1,430 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 871 343 86 324 1,624 Additions to Goodwill and Changes in the composition of the group and other changes in 2022 mainly relate to acquisition of MetLife Poland and Greece. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Intangible assets (2021) 2021 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 533 210 87 233 1,063 Additions 334 37 13 384 Amortisation -17 -33 -33 -83 Disposals -1 -8 -9 Changes in the composition of the group and other changes -311 -13 104 -220 Exchange rate differences -7 3 -2 -6 Intangible assets \u2013 closing balance 549 196 75 309 1,129 Gross carrying value 1,522 309 921 784 3,536 Accumulated amortisation -113 -780 -427 -1,320 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 549 196 75 309 1,129 10 Intangible assets continued Additions to Goodwill in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Changes in composition of the group and other changes includes the impact of the classification of the asset management activities as held for sale. Other intangible assets include the intangibles recognised upon the acquisition of Met Life Greece, Heinenoord, VIVAT Non-life and the remaining part of the intangibles recognised in 2017 on the acquisition of Delta Lloyd. Changes in composition of the group and other changes in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. The acquisition intangibles comprise: \u2022 Brand names \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years \u2022 Client relationships \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years \u2022 Distribution channels/agreements \u2013 with an average expected remaining useful life at the acquisition date of approximately 18 years Amortisation of software and other intangible assets is included in the profit and loss account in \u2018Other operating expenses\u2019 and \u2018Amortisation of intangible assets and other impairments\u2019, respectively", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-497": { "value": "10 Intangible assets Intangible assets (2022) 2022 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 549 196 75 309 1,129 Additions 324 43 32 399 Amortisation -41 -36 -33 -110 Changes in the composition of the group and other changes 185 6 16 207 Exchange rate differences -2 3 -2 -1 Intangible assets \u2013 closing balance 871 343 86 324 1,624 Gross carrying value 1,844 497 968 832 4,141 Accumulated amortisation -154 -816 -460 -1,430 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 871 343 86 324 1,624 Additions to Goodwill and Changes in the composition of the group and other changes in 2022 mainly relate to acquisition of MetLife Poland and Greece. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Intangible assets (2021) 2021 Goodwill Value of business acquired Software Other Total Intangible assets \u2013 opening balance 533 210 87 233 1,063 Additions 334 37 13 384 Amortisation -17 -33 -33 -83 Disposals -1 -8 -9 Changes in the composition of the group and other changes -311 -13 104 -220 Exchange rate differences -7 3 -2 -6 Intangible assets \u2013 closing balance 549 196 75 309 1,129 Gross carrying value 1,522 309 921 784 3,536 Accumulated amortisation -113 -780 -427 -1,320 Accumulated impairments -973 -66 -48 -1,087 Net carrying value 549 196 75 309 1,129 Additions to Goodwill in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Changes in composition of the group and other changes includes the impact of the classification of the asset management activities as held for sale. Other intangible assets include the intangibles recognised upon the acquisition of Met Life Greece, Heinenoord, VIVAT Non-life and the remaining part of the intangibles recognised in 2017 on the acquisition of Delta Lloyd. Changes in composition of the group and other changes in 2021 mainly relate to the acquisition of Heinenoord. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. The acquisition intangibles comprise: \u2022 Brand names \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years \u2022 Client relationships \u2013 with an average expected remaining useful life at the acquisition date of approximately 10 years \u2022 Distribution channels/agreements \u2013 with an average expected remaining useful life at the acquisition date of approximately 18 years Amortisation of software and other intangible assets is included in the profit and loss account in \u2018Other operating expenses\u2019 and \u2018Amortisation of intangible assets and other impairments\u2019, respectively. Goodwill by cash generating unit (reporting unit) 2022 2021 Netherlands Non-life 462 424 Insurance Europe 347 63 Bank 62 62 Goodwill 871 549 Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Goodwill impairment Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as the cash generating unit (reporting unit) as set out above. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU book value including goodwill and certain acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. The identification of impairment is an inherently uncertain process involving various assumptions and factors. Estimates and assumptions (including unobservable Level 3 inputs) are based on management\u2019s judgement and other information available. For the goodwill recognised there is a significant excess of recoverable amount over book value for the cash generating units (reporting units) to which goodwill is allocated. In 2022 and 2021, there was no impairment of goodwill. ", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-498": { "value": "Goodwill by cash generating unit (reporting unit) 2022 2021 Netherlands Non-life 462 424 Insurance Europe 347 63 Bank 62 62 Goodwill 871 549 Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Goodwill impairment Goodwill is tested for impairment at the lowest level at which it is monitored for internal management purposes. This level is defined as the cash generating unit (reporting unit) as set out above. Goodwill is tested for impairment by comparing the carrying value of the cash generating unit (reporting unit) to the best estimate of the recoverable amount of that cash generating unit (reporting unit). The carrying value is determined as the IFRS-EU book value including goodwill and certain acquisition intangibles. The recoverable amount is estimated as the higher of fair value less cost to sell and value in use. Several methodologies are applied to arrive at the best estimate of the recoverable amount. The identification of impairment is an inherently uncertain process involving various assumptions and factors. Estimates and assumptions (including unobservable Level 3 inputs) are based on management\u2019s judgement and other information available. For the goodwill recognised there is a significant excess of recoverable amount over book value for the cash generating units (reporting units) to which goodwill is allocated. In 2022 and 2021, there was no impairment of goodwill", "dimensions": { "concept": "ifrs-full:DisclosureOfGoodwillExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-499": { "value": "11 Deferred acquisition costs Changes in Deferred acquisition costs Life insurance Non-life insurance Total 2022 2021 2022 2021 2022 2021 Deferred acquisition costs \u2013 opening balance 1,807 1,781 86 90 1,893 1,871 Capitalised expenses 441 447 629 656 1,070 1,103 Amortisation and unlocking -400 -384 -636 -662 -1,036 -1,046 Changes in the composition of the group and other changes 1 -2 2 2 3 \u2013 Exchange rate differences -72 -35 -72 -35 Deferred acquisition costs \u2013 closing balance 1,777 1,807 81 86 1,858 1,893 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredAcquisitionCostsArisingFromInsuranceContractsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-500": { "value": "12 Assets and liabilities held for sale Disposal groups (and groups of non-current assets) are classified as held for sale if their carrying amount will be recovered principally through a sale transaction rather than through continuing use. This is only the case when the sale is highly probable and the disposal group (or group of assets) is available for immediate sale in its present condition; management must be committed to the sale, which is expected to occur within one year from the date of classification as held for sale. Upon classification as held for sale, the carrying amount of the disposal group (or group of assets) is compared to their fair value less cost to sell. If the fair value less cost to sell is lower than the carrying value, this expected loss is recognised through a reduction of the carrying value of any goodwill related to the disposal group or the carrying value of certain other non-current non-financial assets to the extent that the carrying value of those assets exceeds their fair value. Any excess of the expected loss over the reduction of the carrying amount of these relevant assets is not recognised upon classification as held for sale, but is recognised as part of the result on disposal if and when a divestment transaction occurs. Classification into or out of held for sale does not result in restating comparative amounts in the balance sheet. When a group of assets that is classified as held for sale or is sold also represents a major line of business or geographical area, the disposal group is classified as discontinued operations. In the Consolidated profit and loss account, the result after tax from discontinued operations is reported separately from income and expenses from continuing operations. The information for comparative years is adjusted accordingly. Reference is made to Note 31 \u2018Discontinued operations\u2019. As at 31 December 2021 assets and liabilities held for sale relate to NN Group\u2019s asset management activities executed by NN Investment Partners (NN IP) and a closed book life insurance portfolio in NN Belgium. Assets held for sale 2022 2021 Cash and cash equivalents 226 Available-for-sale investments 3,117 Loans 64 Reinsurance contracts 1 Property and equipment 12 Intangible assets 345 Other assets 356 Total assets \u2013 4,121 Liabilities held for sale 2022 2021 Insurance and investment contracts 3,115 Other liabilities 349 Total liabilities \u2013 3,464 Reference is made to Note 46 \u2018Companies acquired and companies divested \u2019 n 2021, Intangible assets under Assets held for sale includes EUR 311 million goodwill that relates to asset management. For businesses classified as held for sale, the related goodwill is no longer evaluated at the level of the reporting unit to which it was allocated in the regular goodwill impairment test. Instead, it is reviewed as part of the valuation of the disposal unit that is presented as held for sale. This goodwill was recovered through the sale above book value. The fair value hierarchy of financial assets and liabilities (measured at fair value and measured at amortised cost), which are presented as held for sale is included below. The fair value hierarchy consists of three levels, depending upon whether fair values were determined based on quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Reference is made to Note 36 \u2018Fair value of financial assets and liabilities\u2019 for more details on the methods applied in determining fair values. Methods applied in determining the fair value of financial assets and liabilities at fair value \u2013 held for sale (2021) 2021 Level 1 Level 2 Level 3 Total Available-for-sale investments 2,492 625 3,117 Financial assets 2,492 625 \u2013 3,117 ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncurrentAssetsOrDisposalGroupsClassifiedAsHeldForSaleExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-501": { "value": "13 Other assets Other assets 2022 2021 Insurance and reinsurance receivables 681 634 Income tax receivables 366 141 Accrued interest and rents 1,237 1,307 Other accrued assets 172 131 Cash collateral amounts paid 5,001 803 Other 520 690 Other assets 7,977 3,706 Cash collateral amounts paid relate to collateralised derivatives. The increase is a result of the increase in fair value of outstanding collateralised derivatives following an increase in market interest rates. Insurance and reinsurance receivables 2022 2021 Receivables on account of direct insurance from: \u2013 policyholders 424 434 \u2013 intermediaries 144 139 Reinsurance receivables 113 61 Insurance and reinsurance receivables 681 634 The allowance for uncollectable insurance and reinsurance receivables amounts to EUR 38 million as at 31 December 2022 (2021: EUR 33 million). The receivable is presented net of this allowance. ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-502": { "value": "Other assets 2022 2021 Insurance and reinsurance receivables 681 634 Income tax receivables 366 141 Accrued interest and rents 1,237 1,307 Other accrued assets 172 131 Cash collateral amounts paid 5,001 803 Other 520 690 Other assets 7,977 3,706 Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 ", "dimensions": { "concept": "ifrs-full:DisclosureOfTaxReceivablesAndPayablesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-503": { "value": "Other assets 2022 2021 Insurance and reinsurance receivables 681 634 Income tax receivables 366 141 Accrued interest and rents 1,237 1,307 Other accrued assets 172 131 Cash collateral amounts paid 5,001 803 Other 520 690 Other assets 7,977 3,706 Cash collateral amounts paid relate to collateralised derivatives. The increase is a result of the increase in fair value of outstanding collateralised derivatives following an increase in market interest rates. Insurance and reinsurance receivables 2022 2021 Receivables on account of direct insurance from: \u2013 policyholders 424 434 \u2013 intermediaries 144 139 Reinsurance receivables 113 61 Insurance and reinsurance receivables 681 634 The allowance for uncollectable insurance and reinsurance receivables amounts to EUR 38 million as at 31 December 2022 (2021: EUR 33 million). The receivable is presented net of this allowance", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherReceivablesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-504": { "value": "14 Equity Total equity 2022 2021 Share capital 35 38 Share premium 12,578 12,575 Revaluation reserve -2,134 14,422 Currency translation reserve -300 -181 Net defined benefit asset/liability remeasurement reserve -51 -119 Other reserves 5,877 6,153 Shareholders\u2019 equity (parent) 16,005 32,888 Minority interests 63 266 Undated subordinated notes 1,764 1,764 Total equity 17,832 34,918 Changes in Equity (2022) 2022 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 38 12,575 20,275 32,888 Total amount recognised directly in equity (Other comprehensive income) -16,576 -16,576 Net result for the period 1,562 1,562 Changes in share capital -3 3 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on undated subordinated notes -58 -58 Equity \u2013 closing balance 35 12,578 3,392 16,005 Purchase/sale of treasury shares (2022) In 2022, 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 6 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2022, 22,878,210 NN Group treasury shares were cancelled. As at 31 December 2022, 13,608,384 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2022) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 58 million (net of tax) from equity. Changes in Equity (2021) 2021 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 39 12,574 24,118 36,731 Total amount recognised directly in equity (Other comprehensive income) -6,103 -6,103 Net result for the period 3,278 3,278 Changes in share capital -1 1 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on undated subordinated notes -59 -59 Equity \u2013 closing balance 38 12,575 20,275 32,888 Purchase/sale of treasury shares (2021) In 2021, 12,828,981 ordinary shares for a total amount of EUR 550 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 5 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2021, 12,400,000 NN Group treasury shares were cancelled. As at 31 December 2021, 12,294,129 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2021) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 59 million (net of tax) from equity ", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-505": { "value": "14 Equity Total equity 2022 2021 Share capital 35 38 Share premium 12,578 12,575 Revaluation reserve -2,134 14,422 Currency translation reserve -300 -181 Net defined benefit asset/liability remeasurement reserve -51 -119 Other reserves 5,877 6,153 Shareholders\u2019 equity (parent) 16,005 32,888 Minority interests 63 266 Undated subordinated notes 1,764 1,764 Total equity 17,832 34,918 Shareholders\u2019 equity (parent) Share capital Ordinary shares (in number) Ordinary shares (amounts in millions of euros) 2022 2021 2022 2021 Authorised share capital 700,000,000 700,000,000 84 84 Unissued share capital 405,000,000 382,121,790 49 46 Issued share capital 295,000,000 317,878,210 35 38 Ordinary shares The authorised ordinary share capital consists of 700,000,000 ordinary shares with a par value of EUR 0.12 per share. At 31 December 2022 issued and fully paid ordinary share capital consists of 295,000,000 ordinary shares with a par value of EUR 0.12 per share. Distributable reserves NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains the restriction that dividends can only be paid up insofar as NN Group N.V. equity exceeds the amount equal to total shareholders\u2019 equity less the paid-up and called share capital and less the reserves required pursuant to law or the Articles of Association. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts. In addition, NN Group\u2019s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures. NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject to dividend payment restrictions. Such restrictions may among others be of a similar nature as the restrictions which apply to NN Group. Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code, from NN Group\u2019s subsidiaries, associates and joint ventures are as follows: Distributable reserves based on the Dutch Civil Code 2022 2022 2021 2021 Total shareholders\u2019 equity 16,005 32,888 \u2013 share capital 35 38 \u2013 non-distributable reserves 3,980 16,951 Total non-distributable part of shareholders\u2019 equity: 4,015 16,989 Distributable reserves based on the Dutch Civil Code 11,990 15,899 Reference is made to Note 6 \u2018Equity\u2019 in the Parent company annual accounts. The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on the basis of solvency requirements and freely distributable capital on the basis of capital protection. Freely distributable reserves 2022 2022 2021 2021 Solvency requirement under the Financial Supervision Act 9,040 9,840 Reserves available for financial supervision purposes 17,904 20,927 Total freely distributable reserves on the basis of solvency requirements 8,864 11,087 Total freely distributable reserves on the basis of the Dutch Civil Code 11,990 15,899 Total freely distributable reserves (lower of the values above) 8,864 11,087 Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for more information on solvency requirements. Other restrictions There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for the minimum capital requirements. In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the Group\u2019s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations. Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist. Furthermore, NN Group is subject to legal restrictions with respect to repayment of nominal share capital to holders of ordinary shares. Nominal share capital may be repaid to the holders of ordinary shares pursuant to an amendment of NN Group\u2019s Articles of Association whereby the ordinary shares are written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group\u2019s creditors opposes such a repayment within two months following the announcement of a resolution to that effect. Preference shares As at 31 December 2022, none of the preference shares had been issued. The authorised number of preference shares is 700,000,000 shares. Changes in Revaluation reserve (2022) 2022 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 5,576 8,837 14,422 Unrealised revaluations 3 -15,738 -15,735 Realised gains/losses transferred to the profit and loss account 112 112 Changes in cash flow hedge reserve -5,942 -5,942 Deferred interest credited to policyholders 4,986 4,986 Changes in the composition of the group and other changes 24 24 Revaluation reserve \u2013 closing balance 12 -5,040 2,895 -2,133 Changes in Revaluation reserve (2021) 2021 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 8,239 12,220 20,468 Unrealised revaluations -3,093 -3,093 Realised gains/losses transferred to the profit and loss account -1,431 -1,431 Changes in cash flow hedge reserve -3,383 -3,383 Deferred interest credited to policyholders 1,861 1,861 Revaluation reserve \u2013 closing balance 9 5,576 8,837 14,422 Deferred interest credited to policyholders reflects the change in the deferred profit sharing liabilities (net of deferred tax). Reference is made to Note 18 \u2018Insurance and investment contracts, reinsurance contracts\u2019. Changes in Currency translation reserve 2022 2021 Currency translation reserve \u2013 opening balance -181 -97 Unrealised revaluations after taxation 45 -18 Exchange rate differences for the period -164 -66 Currency translation reserve \u2013 closing balance -300 -181 Unrealised revaluations relate to changes in the value of hedging instruments that are designated as net investment hedges . Changes in Other reserves (2022) 2022 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 4,042 2,111 6,153 Net result for the period 1,562 1,562 Transfers to/from share of associates reserve 198 -198 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on subordinated notes -58 -58 Changes in the composition of the group and other changes 31 31 Other reserves \u2013 closing balance 3,964 1,913 5,877 Changes in Other reserves (2021) 2021 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 2,473 1,412 3,885 Net result for the period 3,278 3,278 Transfers to/from share of associates reserve -699 699 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on subordinated notes -59 -59 Changes in the composition of the group and other changes 8 8 Other reserves \u2013 closing balance 4,042 2,111 6,153 Dividends 2022 2021 Dividend distributed from Other reserves: Dividend paid in cash (interim current year) 162 160 Dividend paid in cash (final previous year) 252 252 Stock dividend (interim current year) 131 128 Stock dividend (final previous year) 218 202 Total dividend 763 742 Interim dividend 2022 In September 2022, NN Group paid an interim dividend of EUR 1.00 per ordinary share, or approximately EUR 294 million in total based on the current number of outstanding shares (net of treasury shares). The interim dividend was paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares were delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves. Proposed final dividend 2022 At the annual general meeting on 2 June 2023, a final dividend will be proposed of EUR 1. 79 per ordinary share, or approximately EUR 504 million in total based on the current number of outstanding shares. The final dividend will be paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares will be delivered from NN Group treasury shares or issued at the expense of the share premium reserve. To neutralise the dilutive effect of the stock dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. The final dividend is subject to adoption by the General Meeting at the annual general meeting to be held on 2 June 2023 Interim dividend 2021 In September 2021 NN Group paid an interim dividend of EUR 0.93 per ordinary share, or approximately EUR 287 million in total. The interim dividend was paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares have been delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the stock dividend. Final dividend 2021 On 19 May 2022, the General Meeting adopted the proposed final dividend of EUR 1.56 per ordinary share, or approximately EUR 476 million in total based on the current number of outstanding shares (net of treasury shares). Together with the 2021 interim dividend of EUR 0.93 per ordinary share paid in September 2021, NN Group\u2019s total dividend for 2021 was EUR 2.49 per ordinary share. The final dividend was paid in cash, after deduction of withholding tax if applicable, or ordinary shares, at the election of the shareholder. Dividends paid in the form of ordinary shares were delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves. Appropriation of result The result is appropriated pursuant to Article 34 of the Articles of Association of NN Group N.V., of which the relevant provisions state that the appropriation of result shall be determined by the General Meeting, on the proposal of the Executive Board, as approved by the Supervisory Board. It is proposed to add the 2022 net result less the (interim and final) cash dividends to the retained earnings. Minority interest NN Group owns 51% of the shares of ABN AMRO Verzekeringen Holding B.V. (ABN AMRO Verzekeringen). ABN AMRO Verzekeringen\u2018s principal place of business is Zwolle, the Netherlands. ABN AMRO Verzekeringen is fully consolidated by NN Group, with a minority interest recognised of 49%. The minority interest decreased by EUR 153 million following the acquisition by NN Group of the minority interest in ABN AMRO Life from ABN AMRO Verzekeringen in July 2022. The difference of EUR 30 million between the payment and the reduction of the minority interest was recognised in Other reserves. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. At 31 December 2022, the minority interest relating to ABN AMRO Verzekeringen recognised in equity was EUR 55 million (2021: EUR 245 million). Summarised information ABN AMRO Verzekeringen 1 2022 2 2021 Total assets 378 4,566 Total liabilities 266 4,065 Total income 294 502 Total expenses 288 470 Net result recognised in period 5 23 Other comprehensive income recognised in period -75 7 Dividends paid 250 59 1 All on 100% basis. 2 2022 excludes ABN AMRO Life. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Undated subordinated notes In July 2014, NN Group N.V. issued fixed to floating rate undated subordinated notes with a par value of EUR 1,000 million. The notes are undated, but are callable after 11.5 years and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.5% per annum for the first 11.5 years and will be floating thereafter. As these notes are undated and include optional deferral of interest at the discretion of NN Group, these are classified under IFRS-EU as equity. Coupon payments are distributed out of equity if and when paid or contractually due. The discount to the par value and certain issue costs were deducted from equity at issue, resulting in a balance sheet value equal to the net proceeds of EUR 986 million. In June 2014, fixed to floating rate undated subordinated notes with a par value of EUR 750 million were originally issued by Delta Lloyd which are classified as equity under IFRS-EU. The notes are undated, but are callable as from 13 June 2024 and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.375% per annum until 13 June 2024 and will be floating thereafter. Coupon payments are distributed out of equity if and when paid or contractually due. These notes were recognised upon acquisition of Delta Lloyd for an amount of EUR 778 million Changes in Equity (2022) 2022 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 38 12,575 20,275 32,888 Total amount recognised directly in equity (Other comprehensive income) -16,576 -16,576 Net result for the period 1,562 1,562 Changes in share capital -3 3 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on undated subordinated notes -58 -58 Equity \u2013 closing balance 35 12,578 3,392 16,005 Purchase/sale of treasury shares (2022) In 2022, 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 6 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2022, 22,878,210 NN Group treasury shares were cancelled. As at 31 December 2022, 13,608,384 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2022) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 58 million (net of tax) from equity. Changes in Equity (2021) 2021 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 39 12,574 24,118 36,731 Total amount recognised directly in equity (Other comprehensive income) -6,103 -6,103 Net result for the period 3,278 3,278 Changes in share capital -1 1 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on undated subordinated notes -59 -59 Equity \u2013 closing balance 38 12,575 20,275 32,888 Purchase/sale of treasury shares (2021) In 2021, 12,828,981 ordinary shares for a total amount of EUR 550 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 5 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2021, 12,400,000 NN Group treasury shares were cancelled. As at 31 December 2021, 12,294,129 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2021) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 59 million (net of tax) from equity ", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-506": { "value": "14 Equity Total equity 2022 2021 Share capital 35 38 Share premium 12,578 12,575 Revaluation reserve -2,134 14,422 Currency translation reserve -300 -181 Net defined benefit asset/liability remeasurement reserve -51 -119 Other reserves 5,877 6,153 Shareholders\u2019 equity (parent) 16,005 32,888 Minority interests 63 266 Undated subordinated notes 1,764 1,764 Total equity 17,832 34,918 2 Changes in Equity (2022) 2022 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 38 12,575 20,275 32,888 Total amount recognised directly in equity (Other comprehensive income) -16,576 -16,576 Net result for the period 1,562 1,562 Changes in share capital -3 3 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on undated subordinated notes -58 -58 Equity \u2013 closing balance 35 12,578 3,392 16,005 Purchase/sale of treasury shares (2022) In 2022, 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 6 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2022, 22,878,210 NN Group treasury shares were cancelled. As at 31 December 2022, 13,608,384 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2022) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 58 million (net of tax) from equity. Changes in Equity (2021) 2021 Share capital Share premium Reserves Total shareholders\u2019 equity (parent) Equity \u2013 opening balance 39 12,574 24,118 36,731 Total amount recognised directly in equity (Other comprehensive income) -6,103 -6,103 Net result for the period 3,278 3,278 Changes in share capital -1 1 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on undated subordinated notes -59 -59 Equity \u2013 closing balance 38 12,575 20,275 32,888 Purchase/sale of treasury shares (2021) In 2021, 12,828,981 ordinary shares for a total amount of EUR 550 million were repurchased under an open market share buyback programme, including repurchases to neutralise the dilutive effect of stock dividends. Treasury shares for an amount of EUR 5 million were delivered under Employee share plans. The repurchased shares are held by NN Group and the amount was deducted from Other reserves (Purchase/sale of treasury shares). In 2021, 12,400,000 NN Group treasury shares were cancelled. As at 31 December 2021, 12,294,129 treasury shares were held by NN Group. Coupon paid on undated subordinated notes (2021) The undated subordinated notes have optional annual coupon payments in June and July. The annual coupons resulted in a deduction of EUR 59 million (net of tax) from equity . Shareholders\u2019 equity (parent) Share capital Ordinary shares (in number) Ordinary shares (amounts in millions of euros) 2022 2021 2022 2021 Authorised share capital 700,000,000 700,000,000 84 84 Unissued share capital 405,000,000 382,121,790 49 46 Issued share capital 295,000,000 317,878,210 35 38 Ordinary shares The authorised ordinary share capital consists of 700,000,000 ordinary shares with a par value of EUR 0.12 per share. At 31 December 2022 issued and fully paid ordinary share capital consists of 295,000,000 ordinary shares with a par value of EUR 0.12 per share. Distributable reserves NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains the restriction that dividends can only be paid up insofar as NN Group N.V. equity exceeds the amount equal to total shareholders\u2019 equity less the paid-up and called share capital and less the reserves required pursuant to law or the Articles of Association. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts. In addition, NN Group\u2019s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures. NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject to dividend payment restrictions. Such restrictions may among others be of a similar nature as the restrictions which apply to NN Group. Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code, from NN Group\u2019s subsidiaries, associates and joint ventures are as follows: Distributable reserves based on the Dutch Civil Code 2022 2022 2021 2021 Total shareholders\u2019 equity 16,005 32,888 \u2013 share capital 35 38 \u2013 non-distributable reserves 3,980 16,951 Total non-distributable part of shareholders\u2019 equity: 4,015 16,989 Distributable reserves based on the Dutch Civil Code 11,990 15,899 Reference is made to Note 6 \u2018Equity\u2019 in the Parent company annual accounts. The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on the basis of solvency requirements and freely distributable capital on the basis of capital protection. Freely distributable reserves 2022 2022 2021 2021 Solvency requirement under the Financial Supervision Act 9,040 9,840 Reserves available for financial supervision purposes 17,904 20,927 Total freely distributable reserves on the basis of solvency requirements 8,864 11,087 Total freely distributable reserves on the basis of the Dutch Civil Code 11,990 15,899 Total freely distributable reserves (lower of the values above) 8,864 11,087 Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for more information on solvency requirements. Other restrictions There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for the minimum capital requirements. In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the Group\u2019s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations. Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist. Furthermore, NN Group is subject to legal restrictions with respect to repayment of nominal share capital to holders of ordinary shares. Nominal share capital may be repaid to the holders of ordinary shares pursuant to an amendment of NN Group\u2019s Articles of Association whereby the ordinary shares are written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group\u2019s creditors opposes such a repayment within two months following the announcement of a resolution to that effect. Preference shares As at 31 December 2022, none of the preference shares had been issued. The authorised number of preference shares is 700,000,000 shares. Changes in Revaluation reserve (2022) 2022 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 5,576 8,837 14,422 Unrealised revaluations 3 -15,738 -15,735 Realised gains/losses transferred to the profit and loss account 112 112 Changes in cash flow hedge reserve -5,942 -5,942 Deferred interest credited to policyholders 4,986 4,986 Changes in the composition of the group and other changes 24 24 Revaluation reserve \u2013 closing balance 12 -5,040 2,895 -2,133 Changes in Revaluation reserve (2021) 2021 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 8,239 12,220 20,468 Unrealised revaluations -3,093 -3,093 Realised gains/losses transferred to the profit and loss account -1,431 -1,431 Changes in cash flow hedge reserve -3,383 -3,383 Deferred interest credited to policyholders 1,861 1,861 Revaluation reserve \u2013 closing balance 9 5,576 8,837 14,422 Deferred interest credited to policyholders reflects the change in the deferred profit sharing liabilities (net of deferred tax). Reference is made to Note 18 \u2018Insurance and investment contracts, reinsurance contracts\u2019. Changes in Currency translation reserve 2022 2021 Currency translation reserve \u2013 opening balance -181 -97 Unrealised revaluations after taxation 45 -18 Exchange rate differences for the period -164 -66 Currency translation reserve \u2013 closing balance -300 -181 Unrealised revaluations relate to changes in the value of hedging instruments that are designated as net investment hedges Undated subordinated notes In July 2014, NN Group N.V. issued fixed to floating rate undated subordinated notes with a par value of EUR 1,000 million. The notes are undated, but are callable after 11.5 years and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.5% per annum for the first 11.5 years and will be floating thereafter. As these notes are undated and include optional deferral of interest at the discretion of NN Group, these are classified under IFRS-EU as equity. Coupon payments are distributed out of equity if and when paid or contractually due. The discount to the par value and certain issue costs were deducted from equity at issue, resulting in a balance sheet value equal to the net proceeds of EUR 986 million. In June 2014, fixed to floating rate undated subordinated notes with a par value of EUR 750 million were originally issued by Delta Lloyd which are classified as equity under IFRS-EU. The notes are undated, but are callable as from 13 June 2024 and every quarter thereafter (subject to regulatory approval). The coupon is fixed at 4.375% per annum until 13 June 2024 and will be floating thereafter. Coupon payments are distributed out of equity if and when paid or contractually due. These notes were recognised upon acquisition of Delta Lloyd for an amount of EUR 778 million Changes in Other reserves (2022) 2022 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 4,042 2,111 6,153 Net result for the period 1,562 1,562 Transfers to/from share of associates reserve 198 -198 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on subordinated notes -58 -58 Changes in the composition of the group and other changes 31 31 Other reserves \u2013 closing balance 3,964 1,913 5,877 Changes in Other reserves (2021) 2021 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 2,473 1,412 3,885 Net result for the period 3,278 3,278 Transfers to/from share of associates reserve -699 699 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on subordinated notes -59 -59 Changes in the composition of the group and other changes 8 8 Other reserves \u2013 closing balance 4,042 2,111 6,153 ", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-507": { "value": "Distributable reserves NN Group N.V. is subject to legal restrictions regarding the amount of dividends it can pay to its shareholders. The Dutch Civil Code contains the restriction that dividends can only be paid up insofar as NN Group N.V. equity exceeds the amount equal to total shareholders\u2019 equity less the paid-up and called share capital and less the reserves required pursuant to law or the Articles of Association. In case of negative balances for individual reserves legally to be retained, no distributions can be made out of retained earnings to the level of these negative amounts. In addition, NN Group\u2019s ability to pay dividends is dependent on the dividend payment ability of its subsidiaries, associates and joint ventures. NN Group is legally required to create a non-distributable reserve insofar profits of its subsidiaries, associates and joint ventures are subject to dividend payment restrictions. Such restrictions may among others be of a similar nature as the restrictions which apply to NN Group. Legally distributable reserves, determined in accordance with the financial reporting requirements included in Part 9 of Book 2 of the Dutch Civil Code, from NN Group\u2019s subsidiaries, associates and joint ventures are as follows: Distributable reserves based on the Dutch Civil Code 2022 2022 2021 2021 Total shareholders\u2019 equity 16,005 32,888 \u2013 share capital 35 38 \u2013 non-distributable reserves 3,980 16,951 Total non-distributable part of shareholders\u2019 equity: 4,015 16,989 Distributable reserves based on the Dutch Civil Code 11,990 15,899 Reference is made to Note 6 \u2018Equity\u2019 in the Parent company annual accounts. The Dutch supervisory rules and regulations stemming from the Dutch Financial Supervision Act (Wet op het financieel toezicht) provide a second restriction on the possibility to distribute dividends. Total freely distributable reserves is the minimum of freely distributable capital on the basis of solvency requirements and freely distributable capital on the basis of capital protection. Freely distributable reserves 2022 2022 2021 2021 Solvency requirement under the Financial Supervision Act 9,040 9,840 Reserves available for financial supervision purposes 17,904 20,927 Total freely distributable reserves on the basis of solvency requirements 8,864 11,087 Total freely distributable reserves on the basis of the Dutch Civil Code 11,990 15,899 Total freely distributable reserves (lower of the values above) 8,864 11,087 Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for more information on solvency requirements. Other restrictions There are other restrictions to the ability of subsidiaries, associates and joint ventures to distribute reserves to NN Group as a result of minimum capital requirements that are imposed by industry regulators in the countries in which the group companies operate. Reference is made to Note 53 \u2018Capital and liquidity management\u2019 for the minimum capital requirements. In addition to the legal and regulatory restrictions on distributing dividends from subsidiaries, associates and joint ventures to NN Group there are various other considerations and limitations that are taken into account in determining the appropriate levels of equity in the Group\u2019s subsidiaries, associates and joint ventures. These considerations and limitations include, but are not restricted to, rating agency and regulatory views, which can change over time; it is not possible to disclose a reliable quantification of these limitations. Without prejudice to the authority of the Executive Board to allocate profits to reserves and to the fact that the ordinary shares are the most junior securities issued by NN Group, no specific dividend payment restrictions with respect to ordinary shares exist. Furthermore, NN Group is subject to legal restrictions with respect to repayment of nominal share capital to holders of ordinary shares. Nominal share capital may be repaid to the holders of ordinary shares pursuant to an amendment of NN Group\u2019s Articles of Association whereby the ordinary shares are written down. Pursuant to the Dutch Civil Code, capital may only be repaid if none of NN Group\u2019s creditors opposes such a repayment within two months following the announcement of a resolution to that effect. Preference shares As at 31 December 2022, none of the preference shares had been issued. The authorised number of preference shares is 700,000,000 shares. Changes in Revaluation reserve (2022) 2022 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 5,576 8,837 14,422 Unrealised revaluations 3 -15,738 -15,735 Realised gains/losses transferred to the profit and loss account 112 112 Changes in cash flow hedge reserve -5,942 -5,942 Deferred interest credited to policyholders 4,986 4,986 Changes in the composition of the group and other changes 24 24 Revaluation reserve \u2013 closing balance 12 -5,040 2,895 -2,133 Changes in Revaluation reserve (2021) 2021 Property revaluation reserve Available- for-sale reserve Cash flow hedge reserve Total Revaluation reserve \u2013 opening balance 9 8,239 12,220 20,468 Unrealised revaluations -3,093 -3,093 Realised gains/losses transferred to the profit and loss account -1,431 -1,431 Changes in cash flow hedge reserve -3,383 -3,383 Deferred interest credited to policyholders 1,861 1,861 Revaluation reserve \u2013 closing balance 9 5,576 8,837 14,422 Deferred interest credited to policyholders reflects the change in the deferred profit sharing liabilities (net of deferred tax). Reference is made to Note 18 \u2018Insurance and investment contracts, reinsurance contracts\u2019. Changes in Currency translation reserve 2022 2021 Currency translation reserve \u2013 opening balance -181 -97 Unrealised revaluations after taxation 45 -18 Exchange rate differences for the period -164 -66 Currency translation reserve \u2013 closing balance -300 -181 Unrealised revaluations relate to changes in the value of hedging instruments that are designated as net investment hedges . Changes in Other reserves (2022) 2022 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 4,042 2,111 6,153 Net result for the period 1,562 1,562 Transfers to/from share of associates reserve 198 -198 \u2013 Dividend -413 -413 Purchase/sale of treasury shares -1,392 -1,392 Employee stock option and share plans -6 -6 Coupon on subordinated notes -58 -58 Changes in the composition of the group and other changes 31 31 Other reserves \u2013 closing balance 3,964 1,913 5,877 Changes in Other reserves (2021) 2021 Retained earnings Share of associates reserve Total Other reserves \u2013 opening balance 2,473 1,412 3,885 Net result for the period 3,278 3,278 Transfers to/from share of associates reserve -699 699 \u2013 Dividend -412 -412 Purchase/sale of treasury shares -545 -545 Employee stock option and share plans -2 -2 Coupon on subordinated notes -59 -59 Changes in the composition of the group and other changes 8 8 Other reserves \u2013 closing balance 4,042 2,111 6,153 ", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-508": { "value": "Dividends 2022 2021 Dividend distributed from Other reserves: Dividend paid in cash (interim current year) 162 160 Dividend paid in cash (final previous year) 252 252 Stock dividend (interim current year) 131 128 Stock dividend (final previous year) 218 202 Total dividend 763 742 Interim dividend 2022 In September 2022, NN Group paid an interim dividend of EUR 1.00 per ordinary share, or approximately EUR 294 million in total based on the current number of outstanding shares (net of treasury shares). The interim dividend was paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares were delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves. Proposed final dividend 2022 At the annual general meeting on 2 June 2023, a final dividend will be proposed of EUR 1. 79 per ordinary share, or approximately EUR 504 million in total based on the current number of outstanding shares. The final dividend will be paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares will be delivered from NN Group treasury shares or issued at the expense of the share premium reserve. To neutralise the dilutive effect of the stock dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. The final dividend is subject to adoption by the General Meeting at the annual general meeting to be held on 2 June 2023 Interim dividend 2021 In September 2021 NN Group paid an interim dividend of EUR 0.93 per ordinary share, or approximately EUR 287 million in total. The interim dividend was paid either in cash, after deduction of withholding tax if applicable, or in ordinary shares, at the election of the shareholders. Dividends paid in the form of ordinary shares have been delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the stock dividend. Final dividend 2021 On 19 May 2022, the General Meeting adopted the proposed final dividend of EUR 1.56 per ordinary share, or approximately EUR 476 million in total based on the current number of outstanding shares (net of treasury shares). Together with the 2021 interim dividend of EUR 0.93 per ordinary share paid in September 2021, NN Group\u2019s total dividend for 2021 was EUR 2.49 per ordinary share. The final dividend was paid in cash, after deduction of withholding tax if applicable, or ordinary shares, at the election of the shareholder. Dividends paid in the form of ordinary shares were delivered from NN Group treasury shares. To neutralise the dilutive effect of the stock dividend, NN Group repurchases ordinary shares for an amount equivalent to the value of the stock dividend. The cash dividend was distributed out of Other reserves. ", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-509": { "value": "1.79", "decimals": 4, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwnersPerShare", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:EUR/xbrli:shares" } }, "fact-510": { "value": "504", "decimals": -6, "dimensions": { "concept": "ifrs-full:DividendsProposedOrDeclaredBeforeFinancialStatementsAuthorisedForIssueButNotRecognisedAsDistributionToOwners", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00", "unit": "iso4217:EUR" } }, "fact-511": { "value": "Minority interest NN Group owns 51% of the shares of ABN AMRO Verzekeringen Holding B.V. (ABN AMRO Verzekeringen). ABN AMRO Verzekeringen\u2018s principal place of business is Zwolle, the Netherlands. ABN AMRO Verzekeringen is fully consolidated by NN Group, with a minority interest recognised of 49%. The minority interest decreased by EUR 153 million following the acquisition by NN Group of the minority interest in ABN AMRO Life from ABN AMRO Verzekeringen in July 2022. The difference of EUR 30 million between the payment and the reduction of the minority interest was recognised in Other reserves. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. At 31 December 2022, the minority interest relating to ABN AMRO Verzekeringen recognised in equity was EUR 55 million (2021: EUR 245 million). Summarised information ABN AMRO Verzekeringen 1 2022 2 2021 Total assets 378 4,566 Total liabilities 266 4,065 Total income 294 502 Total expenses 288 470 Net result recognised in period 5 23 Other comprehensive income recognised in period -75 7 Dividends paid 250 59 1 All on 100% basis. 2 2022 excludes ABN AMRO Life. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. ", "dimensions": { "concept": "ifrs-full:DisclosureOfNoncontrollingInterestsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-512": { "value": "15 Subordinated debt Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 4.625% 2014 8 April 2044 8 April 2024 1,000 1,000 997 995 4.625% 2017 13 January 2048 13 January 2028 850 850 843 841 5.250% 2022 1 March 2043 30 August 2032 500 494 9.000% 2017 29 August 2042 29 August 2022 500 520 Subordinated debt 2,334 2,356 The above subordinated debt instruments have been issued to raise hybrid capital. Under IFRS-EU these debt instruments are classified as liabilities. They are considered capital for regulatory purposes. All subordinated debt is euro denominated. In August 2022, NN Group issued EUR 500 million of subordinated notes. This was the first issuance under NN Group\u2019s Sustainability Bond Framework, which was established in February 2022 with the aim to finance green and social projects. The EUR 500 million subordinated notes have a maturity of 20.5 years and are first callable after 10 years, subject to redemption conditions. The coupon is fixed at 5.25% per annum until the first reset date on 1 March 2033 and will be floating thereafter. The subordinated notes qualify as Tier 2 regulatory capital under Solvency II. The outstanding EUR 500 million 9.0% Fixed to Floating Rate Subordinated Notes due 2042 were redeemed early on their first call date, 29 August 2022. ", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-513": { "value": "15 Subordinated debt Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 4.625% 2014 8 April 2044 8 April 2024 1,000 1,000 997 995 4.625% 2017 13 January 2048 13 January 2028 850 850 843 841 5.250% 2022 1 March 2043 30 August 2032 500 494 9.000% 2017 29 August 2042 29 August 2022 500 520 Subordinated debt 2,334 2,356 The above subordinated debt instruments have been issued to raise hybrid capital. Under IFRS-EU these debt instruments are classified as liabilities. They are considered capital for regulatory purposes. All subordinated debt is euro denominated. In August 2022, NN Group issued EUR 500 million of subordinated notes. This was the first issuance under NN Group\u2019s Sustainability Bond Framework, which was established in February 2022 with the aim to finance green and social projects. The EUR 500 million subordinated notes have a maturity of 20.5 years and are first callable after 10 years, subject to redemption conditions. The coupon is fixed at 5.25% per annum until the first reset date on 1 March 2033 and will be floating thereafter. The subordinated notes qualify as Tier 2 regulatory capital under Solvency II. The outstanding EUR 500 million 9.0% Fixed to Floating Rate Subordinated Notes due 2042 were redeemed early on their first call date, 29 August 2022. 16 Debt securities issued Debt securities issued Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 1.000% 2015 18 March 2022 Not applicable 600 600 0.875% 2017 13 January 2023 13 January 2023 500 500 500 499 1.625% 2017 1 June 2027 1 March 2027 600 600 597 596 0.875% 2021 23 November 2031 23 May 2031 600 600 597 597 Debt securities issued 1,694 2,292 The outstanding EUR 600 million 1.000% fixed rate senior unsecured bond, due 18 March 2022, was redeemed on the due date. NN Group repaid the outstanding EUR 500 million 0.875% fixed rate unsecured senior notes that matured on 13 January 2023 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-514": { "value": "16 Debt securities issued Debt securities issued Notional amount Balance sheet value Interest rate Year of issue Due date First call date 2022 2021 2022 2021 1.000% 2015 18 March 2022 Not applicable 600 600 0.875% 2017 13 January 2023 13 January 2023 500 500 500 499 1.625% 2017 1 June 2027 1 March 2027 600 600 597 596 0.875% 2021 23 November 2031 23 May 2031 600 600 597 597 Debt securities issued 1,694 2,292 The outstanding EUR 600 million 1.000% fixed rate senior unsecured bond, due 18 March 2022, was redeemed on the due date. NN Group repaid the outstanding EUR 500 million 0.875% fixed rate unsecured senior notes that matured on 13 January 2023 . 17 Other borrowed funds Other borrowed funds 2022 2021 Credit institutions 5,078 578 Other 6,040 6,723 Other borrowed funds 11,118 7,301 Other borrowed funds includes the funding of the consolidated securitisation programmes as disclosed in Note 47 \u2018Structured entities\u2019 and repo transactions used for liquidity management purposes. During 2022, NN Bank issued EUR 0.5 billion bonds under its Covered Bond Programme, backed by Dutch prime residential mortgage loans (2021: EUR 0.5 billion) .", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-515": { "value": "Other borrowed funds 2022 2021 Credit institutions 5,078 578 Other 6,040 6,723 Other borrowed funds 11,118 7,301 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromBanksExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-516": { "value": "18 Insurance and investment contracts, reinsurance contracts Insurance and investment contracts, reinsurance contracts Liabilities net of reinsurance Reinsurance contracts Insurance and investment contracts 2022 2021 2022 2021 2022 2021 Non-participating life policy liabilities 52,773 55,364 470 475 53,243 55,839 Participating life policy liabilities 55,846 54,739 105 98 55,951 54,837 Investment contracts with discretionary participation features 3,044 3,222 3,044 3,222 Liabilities for (deferred) profit sharing and rebates 778 7,305 778 7,305 Life insurance liabilities excluding liabilities for risk of policyholders 112,441 120,630 575 573 113,016 121,203 Liabilities for life insurance for risk of policyholders 32,227 37,499 32 32 32,259 37,531 Investment contract with discretionary participation features for risk of policyholders 217 259 217 259 Life insurance liabilities 144,885 158,388 607 605 145,492 158,993 Liabilities for unearned premiums and unexpired risks 392 406 16 19 408 425 Reported claims liabilities 5,094 4,940 280 265 5,374 5,205 Claims incurred but not reported (IBNR) 1,764 1,722 116 65 1,880 1,787 Claims liabilities 6,858 6,662 396 330 7,254 6,992 Insurance liabilities and investment contracts with discretionary participation features 152,135 165,456 1,019 954 153,154 166,410 Investment contracts 1,167 953 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Investment contracts liabilities 3,224 2,402 3,224 2,402 Insurance and investment contracts, reinsurance contracts 155,359 167,858 1,019 954 156,378 168,812 The liabilities for insurance and investment contracts are presented gross in the balance sheet as \u2018Insurance and investment contracts\u2019. The related reinsurance is presented as \u2018Reinsurance contracts\u2019 under Assets in the balance sheet. Deferred interest credited to policyholders is included in the \u2018Liabilities for (deferred) profit sharing and rebates\u2019 and amounts to EUR 455 million as at 31 December 2022 (2021: EUR 7,148 million) . Changes in Life insurance liabilities (2022) 2022 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 120,630 37,758 605 158,993 Deferred interest credited to policyholders -6,694 -6,694 Current year liabilities 4,070 2,792 1,125 7,987 Prior years liabilities: \u2013 benefit payments to policyholders -7,562 -2,671 -1,097 -11,330 \u2013 interest accrual and changes in fair value of liabilities 2,077 1 2,078 \u2013 valuation changes for risk of policyholders -5,522 -5,522 \u2013 effect of changes in discount rate assumptions -6 -6 \u2013 effect of changes in other assumptions -420 -25 -445 Changes in the composition of the group and other changes 1,605 304 7 1,916 Exchange rate differences -1,259 -192 -34 -1,485 Life insurance liabilities \u2013 closing balance 112,441 32,444 607 145,492 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2022 includes the impact of the acquisition of MetLife Poland and Greece. Changes in Life insurance liabilities (2021) 2021 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 126,842 33,532 717 161,091 Deferred interest credited to policyholders -2,381 -2,381 Current year liabilities 4,567 2,971 1,082 8,620 Prior years liabilities: \u2013 benefit payments to policyholders -7,495 -2,525 -809 -10,829 \u2013 interest accrual and changes in fair value of liabilities 2,135 3 2,138 \u2013 valuation changes for risk of policyholders 4,201 4,201 \u2013 effect of changes in discount rate assumptions -15 -4 -19 \u2013 effect of changes in other assumptions -94 -22 -116 Changes in the composition of the group and other changes -2,316 -339 -373 -3,028 Exchange rate differences -613 -60 -11 -684 Life insurance liabilities \u2013 closing balance 120,630 37,758 605 158,993 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2021 includes the impact of the classification of a closed book life insurance portfolio in NN Belgium as held for sale. Where discounting is used in the calculation of life insurance liabilities, the discount rate for the main units in the Netherlands was in a range of 1.0% to 4.0% (2021: 1.0% to 4.0%). The range of discount rates in the international entities was -1.0% to 6.0% (2021: -1.0% to 6.0%) Longevity reinsurance In May 2020, NN Group entered into three reinsurance agreements to reinsure the full longevity risk associated with in total approximately EUR 13.5 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The three reinsurance agreements are similar in nature but are agreed with three different assuming reinsurers, Canada Life, Munich Re and Swiss Re. The risk transfer has been effective as of 1 January 2020 and will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurers is fixed and includes a margin of approximately EUR 456 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 26 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 378 million (undiscounted) remains to be recognised in future periods. In December 2021, NN Group entered into a fourth reinsurance agreement to reinsure the full longevity risk associated with in total approximately EUR 4 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The fourth reinsurance agreement is similar in nature to the first three contracts but is agreed with a different reinsurer, RGA. The risk transfer for the fourth contract is effective as of 31 December 2021. The risk transfer will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurer is fixed and includes a margin of approximately EUR 140 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 5 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 135 million (undiscounted) remains to be recognised in future periods. Changes in Liabilities for unearned premiums and unexpired risks Liabilities net of reinsurance Reinsurance contracts Liabilities for unearned premiums and unexpired risk 2022 2021 2022 2021 2022 2021 Liabilities for unearned premiums and unexpired risks \u2013 opening balance 406 443 19 16 425 459 Premiums written 3,639 3,648 212 221 3,851 3,869 Premiums earned during the year -3,648 -3,681 -215 -218 -3,863 -3,899 Changes in the composition of the group and other changes -5 -4 -5 -4 Liabilities for unearned premiums and unexpired risks \u2013 closing balance 392 406 16 19 408 425 Changes in Claims liabilities Liabilities net of reinsurance Reinsurance contracts Claims liabilities 2022 2021 2022 2021 2022 2021 Claims liabilities \u2013 opening balance 6,662 6,540 330 330 6,992 6,870 Additions: \u2013 for the current year 2,435 2,347 115 60 2,550 2,407 \u2013 for prior years -44 -28 -2 -18 -46 -46 \u2013 interest accrual of liabilities 55 58 55 58 Additions 2,446 2,377 113 42 2,559 2,419 Claim settlements and claim settlement costs: \u2013 for the current year -882 -859 -7 -9 -889 -868 \u2013 for prior years -1,368 -1,396 -40 -33 -1,408 -1,429 Claim settlements and claim settlement cost -2,250 -2,255 -47 -42 -2,297 -2,297 Claims liabilities \u2013 closing balance 6,858 6,662 396 330 7,254 6,992 Where discounting is used in the calculation of the claims liabilities the rate is within the range of 0.0% to 4.0% (2021: -1.0% to 4.0%). Changes in Investment contracts 2022 2021 Investment contracts \u2013 opening balance 2,402 2,252 Current year liabilities 416 276 Prior years liabilities: \u2013 payments to contract holders -280 -266 \u2013 interest accrual 9 8 \u2013 valuation changes investments -292 132 Changes in the composition of the group and other changes 969 Investment contracts \u2013 closing balance 3,224 2,402 Gross claims development table Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Estimate of cumulative claims At the end of accident year 2,789 2,669 2,546 2,709 2,602 2,837 2,640 2,674 2,443 2,597 1 year later 2,874 2,687 2,596 2,721 2,598 2,792 2,648 2,569 2,378 2 years later 2,839 2,661 2,615 2,699 2,539 2,795 2,664 2,565 3 years later 2,814 2,680 2,611 2,715 2,555 2,817 2,675 4 years later 2,778 2,656 2,577 2,658 2,538 2,788 5 years later 2,762 2,655 2,569 2,694 2,542 6 years later 2,769 2,670 2,587 2,691 7 years later 2,772 2,630 2,584 8 years later 2,775 2,630 9 years later 2,779 Estimate of cumulative claims 2,779 2,630 2,584 2,691 2,542 2,788 2,675 2,565 2,378 2,597 26,229 Cumulative payments -2,545 -2,384 -2,260 -2,339 -2,095 -2,166 -1,961 -1,699 -1,418 -889 -19,756 234 246 324 352 447 622 714 866 960 1,708 6,473 Effect of discounting -19 -18 -24 -22 -26 -36 -42 -28 -29 -44 -288 Liabilities recognised 215 228 300 330 421 586 672 838 931 1,664 6,185 Liabilities relating to accident years prior to 2013 1,069 Gross claims 7,254 To the extent that the assuming reinsurers are unable to meet their obligations, NN Group is liable to its policyholders for the portion reinsured. Consequently, provisions are made for receivables on reinsurance contracts if and when they are deemed uncollectable. As at 31 December 2022, the total reinsurance exposure including reinsurance contracts and receivables from reinsurers (presented in Note 13 \u2018Other assets\u2019) amounts to EUR 1,132 million (2021: EUR 1,015 million). ", "dimensions": { "concept": "ifrs-full:DisclosureOfInsuranceContractsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-518": { "value": "Insurance and investment contracts, reinsurance contracts Liabilities net of reinsurance Reinsurance contracts Insurance and investment contracts 2022 2021 2022 2021 2022 2021 Non-participating life policy liabilities 52,773 55,364 470 475 53,243 55,839 Participating life policy liabilities 55,846 54,739 105 98 55,951 54,837 Investment contracts with discretionary participation features 3,044 3,222 3,044 3,222 Liabilities for (deferred) profit sharing and rebates 778 7,305 778 7,305 Life insurance liabilities excluding liabilities for risk of policyholders 112,441 120,630 575 573 113,016 121,203 Liabilities for life insurance for risk of policyholders 32,227 37,499 32 32 32,259 37,531 Investment contract with discretionary participation features for risk of policyholders 217 259 217 259 Life insurance liabilities 144,885 158,388 607 605 145,492 158,993 Liabilities for unearned premiums and unexpired risks 392 406 16 19 408 425 Reported claims liabilities 5,094 4,940 280 265 5,374 5,205 Claims incurred but not reported (IBNR) 1,764 1,722 116 65 1,880 1,787 Claims liabilities 6,858 6,662 396 330 7,254 6,992 Insurance liabilities and investment contracts with discretionary participation features 152,135 165,456 1,019 954 153,154 166,410 Investment contracts 1,167 953 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Investment contracts liabilities 3,224 2,402 3,224 2,402 Insurance and investment contracts, reinsurance contracts 155,359 167,858 1,019 954 156,378 168,812 The liabilities for insurance and investment contracts are presented gross in the balance sheet as \u2018Insurance and investment contracts\u2019. The related reinsurance is presented as \u2018Reinsurance contracts\u2019 under Assets in the balance sheet. Deferred interest credited to policyholders is included in the \u2018Liabilities for (deferred) profit sharing and rebates\u2019 and amounts to EUR 455 million as at 31 December 2022 (2021: EUR 7,148 million) . Changes in Life insurance liabilities (2022) 2022 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 120,630 37,758 605 158,993 Deferred interest credited to policyholders -6,694 -6,694 Current year liabilities 4,070 2,792 1,125 7,987 Prior years liabilities: \u2013 benefit payments to policyholders -7,562 -2,671 -1,097 -11,330 \u2013 interest accrual and changes in fair value of liabilities 2,077 1 2,078 \u2013 valuation changes for risk of policyholders -5,522 -5,522 \u2013 effect of changes in discount rate assumptions -6 -6 \u2013 effect of changes in other assumptions -420 -25 -445 Changes in the composition of the group and other changes 1,605 304 7 1,916 Exchange rate differences -1,259 -192 -34 -1,485 Life insurance liabilities \u2013 closing balance 112,441 32,444 607 145,492 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2022 includes the impact of the acquisition of MetLife Poland and Greece. Changes in Life insurance liabilities (2021) 2021 Net life insurance liabilities 1 Net liabilities for risk of policyholders 2 Reinsurance contracts Life insurance liabilities Life insurance liabilities \u2013 opening balance 126,842 33,532 717 161,091 Deferred interest credited to policyholders -2,381 -2,381 Current year liabilities 4,567 2,971 1,082 8,620 Prior years liabilities: \u2013 benefit payments to policyholders -7,495 -2,525 -809 -10,829 \u2013 interest accrual and changes in fair value of liabilities 2,135 3 2,138 \u2013 valuation changes for risk of policyholders 4,201 4,201 \u2013 effect of changes in discount rate assumptions -15 -4 -19 \u2013 effect of changes in other assumptions -94 -22 -116 Changes in the composition of the group and other changes -2,316 -339 -373 -3,028 Exchange rate differences -613 -60 -11 -684 Life insurance liabilities \u2013 closing balance 120,630 37,758 605 158,993 1 Net of reinsurance and liabilities for risk of policyholders. 2 Net of reinsurance. Changes in composition of the group and other changes in 2021 includes the impact of the classification of a closed book life insurance portfolio in NN Belgium as held for sale. Where discounting is used in the calculation of life insurance liabilities, the discount rate for the main units in the Netherlands was in a range of 1.0% to 4.0% (2021: 1.0% to 4.0%). The range of discount rates in the international entities was -1.0% to 6.0% (2021: -1.0% to 6.0%) . Longevity reinsurance In May 2020, NN Group entered into three reinsurance agreements to reinsure the full longevity risk associated with in total approximately EUR 13.5 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The three reinsurance agreements are similar in nature but are agreed with three different assuming reinsurers, Canada Life, Munich Re and Swiss Re. The risk transfer has been effective as of 1 January 2020 and will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurers is fixed and includes a margin of approximately EUR 456 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 26 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 378 million (undiscounted) remains to be recognised in future periods. In December 2021, NN Group entered into a fourth reinsurance agreement to reinsure the full longevity risk associated with in total approximately EUR 4 billion of pension liabilities in NN Group in the Netherlands. This reinsurance reduces NN Group\u2019s exposure to longevity risk and, consequently, the required capital under Solvency II. The fourth reinsurance agreement is similar in nature to the first three contracts but is agreed with a different reinsurer, RGA. The risk transfer for the fourth contract is effective as of 31 December 2021. The risk transfer will continue until the relevant portfolio has run off. The premium payable to the assuming reinsurer is fixed and includes a margin of approximately EUR 140 million over the current best estimate of benefits payable under the related portfolios. This margin, which represents a cost of reinsurance to NN Group, is recognised in the profit and loss account over the duration of the reinsurance. An amount of EUR 5 million was recognised in Underwriting expenditure in the profit and loss account in 2022. An amount of approximately EUR 135 million (undiscounted) remains to be recognised in future periods. Changes in Liabilities for unearned premiums and unexpired risks Liabilities net of reinsurance Reinsurance contracts Liabilities for unearned premiums and unexpired risk 2022 2021 2022 2021 2022 2021 Liabilities for unearned premiums and unexpired risks \u2013 opening balance 406 443 19 16 425 459 Premiums written 3,639 3,648 212 221 3,851 3,869 Premiums earned during the year -3,648 -3,681 -215 -218 -3,863 -3,899 Changes in the composition of the group and other changes -5 -4 -5 -4 Liabilities for unearned premiums and unexpired risks \u2013 closing balance 392 406 16 19 408 425 Changes in Claims liabilities Liabilities net of reinsurance Reinsurance contracts Claims liabilities 2022 2021 2022 2021 2022 2021 Claims liabilities \u2013 opening balance 6,662 6,540 330 330 6,992 6,870 Additions: \u2013 for the current year 2,435 2,347 115 60 2,550 2,407 \u2013 for prior years -44 -28 -2 -18 -46 -46 \u2013 interest accrual of liabilities 55 58 55 58 Additions 2,446 2,377 113 42 2,559 2,419 Claim settlements and claim settlement costs: \u2013 for the current year -882 -859 -7 -9 -889 -868 \u2013 for prior years -1,368 -1,396 -40 -33 -1,408 -1,429 Claim settlements and claim settlement cost -2,250 -2,255 -47 -42 -2,297 -2,297 Claims liabilities \u2013 closing balance 6,858 6,662 396 330 7,254 6,992 Where discounting is used in the calculation of the claims liabilities the rate is within the range of 0.0% to 4.0% (2021: -1.0% to 4.0%). Changes in Investment contracts 2022 2021 Investment contracts \u2013 opening balance 2,402 2,252 Current year liabilities 416 276 Prior years liabilities: \u2013 payments to contract holders -280 -266 \u2013 interest accrual 9 8 \u2013 valuation changes investments -292 132 Changes in the composition of the group and other changes 969 Investment contracts \u2013 closing balance 3,224 2,402 Gross claims development table Accident year 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 Total Estimate of cumulative claims At the end of accident year 2,789 2,669 2,546 2,709 2,602 2,837 2,640 2,674 2,443 2,597 1 year later 2,874 2,687 2,596 2,721 2,598 2,792 2,648 2,569 2,378 2 years later 2,839 2,661 2,615 2,699 2,539 2,795 2,664 2,565 3 years later 2,814 2,680 2,611 2,715 2,555 2,817 2,675 4 years later 2,778 2,656 2,577 2,658 2,538 2,788 5 years later 2,762 2,655 2,569 2,694 2,542 6 years later 2,769 2,670 2,587 2,691 7 years later 2,772 2,630 2,584 8 years later 2,775 2,630 9 years later 2,779 Estimate of cumulative claims 2,779 2,630 2,584 2,691 2,542 2,788 2,675 2,565 2,378 2,597 26,229 Cumulative payments -2,545 -2,384 -2,260 -2,339 -2,095 -2,166 -1,961 -1,699 -1,418 -889 -19,756 234 246 324 352 447 622 714 866 960 1,708 6,473 Effect of discounting -19 -18 -24 -22 -26 -36 -42 -28 -29 -44 -288 Liabilities recognised 215 228 300 330 421 586 672 838 931 1,664 6,185 Liabilities relating to accident years prior to 2013 1,069 Gross claims 7,254 To the extent that the assuming reinsurers are unable to meet their obligations, NN Group is liable to its policyholders for the portion reinsured. Consequently, provisions are made for receivables on reinsurance contracts if and when they are deemed uncollectable. As at 31 December 2022, the total reinsurance exposure including reinsurance contracts and receivables from reinsurers (presented in Note 13 \u2018Other assets\u2019) amounts to EUR 1,132 million (2021: EUR 1,015 million)", "dimensions": { "concept": "ifrs-full:DisclosureOfReinsuranceExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-519": { "value": "Changes in Investment contracts 2022 2021 Investment contracts \u2013 opening balance 2,402 2,252 Current year liabilities 416 276 Prior years liabilities: \u2013 payments to contract holders -280 -266 \u2013 interest accrual 9 8 \u2013 valuation changes investments -292 132 Changes in the composition of the group and other changes 969 Investment contracts \u2013 closing balance 3,224 2,402 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentContractsLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-520": { "value": "19 Customer deposits and other funds on deposit Customer deposits and other funds on deposit 2022 2021 Savings 7,627 7,364 Bank annuities 8,608 8,577 Corporate deposits 4 Customer deposits and other funds on deposit 16,235 15,945 Customers have not entrusted any funds to NN Group on terms other than those prevailing in the normal course of business. All customer deposits and other funds on deposit are interest bearing. Changes in Customer deposits and other funds on deposit 2022 2021 Customer deposits and other funds on deposit \u2013 opening balance 15,945 15,803 Deposits received 3,842 4,826 Withdrawals -3,527 -4,656 Amortisation -25 -28 Customer deposits and other funds on deposit \u2013 closing balance 16,235 15,945 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromCustomersExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-523": { "value": "21 Other liabilities Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 Other staff-related liabilities include provisions for vacation leave, variable compensation, jubilee and disability/illness . Cash collateral amounts received relate to collateralised derivatives. The decrease is a result of the decrease in fair value of outstanding collateralised derivatives following an increase in market interest rates. Other mainly relates to year-end accruals in the normal course of business. Net defined benefit liability 2022 2021 Fair value of plan assets 69 79 Defined benefit obligation 109 217 Net defined benefit liability recognised in the balance sheet (funded status) 40 138 21 Other liabilities continued Changes in Provisions 2022 2021 Provisions \u2013 opening balance 137 158 Additions 61 69 Releases -22 -12 Charges -38 -74 Changes in the composition of the group and other changes 62 -3 Exchange rate differences -1 -1 Provisions \u2013 closing balance 199 137 Provisions relate to reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions were recognised for operations in the Netherlands for the cost of workforce reductions. Additions to the reorganisation provision were recognised in 2022 and 2021 due to additional initiatives announced during the year. During 2022 EUR 31 million was charged to the reorganisation provision for the cost of workforce reductions (2021: EUR 66 million) ", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-524": { "value": "21 Other liabilities Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 Other staff-related liabilities include provisions for vacation leave, variable compensation, jubilee and disability/illness . Cash collateral amounts received relate to collateralised derivatives. The decrease is a result of the decrease in fair value of outstanding collateralised derivatives following an increase in market interest rates. Other mainly relates to year-end accruals in the normal course of business. Net defined benefit liability 2022 2021 Fair value of plan assets 69 79 Defined benefit obligation 109 217 Net defined benefit liability recognised in the balance sheet (funded status) 40 138 21 Other liabilities continued Changes in Provisions 2022 2021 Provisions \u2013 opening balance 137 158 Additions 61 69 Releases -22 -12 Charges -38 -74 Changes in the composition of the group and other changes 62 -3 Exchange rate differences -1 -1 Provisions \u2013 closing balance 199 137 Provisions relate to reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions were recognised for operations in the Netherlands for the cost of workforce reductions. Additions to the reorganisation provision were recognised in 2022 and 2021 due to additional initiatives announced during the year. During 2022 EUR 31 million was charged to the reorganisation provision for the cost of workforce reductions (2021: EUR 66 million) . ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-525": { "value": "21 Other liabilities Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 Other staff-related liabilities include provisions for vacation leave, variable compensation, jubilee and disability/illness . Cash collateral amounts received relate to collateralised derivatives. The decrease is a result of the decrease in fair value of outstanding collateralised derivatives following an increase in market interest rates. Other mainly relates to year-end accruals in the normal course of business", "dimensions": { "concept": "ifrs-full:DisclosureOfTradeAndOtherPayablesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-527": { "value": "Other liabilities 2022 2021 Income tax payable 82 65 Net defined benefit liability 40 138 Other post-employment benefits 4 6 Other staff-related liabilities 78 93 Other taxation and social security contributions 175 161 Deposits from reinsurers 55 63 Lease liabilities 255 294 Accrued interest 243 182 Costs payable 336 309 Amounts payable to policyholders 830 802 Provisions 199 137 Amounts to be settled 1,013 1,213 Cash collateral amounts received 681 5,330 Other 643 983 Other liabilities 4,634 9,776 Other staff-related liabilities include provisions for vacation leave, variable compensation, jubilee and disability/illness 30 Other operating expenses Other operating expenses 2022 2021 Depreciation of property and equipment 77 79 Amortisation of software 36 33 Computer costs 289 281 Office expenses 71 60 Travel and accommodation expenses 11 3 Advertising and public relations 85 66 External advisory fees 237 211 Addition/(releases) of provisions for reorganisation and relocations 27 31 Other 96 78 Other operating expenses 929 842 Changes in Provisions 2022 2021 Provisions \u2013 opening balance 137 158 Additions 61 69 Releases -22 -12 Charges -38 -74 Changes in the composition of the group and other changes 62 -3 Exchange rate differences -1 -1 Provisions \u2013 closing balance 199 137 Provisions relate to reorganisation provisions, litigation provisions and other provisions. Reorganisation provisions were recognised for operations in the Netherlands for the cost of workforce reductions. Additions to the reorganisation provision were recognised in 2022 and 2021 due to additional initiatives announced during the year. During 2022 EUR 31 million was charged to the reorganisation provision for the cost of workforce reductions (2021: EUR 66 million) ", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-528": { "value": "22 Gross premium income Gross premium income 2022 2021 Gross premium income from life insurance policies 9,790 10,443 Gross premium income from non-life insurance policies 3,851 3,869 Gross premium income 13,641 14,312 Gross premium income is presented before deduction of reinsurance and retrocession premiums. Gross premium income excludes premium received for investment contracts, for which deposit accounting is applied. Premiums written \u2013 net of reinsurance Life Non-life Total 2022 2021 2022 2021 2022 2021 Direct gross premiums written 9,745 10,411 3,847 3,864 13,592 14,275 Reinsurance assumed gross premiums written 45 32 4 5 49 37 Gross premiums written 9,790 10,443 3,851 3,869 13,641 14,312 Reinsurance ceded -1,342 -1,304 -212 -221 -1,554 -1,525 Premiums written net of reinsurance 8,448 9,139 3,639 3,648 12,087 12,787 Non-life premiums earned \u2013 net of reinsurance 2022 2021 Direct gross premiums earned 3,859 3,894 Reinsurance assumed gross premiums earned 4 5 Gross premiums earned 3,863 3,899 Reinsurance ceded -215 -218 Non-life premiums earned \u2013 net of reinsurance 3,648 3,681 Reinsurance ceded is included in Underwriting expenditure. Reference is made to Note 26 \u2018Underwriting expenditure 23 Investment income Investment income 2022 2021 Interest income from investments in debt securities 1,757 1,739 Interest income from loans 1,546 1,531 Interest income from investments in debt securities and loans 3,303 3,270 Realised gains/losses on disposal of available-for-sale debt securities 112 569 Impairments of available-for-sale debt securities -24 Realised gains/losses and impairments of available-for-sale debt securities 88 569 Realised gains/losses on disposal of available-for-sale equity securities 380 1,141 Impairments of available-for-sale equity securities -735 -44 Realised gains/losses and impairments of available-for-sale equity securities -355 1,097 Interest income on non-trading derivatives 210 210 Changes in loan loss provisions -35 13 Income from real estate investments 109 104 Dividend income 329 301 Change in fair value of real estate investments -8 241 Investment income 3,641 5,805 Impairments on investments by segment 2022 2021 Netherlands Life -587 -39 Netherlands Non-life -43 -1 Insurance Europe -71 -4 Japan Life -6 Other -52 Impairments on investments -759 -44 24 Net fee and commission income Net fee and commission income 2022 2021 Asset management fees 292 288 Insurance brokerage and advisory fees 182 153 Other 71 -14 Gross fee and commission income 545 427 Asset management fees 94 34 Commission expenses and other 89 88 Fee and commission expenses 183 122 Net fee and commission income 362 305 25 Valuation results on non-trading derivatives Valuation results on non-trading derivatives 2022 2021 Change in fair value of derivatives relating to: \u2013 fair value hedges 1,701 481 \u2013 cash flow hedges (ineffective portion) -75 -10 \u2013 other non-trading derivatives -1,454 -716 Net result on non-trading derivatives 172 -245 Change in fair value of assets and liabilities (hedged items) -1,692 -486 Valuation results on assets and liabilities designated as at fair value through profit or loss -19 29 Valuation results on non-trading derivatives -1,539 -702 Included in \u2018Valuation results on non-trading derivatives\u2019 are the fair value movements on derivatives used to economically hedge exposures, but for which no hedge accounting is applied. These derivatives hedge exposures in insurance contract liabilities and foreign exchange exposures in the investment portfolio. The fair value movements on the derivatives are influenced by changes in the market conditions, such as share prices, interest rates and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance contract liabilities, which are included in \u2018Underwriting expenditure\u2019 and partly offset by foreign currency results. Reference is made to Note 26 \u2018Underwriting expenditure\u2019 and the line Foreign currency results in the consolidated profit and loss account. Valuation results on non-trading derivatives are reflected in the Consolidated statement of cash flows in the section \u2018Result before tax\u2019, in the line item \u2018Adjusted for: other\u2019. Reference is made to Note 38 \u2018Derivatives and hedge accounting", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-529": { "value": "23 Investment income Investment income 2022 2021 Interest income from investments in debt securities 1,757 1,739 Interest income from loans 1,546 1,531 Interest income from investments in debt securities and loans 3,303 3,270 Realised gains/losses on disposal of available-for-sale debt securities 112 569 Impairments of available-for-sale debt securities -24 Realised gains/losses and impairments of available-for-sale debt securities 88 569 Realised gains/losses on disposal of available-for-sale equity securities 380 1,141 Impairments of available-for-sale equity securities -735 -44 Realised gains/losses and impairments of available-for-sale equity securities -355 1,097 Interest income on non-trading derivatives 210 210 Changes in loan loss provisions -35 13 Income from real estate investments 109 104 Dividend income 329 301 Change in fair value of real estate investments -8 241 Investment income 3,641 5,805 Total net interest income 2022 2021 Investment income 3,513 3,480 Interest expenses on non-trading derivatives -273 -238 Other interest expenses -339 -283 Total net interest income 2,901 2,959 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-530": { "value": "23 Investment income Investment income 2022 2021 Interest income from investments in debt securities 1,757 1,739 Interest income from loans 1,546 1,531 Interest income from investments in debt securities and loans 3,303 3,270 Realised gains/losses on disposal of available-for-sale debt securities 112 569 Impairments of available-for-sale debt securities -24 Realised gains/losses and impairments of available-for-sale debt securities 88 569 Realised gains/losses on disposal of available-for-sale equity securities 380 1,141 Impairments of available-for-sale equity securities -735 -44 Realised gains/losses and impairments of available-for-sale equity securities -355 1,097 Interest income on non-trading derivatives 210 210 Changes in loan loss provisions -35 13 Income from real estate investments 109 104 Dividend income 329 301 Change in fair value of real estate investments -8 241 Investment income 3,641 5,805 Impairments on investments by segment 2022 2021 Netherlands Life -587 -39 Netherlands Non-life -43 -1 Insurance Europe -71 -4 Japan Life -6 Other -52 Impairments on investments -759 -44 27 Amortisation of intangible assets and other impairments Amortisation of intangible assets and other impairments 2022 2021 Other impairments and reversals of other impairments \u2013 \u2013 Amortisation of other intangible assets 33 33 Amortisation of intangible assets and other impairments 33 33 Impairment on debt securities, equity securities and loans are included in Note 23 \u2018Investment income \u2019. ", "dimensions": { "concept": "ifrs-full:DisclosureOfImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-531": { "value": "24 Net fee and commission income Net fee and commission income 2022 2021 Asset management fees 292 288 Insurance brokerage and advisory fees 182 153 Other 71 -14 Gross fee and commission income 545 427 Asset management fees 94 34 Commission expenses and other 89 88 Fee and commission expenses 183 122 Net fee and commission income 362 305 ", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-532": { "value": "26 Underwriting expenditure Underwriting expenditure 2022 2021 Gross underwriting expenditure: \u2013 before effect of investment result for risk of policyholders 14,878 15,821 \u2013 effect of investment result for risk of policyholders -5,517 4,201 Gross underwriting expenditure 9,361 20,022 Investment result for risk of policyholders 5,517 -4,201 Reinsurance recoveries -1,216 -1,045 Underwriting expenditure 13,662 14,776 The investment income and valuation results regarding investments for risk of policyholders is EUR -5,517 million (2021: EUR 4,201 million). This amount is recognised in \u2018Underwriting expenditure\u2019. As a result, it is shown together with the equal amount of related change in insurance liabilities for risk of policyholders . 26 Underwriting expenditure continued Underwriting expenditure by class 2022 2021 Expenditure from life underwriting: \u2013 reinsurance and retrocession premiums 1,342 1,304 \u2013 gross benefits 11,203 11,044 \u2013 reinsurance recoveries -1,162 -991 \u2013 change in life insurance liabilities -1,769 -509 \u2013 costs of acquiring insurance business 515 470 \u2013 other underwriting expenditure 220 194 \u2013 profit sharing and rebates 72 62 Expenditure from life underwriting 10,421 11,574 Expenditure from non-life underwriting: \u2013 reinsurance and retrocession premiums 213 221 \u2013 gross claims 2,233 2,260 \u2013 reinsurance recoveries -54 -54 \u2013 changes in the liabilities for unearned premiums -10 -33 \u2013 changes in claims liabilities 196 122 \u2013 costs of acquiring insurance business 689 712 \u2013 other underwriting expenditure -36 -35 Expenditure from non-life underwriting 3,231 3,193 Expenditure from investment contracts: \u2013 costs of acquiring investment contracts 1 1 \u2013 other changes in investment contract liabilities 9 8 Expenditure from investment contracts 10 9 Underwriting expenditure 13,662 14,776 Profit sharing and rebates 2022 2021 Distributions on account of interest or underwriting results 36 7 Bonuses added to policies 36 55 Profit sharing and rebates 72 62 The total costs of acquiring insurance business (life and non-life) and investment contracts amounted to EUR 1,205 million (2021: EUR 1,183 million). This includes amortisation and unlocking of DAC of EUR 1,036 million (2021: EUR 1,046 million) and the net amount of commissions paid of EUR 1,239 million (2021: EUR 1,240 million) and commissions capitalised in DAC of EUR 1,070 million (2021: EUR 1,103 million). The total amount of commission paid and commission payable amounted to EUR 1,417 million (2021: EUR 1,418 million). This includes the commissions recognised in \u2018costs of acquiring insurance business\u2019 of EUR 1,239 million (2021: EUR 1,240 million) referred to above and commissions recognised in \u2018other underwriting expenditure\u2019 of EUR 178 million (2021: EUR 178 million). Other underwriting expenditure also includes reinsurance commissions received of EUR 90 million (2021: EUR 89 million) . 26 Underwriting expenditure continued As set out in the section \u2018Accounting policies for specific items \u2013 Insurance and investment contracts, reinsurance contracts\u2019, NN Group applies, for certain specific products or components thereof, the option in IFRS 4 to measure (components of) the liabilities for insurance contracts using market-consistent interest rates and other current estimates and assumptions. This relates mainly to certain guarantees embedded in insurance contracts in Japan. The impact of these market-consistent assumptions is reflected in \u2018Underwriting expenditure \u2013 change in life insurance liabilities\u2019. This impact is largely offset by the impact of related hedging derivatives. As disclosed in Note 25 \u2018Valuation results on non-trading derivatives\u2019, the valuation results on non-trading derivatives include the fair value movements on derivatives used to economically hedge exposures, but for which no hedge accounting is applied. For insurance operations, these derivatives hedge mainly exposures in Insurance contract liabilities. The fair value movements on the derivatives are influenced by changes in the market conditions, such as stock prices, interest rates and currency exchange rates. The change in fair value of the derivatives is partly offset by changes in insurance contract liabilities, which are included in \u2018Underwriting expenditure\u2019", "dimensions": { "concept": "ifrs-full:DisclosureOfClaimsAndBenefitsPaidExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-533": { "value": "27 Amortisation of intangible assets and other impairments Amortisation of intangible assets and other impairments 2022 2021 Other impairments and reversals of other impairments \u2013 \u2013 Amortisation of other intangible assets 33 33 Amortisation of intangible assets and other impairments 33 33 Impairment on debt securities, equity securities and loans are included in Note 23 \u2018Investment income 30 Other operating expenses Other operating expenses 2022 2021 Depreciation of property and equipment 77 79 Amortisation of software 36 33 Computer costs 289 281 Office expenses 71 60 Travel and accommodation expenses 11 3 Advertising and public relations 85 66 External advisory fees 237 211 Addition/(releases) of provisions for reorganisation and relocations 27 31 Other 96 78 Other operating expenses 929 842 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-534": { "value": "28 Staff expenses Staff expenses 2022 2021 Salaries 892 813 Variable salaries 39 38 Pension costs 113 117 Social security costs 138 123 Share-based compensation arrangements 5 6 External staff costs 287 272 Education 15 14 Other staff costs 44 46 Staff expenses 1,533 1,429 Pension costs 2022 2021 Current service cost 7 9 Past service cost -8 Net interest cost -8 -7 Defined benefit plans -9 2 Defined contribution plans 122 115 Pension costs 113 117 Defined contribution plans Certain group companies sponsor defined contribution pension plans. The assets of all NN Group\u2019s defined contribution plans are held in independently administered funds. Contributions are generally determined as a percentage of pay. These plans do not give rise to balance sheet provisions, other than relating to short-term timing differences included in \u2018Other assets\u2019 or \u2018Other liabilities \u2019. 28 Staff expenses continued Number of employees Reference is made to Note 34 \u2018Principal subsidiaries and geographical information\u2019 for information on the average number of employees. Remuneration of Executive Board, Management Board and Supervisory Board Reference is made to Note 49 \u2018Key management personnel compensation\u2019. Share plans NN Group has granted shares to a number of senior executives (members of the Management Board, general managers and other officers nominated by the Management Board). The purpose of the share schemes is to attract, retain and motivate senior executives and staff. Share awards comprise upfront shares and deferred shares. The entitlement to the deferred shares is granted conditionally. If the participant remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional. A retention period applies from the moment of vesting these awards (five years for Management Board and one year for Identified Staff). Share awards Changes in Share awards outstanding Share awards (in number) Weighted average grant date fair value (in euros) 2022 2021 2022 2021 Share awards outstanding \u2013 opening balance 410,383 454,738 33.64 29.29 Granted 132,048 271,322 42.93 40.48 Vested -348,175 -279,522 34.53 33.13 Forfeited -7,371 -36,155 36.46 34.12 Share awards outstanding \u2013 closing balance 186,885 410,383 38.41 33.64 In 2022, 13,764 (2021: 35,645) share awards on NN Group shares were granted to the members of the Executive and Management Board. In 2022, 118,284 (2021: 235,677) share awards on NN Group shares were granted to senior management and other employees. In 2022, the outstanding share awards (209,423) related to NN IP employees vested as part of the divestment of NN IP. As at 31 December 2022, the share awards on NN Group shares consist of 178,482 (2021: 383,942) share awards relating to equity-settled share-based payment arrangements and 8,403 (2021: 26,441) share awards relating to cash-settled share-based payment arrangements. The fair value of share awards granted is allocated over the vesting period of the share awards as an expense under staff expenses. As at 31 December 2022, total unrecognised compensation costs related to share awards amount to EUR 3 million (2021: EUR 7 million). These costs are expected to be recognised over a weighted average period of 1.4 years (2021: 1.3 years)", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-535": { "value": "Share plans NN Group has granted shares to a number of senior executives (members of the Management Board, general managers and other officers nominated by the Management Board). The purpose of the share schemes is to attract, retain and motivate senior executives and staff. Share awards comprise upfront shares and deferred shares. The entitlement to the deferred shares is granted conditionally. If the participant remains in employment for an uninterrupted period between the grant date and the vesting date, the entitlement becomes unconditional. A retention period applies from the moment of vesting these awards (five years for Management Board and one year for Identified Staff). Share awards Changes in Share awards outstanding Share awards (in number) Weighted average grant date fair value (in euros) 2022 2021 2022 2021 Share awards outstanding \u2013 opening balance 410,383 454,738 33.64 29.29 Granted 132,048 271,322 42.93 40.48 Vested -348,175 -279,522 34.53 33.13 Forfeited -7,371 -36,155 36.46 34.12 Share awards outstanding \u2013 closing balance 186,885 410,383 38.41 33.64 In 2022, 13,764 (2021: 35,645) share awards on NN Group shares were granted to the members of the Executive and Management Board. In 2022, 118,284 (2021: 235,677) share awards on NN Group shares were granted to senior management and other employees. In 2022, the outstanding share awards (209,423) related to NN IP employees vested as part of the divestment of NN IP. As at 31 December 2022, the share awards on NN Group shares consist of 178,482 (2021: 383,942) share awards relating to equity-settled share-based payment arrangements and 8,403 (2021: 26,441) share awards relating to cash-settled share-based payment arrangements. The fair value of share awards granted is allocated over the vesting period of the share awards as an expense under staff expenses. As at 31 December 2022, total unrecognised compensation costs related to share awards amount to EUR 3 million (2021: EUR 7 million). These costs are expected to be recognised over a weighted average period of 1.4 years (2021: 1.3 years). ", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-536": { "value": "29 Interest expenses Interest expenses 2022 2021 Interest expenses on non-trading derivatives 273 238 Other interest expenses 339 283 Interest expenses 612 521 In 2022, total interest income and total interest expenses for items not valued at fair value through profit or loss were EUR 3,303 million (2021: EUR 3,270 million) and EUR 339 million (2021: EUR 283 million) respectively. Interest income and expenses are included in the following profit and loss account lines. Total net interest income 2022 2021 Investment income 3,513 3,480 Interest expenses on non-trading derivatives -273 -238 Other interest expenses -339 -283 Total net interest income 2,901 2,959 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-537": { "value": "29 Interest expenses Interest expenses 2022 2021 Interest expenses on non-trading derivatives 273 238 Other interest expenses 339 283 Interest expenses 612 521 In 2022, total interest income and total interest expenses for items not valued at fair value through profit or loss were EUR 3,303 million (2021: EUR 3,270 million) and EUR 339 million (2021: EUR 283 million) respectively. Interest income and expenses are included in the following profit and loss account lines. Total net interest income 2022 2021 Investment income 3,513 3,480 Interest expenses on non-trading derivatives -273 -238 Other interest expenses -339 -283 Total net interest income 2,901 2,959 ", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-538": { "value": "29 Interest expenses Interest expenses 2022 2021 Interest expenses on non-trading derivatives 273 238 Other interest expenses 339 283 Interest expenses 612 521 In 2022, total interest income and total interest expenses for items not valued at fair value through profit or loss were EUR 3,303 million (2021: EUR 3,270 million) and EUR 339 million (2021: EUR 283 million) respectively. Interest income and expenses are included in the following profit and loss account lines. Total net interest income 2022 2021 Investment income 3,513 3,480 Interest expenses on non-trading derivatives -273 -238 Other interest expenses -339 -283 Total net interest income 2,901 2,959 ", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingCostsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-539": { "value": "30 Other operating expenses Other operating expenses 2022 2021 Depreciation of property and equipment 77 79 Amortisation of software 36 33 Computer costs 289 281 Office expenses 71 60 Travel and accommodation expenses 11 3 Advertising and public relations 85 66 External advisory fees 237 211 Addition/(releases) of provisions for reorganisation and relocations 27 31 Other 96 78 Other operating expenses 929 842 ", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-540": { "value": "30 Other operating expenses Other operating expenses 2022 2021 Depreciation of property and equipment 77 79 Amortisation of software 36 33 Computer costs 289 281 Office expenses 71 60 Travel and accommodation expenses 11 3 Advertising and public relations 85 66 External advisory fees 237 211 Addition/(releases) of provisions for reorganisation and relocations 27 31 Other 96 78 Other operating expenses 929 842 ", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-541": { "value": "Other operating expenses 2022 2021 Depreciation of property and equipment 77 79 Amortisation of software 36 33 Computer costs 289 281 Office expenses 71 60 Travel and accommodation expenses 11 3 Advertising and public relations 85 66 External advisory fees 237 211 Addition/(releases) of provisions for reorganisation and relocations 27 31 Other 96 78 Other operating expenses 929 842 ", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingExpenseExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-542": { "value": "31 Discontinued operations As of 2021, NN Group\u2019s asset management activities executed by NN Investment Partners (NN IP) are classified as discontinued operations. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Net result from discontinued operations consists of the net result (after tax) of the businesses classified as discontinued operations and is presented separately in the profit and loss account for both 2022 and 2021. No gain or loss has been recognised in the profit and loss account upon the classification as held for sale and discontinued operations. Net result from discontinued operations 2022 2021 Total income 110 482 Total expenses 74 304 Net result from disposal of discontinued operations 1,062 Result before tax from discontinued operations 1,098 178 Taxation 9 43 Net result from discontinued operations 1,089 135 The activities of NN IP were reported in the segment Asset Management before these were classified as discontinued operations and held for sale. The segment Asset Management ceased to exist in 2021, following the classification as discontinued operations, as all activities previously included in this segment are now discontinued operations. The sale of NN IP was completed in April 2022. Reference is made to Note 46 \u2018Companies and businesses acquired and divested\u2019. Net cash flow from discontinued operations 2022 2021 Operating cash flow 94 95 Investing cash flow -2 -10 Financing cash flow -4 Net cash flow from discontinued operations 92 81 ", "dimensions": { "concept": "ifrs-full:DisclosureOfDiscontinuedOperationsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-543": { "value": "32 Earnings per ordinary share Earnings per ordinary share shows earnings per share amounts for profit or loss attributable to shareholders of the parent. Earnings per ordinary share is calculated on the basis of the weighted average number of ordinary shares outstanding. In calculating the weighted average number of ordinary shares outstanding, own shares held by group companies are deducted from the total number of ordinary shares in issue. Changes in the number of ordinary shares outstanding without a corresponding change in resources are taken into account, including if these changes occurred after the reporting date but before the annual accounts are authorised for issue. Diluted earnings per share is calculated as if the share plans had been exercised at the beginning of the period and assuming that the cash received from exercised share plans and warrants was used to buy own shares against the average market price during the period. The net increase in the number of shares resulting from exercising share plans and warrants is added to the average number of shares used for the calculation of diluted earnings per share. Earnings per ordinary share from continuing and discontinued operations Amounts (in millions of euros) Weighted average number of ordinary shares (in millions) Per ordinary share (in euros) 2022 2021 2022 2021 2022 2021 Net result from continuing and discontinued operations 1,562 3,278 Coupon on undated subordinated notes -58 -59 Basic earnings from continuing and discontinued operations 1,504 3,219 295.5 308.9 5.09 10.42 Dilutive instruments: \u2013 Share plans 0.2 0.4 Dilutive instruments 0.2 0.4 Diluted earnings from continuing and discontinued operations 1,504 3,219 295.7 309.3 5.09 10.41 Earnings per ordinary share from continuing operations Amounts (in millions of euros) Weighted average number of ordinary shares (in millions) Per ordinary share (in euros) 2022 2021 2022 2021 2022 2021 Net result from continuing operations 475 3,151 Coupon on undated subordinated notes -58 -59 Basic earnings from continuing operations 417 3,092 295.5 308.9 1.41 10.01 Dilutive instruments: \u2013 Share plans 0.2 0.4 Dilutive instruments 0.2 0.4 Diluted earnings from continuing operations 417 3,092 295.7 309.3 1.41 10.00 Earnings per ordinary share from discontinued operations Amounts (in millions of euros) Weighted average number of ordinary shares (in millions) Per ordinary share (in euros) 2022 2021 2022 2021 2022 2021 Net result from discontinued operations 1,087 127 Basic earnings from discontinued operations 1,087 127 295.5 308.9 3.68 0.41 Dilutive instruments: \u2013 Share plans 0.2 0.4 Dilutive instruments 0.2 0.4 Diluted earnings from discontinued operations 1,087 127 295.7 309.3 3.68 0.41 ", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-544": { "value": "
33 Segments
The reporting segments for NN Group, based on the internal reporting structure, are as follows:
\u2022 Netherlands Life (Group life and individual life insurance products in the Netherlands)
\u2022 Netherlands Non-life (Non-life insurance in the Netherlands including disability and accident, fire, motor and transport insurance)
\u2022 Insurance Europe (Life insurance, pension products and to a small extent non-life insurance and retirement services in Central and Rest
of Europe)
\u2022 Japan Life (Life insurance primarily Corporate Owned Life Insurance (COLI) business)
\u2022 Banking
\u2022 Other (Operating segments that have been aggregated due to their respective size; including Japan Closed Block VA (Closed block single
premium variable annuity individual life insurance portfolio in Japan, including the internally reinsured minimum guarantee risk, which
has been closed to new business and which is being managed in run-off), reinsurance and items related to capital management and the
head office)
As disclosed in Note 31 \u2018Discontinued operations\u2019 as of 2021 the segment Asset Management ceased to exist. As a result, the result from the
Asset management activities is presented separately from the results of the remaining segments.
The Executive Board and the Management Board set the performance targets and approve and monitor the budgets prepared by the
reporting segments. The segments formulate strategic, commercial and financial policies in conformity with the strategy and performance
targets set by the Executive Board and the Management Board.
The accounting policies of the segments are the same as those described in Note 1 \u2018Accounting policies\u2019. Transfer prices for inter-segment
transactions are set at arm\u2019s length. Corporate expenses are allocated to segments based on time spent by head office personnel, the
relative number of staff, or on the basis of income and/or assets of the segment. Intercompany loans that qualify as equity instruments
under IFRS-EU are presented in the segment reporting as debt; related coupon payments are presented as income and expenses in the
respective segments.
Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments.
The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and
premium-based revenues and the technical margin. Disclosures on comparative years also reflect the impact of current year\u2019s divestments.
Operating result as presented below is an Alternative Performance Measure (non-GAAP financial measure) and is not a measure of
financial performance under IFRS-EU. Because it is not determined in accordance with IFRS-EU, operating result as presented by NN Group
may not be comparable to other similarly titled measures of performance of other companies. The net result on transactions between
segments is eliminated in the net result of the relevant segment. Operating result is calculated as explained below in the section Alternative
Performance Measures .
33 Segments continued
Segments (2022)
2022
Netherlands
Life
Netherlands
Non-life
Insurance
Europe Japan Life Banking Other Total
Investment margin 980 145 6 1,131
Fees and premium-based revenues 387 859 546 1,792
Technical margin 123 281 14 418
Operating income 1,490 \u2013 1,286 565 \u2013 \u2013 3,342
Administrative expenses 465 515 124 1,104
DAC amortisation and trail commissions 26 460 223 710
Expenses 491 \u2013 976 347 \u2013 \u2013 1,814
Operating result non-life 255 -1 254
Operating result banking 97 97
Operating result other -172 -172
Operating result from continuing
operations 999 255 309 218 97 -172 1,706
Non-operating items from continuing
operations:
\u2013 gains/losses and impairments -126 -38 -92 -7 -50 -312
\u2013 revaluations -1,373 14 13 -10 96 -1,260
\u2013 market and other impacts 646 -6 -8 9 -63 578
Special items before tax -32 -22 -39 -3 -1 -39 -136
Acquisition intangibles and goodwill -2 -28 -30
Result on divestments 15 15
Result before tax from continuing
operations 115 209 201 190 105 -258 562
Taxation -26 47 55 53 27 -71 85
Minority interests 3 -1 2
Net result from continuing operations 141 158 146 137 78 -186 474
Net result from discontinued operations 1,088 1,088
Net result 141 158 146 137 78 902 1,562
Special items in 2022 mainly reflect integration and IFRS 9 and IFRS 17 project expenses .
.
33 Segments continued Operating result (2022) 2022 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other and eliminations Total Operating result from continuing operations 999 255 310 218 97 -172 1,706 Operating result from discontinued operations 38 38 Operating result 999 255 310 218 97 -134 1,743 Result before tax (2022) 2022 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other and eliminations Total Result before tax from continuing operations 115 209 201 190 105 -258 562 Result before tax from discontinued operations 1,098 1,098 Result before tax 115 209 201 190 105 842 1,662 Segments (2021) 2021 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Investment margin 996 116 -12 1,100 Fees and premium-based revenues 391 811 610 1,812 Technical margin 103 235 30 368 Operating income non-modelled life business 1 1 Operating income 1,490 \u2013 1,163 628 \u2013 \u2013 3,281 Administrative expenses 473 446 135 1,054 DAC amortisation and trail commissions 31 401 230 662 Expenses 504 \u2013 847 365 \u2013 \u2013 1,716 Operating result non-life 314 -1 313 Operating result banking 134 134 Operating result other -157 -157 Operating result from continuing operations 986 314 315 263 134 -157 1,855 Non-operating items from continuing operations: \u2013 gains/losses and impairments 1,618 33 2 4 2 12 1,671 \u2013 revaluations 379 24 46 -2 39 485 \u2013 market and other impacts -51 -28 -26 -105 Special items before tax -17 -35 -14 -3 -30 -99 Acquisition intangibles and goodwill -7 -21 -28 Result on divestments 54 54 Result before tax from continuing operations 2,915 336 396 262 106 -184 3,832 Taxation 431 71 80 74 25 -11 669 Minority interests -4 16 12 Net result from continuing operations 2,488 250 316 188 82 -172 3,151 Net result from discontinued operations 127 127 Net result 2,488 250 316 188 82 -45 3,278 33 Segments continued Special items in 2021 mainly reflect integration expenses and other project related expenses such as the implementation of IFRS 17. Operating result (2021) 2021 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other and eliminations Total Operating result from continuing operations 986 314 315 263 134 -157 1,855 Operating result from discontinued operations 181 181 Operating result 986 314 315 263 134 24 2,036 Result before tax (2021) 2021 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other and eliminations Total Result before tax from continuing operations 2,915 336 396 262 106 -184 3,832 Result before tax from discontinued operations 178 178 Result before tax 2,915 336 396 262 106 -6 4,010 Gross premium income and investment income by segment (2022) 2022 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Gross premium income 3,569 3,774 3,247 3,006 45 13,641 Investment income 2,410 149 344 177 609 -48 3,641 Gross premium income and investment income by segment (2021) 2021 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Gross premium income 3,972 3,798 3,127 3,381 34 14,312 Investment income 4,382 213 429 182 613 -14 5,805 Interest income and interest expenses by segment (2022) 2022 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Interest income 2,135 171 422 182 607 -4 3,513 Interest expenses -291 -29 -13 -3 -303 27 -612 Interest income and interest expenses 1,844 142 409 179 304 23 2,901 Interest income and interest expenses by segment (2021) 2021 Netherlands Life Netherlands Non-life Insurance Europe Japan Life Banking Other Total Interest income 2,201 147 389 176 603 -36 3,480 Interest expenses -222 -19 -21 -4 -298 42 -522 Interest income and interest expenses 1,979 128 368 172 305 6 2,958 33 Segments continued Total assets and Total liabilities by segment Total assets Total liabilities Total assets Total liabilities 2022 2022 2021 2021 Netherlands Life 134,035 121,722 158,579 131,056 Netherlands Non-life 9,743 8,833 10,011 8,389 Insurance Europe 27,039 24,886 30,837 28,063 Japan Life 19,179 17,674 21,527 19,205 Banking 23,969 23,181 24,194 23,347 Other (Including held for sale) 33,048 15,211 53,018 17,678 Total 247,013 211,507 298,166 227,738 Eliminations -29,903 -12,229 -46,581 -11,071 Total assets and Total liabilities 217,110 199,278 251,585 216,667 Alternative Performance Measures (Non-GAAP measures) NN Group uses three Alternative Performance Measures (APMs, also referred to as Non-GAAP measures) in its external financial reporting: Operating result, Adjusted allocated equity and Administrative expenses. Operating result Operating result (before tax) is used by NN Group to evaluate the financial performance of its segments. Each segment\u2019s operating result is calculated by adjusting the reported result before tax for the following items: \u2022 Non-operating items: related to (general account) investments that are held for own risk (net of policyholder profit sharing): \u2013 Gains/losses and impairments: realised gains and losses as well as impairments on financial assets that are classified as Available-for- sale and debt securities that are classified as loans. These investments include debt and equity securities (including fixed income and equity funds), private equity (< 20% ownership), real estate funds and loans quoted in active markets. \u2013 Revaluations: revaluations on assets marked-to-market through the Consolidated profit and loss account. These investments include private equity (associates), real estate (property and associates), derivatives unrelated to product hedging programmes (i.e. interest rate swaps, foreign exchange hedges) and direct equity hedges. \u2013 Market & other impacts: these impacts mainly include movements in the liability for guarantees on separate account pension contracts and unit-linked guarantee provisions in the Netherlands and related hedges, the accounting volatility related to the reinsurance of minimum guaranteed benefits of Japan Closed Block VA and the changes in valuation of certain inflation linked liabilities and related derivatives. \u2022 Special items: items of income or expense before tax that are significant and arise from events or transactions that are clearly distinct from the ordinary business activities and therefore are not expected to recur frequently or regularly. This includes, for example, restructuring expenses, rebranding costs, results related to early redemption of debt, and gains/losses from employee pension plan amendments or curtailments. \u2022 Acquisition intangibles and goodwill: At the acquisition date, all assets and liabilities (including investments, loans and funding liabilities) were remeasured to fair value. Acquisition related intangible assets (mainly brand names, distribution agreements and client relationships) were recognised and will be amortised through the profit and loss account over their useful life. Goodwill on acquisition was also recognised; goodwill is not amortised but tested annually for impairment. Any amortisation and goodwill impairment is recognised in the line \u2018Amortisation of acquisition intangibles and other impairments\u2019. \u2022 Result on divestments: Result before tax related to divested operations. The operating result for the life insurance business is analysed through a margin analysis, which includes the investment margin, fees and premium-based revenues and the technical margin. Investment margin is defined as the investment income (on the investments for the account of NN Group) minus interest credited to policyholders and investment expenses. Technical margin includes the difference between costs charged and claim related revenues (such as risk premiums, surrenders and reserve releases) and incurred claims. Disclosures on comparative years also reflect the impact of current year\u2019s divestments. Operating result as presented below is an Alternative Performance Measure (non-GAAP financial measure) and is not a measure of financial performance under IFRS-EU. Because it is not determined in accordance with IFRS-EU, operating result as presented by NN Group may not be comparable to other similarly titled measures of performance of other companies. The net result on transactions between segments is eliminated in the net result of the relevant segment. 33 Segments continued Adjusted allocated equity NN Group evaluates the efficiency of the operational deployment of its equity of its banking operations by calculating Return On Equity (ROE). The net operating ROE is calculated using Net operating result in the numerator and average Adjusted allocated equity in the denominator. Net operating result of NN Group is the Net operating result, adjusted to reflect the deduction of the accrued coupon on undated subordinated notes classified in equity. Adjusted allocated equity is derived from IFRS equity by adjusting for: \u2022 Revaluation reserves \u2022 Undated subordinated notes classified as equity under IFRS \u2022 Goodwill and Intangible assets recognised as a result of the Delta Lloyd acquisition Allocated equity per segment represents the part of equity that is economically deployed by the segments. This allocation does not impact equity in total for NN Group. Adjusted allocated equity is an Alternative Performance Measure that is not a measure under IFRS- EU. Adjusted allocated equity as applied by NN Group may not be comparable to other similarly titled measures of other companies. Adjusted allocated equity is reconciled to IFRS Total equity as follows: Adjusted allocated equity 2022 2021 IFRS Total equity 17,832 34,918 Revaluation reserves, Goodwill and Intangible assets recognised upon acquisitions 1,890 -14,925 Undated subordinated notes -1,764 -1,764 Adjusted allocated equity excluding Japan Closed Block VA 17,959 18,229 Administrative expenses NN Group monitors the level of expenses and assesses cost savings through the Administrative expenses. Administrative expenses are the expenses included in operating result, unless already included in the technical margin or the investment margin in the margin analysis of the operating result. Administrative expenses 2022 2021 Staff expenses 1,533 1,429 Other operating expenses 929 842 IFRS operating expenses 2,462 2,271 Presented in non-operating items (including special items) -144 -112 Presented in the Technical margin (claims handling expenses) -147 -123 Presented in the Investment margin (investment expenses) -34 -56 Administrative expenses continuing operations 2,137 1,980 Administrative expenses are calculated as the total of IFRS Staff expenses and IFRS Other operating expenses, adjusted for expenses already recognised in the technical margin and the investment margin and for expenses that are not included in operating result (non- operating expenses and special items). From the total administrative expenses of EUR 2,137 million (2021: EUR 1,980 million), EUR 1,104 million (2021: EUR 1,055 million) relates to the segments Netherlands Life, Insurance Europe Life and Japan Life. The remainder of EUR 1,033 million (2021: EUR 925 million) is included in the operating result non-life, banking and other. 33 Segments continued In addition, NN Group discloses a number of other metrics (that are not defined in IFRS and/or not defined in regulatory capital legislation). As these are not derived from comparable metrics under IFRS, these cannot be reconciled to an IFRS equivalent. These include the following: \u2022 Operating Capital Generation (OCG): NN Group analyses the change in the excess of Solvency II Own Funds over the Solvency Capital Requirement (SCR) in the following components: Operating Capital Generation, Market variance, Capital flows and Other. Operating Capital Generation is the movement in the Solvency II surplus (Own Funds before eligibility over SCR at 100%) in the period due to operating items, including the impact of new business, expected investment returns in excess of the unwind of liabilities, release of the risk margin, operating variances, non-life underwriting result, contribution of non-Solvency II entities and holding expenses and debt costs and the change in the SCR. It excludes economic variances, economic assumption changes and non-operating expenses. \u2022 Annual Premium Equivalent (APE): the total of the IFRS annual recurring premiums and 10% of the IFRS single premiums received in a given period \u2022 Combined ratio: the sum of the claims ratio (claims incurred, net of reinsurance, excluding unwind of interest accrual, divided by net earned premiums) and the expense ratio (sum of acquisition costs and administrative expenses, divided by net earned premiums) \u2022 Financial leverage ratio: the percentage of financial leverage in the total of financial leverage and equity \u2022 Fixed cost coverage ratio: the ability of Earnings Before Interest and Tax (EBIT) to cover funding costs on financial leverage; calculated on a last 12-months basis \u2022 Free cash flow: the change in the cash capital position at the holding company over the period, excluding acquisitions and capital transactions with shareholders and debtholders \u2022 Cash capital position at the holding company: net current assets available at the holding company \u2022 Net interest margin (NIM): interest result of the banking operations divided by the average total interest bearing assets of the banking operations \u2022 Net operating ROE\u2013 Segment banking only: the (annualised) net operating result of the banking operations, divided by (average) adjusted allocated equity of the banking operations \u2022 Value of New Business (VNB): the additional economic value created through writing new business during the period ", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-545": { "value": "34 Principal subsidiaries and geographical information The table below provides additional information on principal subsidiaries, the nature of the main activities and employees by country. Information on guarantees issued by NN Group N.V. to subsidiaries under article 403 of Book 2 of the Dutch Civil Code is filed with the Chamber of Commerce. Principal subsidiaries and geographical information (2022) Name of principal subsidiaries Main activity Country Average number of employees 1 Total income Total assets Result before tax Taxation 2 Income tax paid Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance Nationale-Nederlanden Bank N.V. Banking Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance REI Investment I B.V. Real estate NN Re (Netherlands) N.V. Reinsurance ABN AMRO Levensverzekering N.V. Life insurance The Netherlands 8,746 10,187 168,243 8 -95 -20 NN Life Insurance Company, Ltd. Life insurance Japan 937 3,159 18,436 317 90 73 NN Insurance Belgium nv Life insurance Belgium 659 998 11,281 70 17 -51 Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance Spain 554 704 4,794 22 4 1 Nationale-Nederlanden Towarzystwo Ubezpiecze\u0144 na \u017bycie S.A. Life insurance Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions Poland 1,125 583 3,198 58 16 59 NN Hellenic Life Insurance Co. S.A. Life insurance Greece 500 765 4,155 23 7 NN \u017divotn\u00ed poji\u0161\u0165ovna N.V. (pobo\u010dka pro \u010ceskou republiku) Life insurance Czech Republic 668 219 1,327 12 3 42 NN Biztos\u00edt\u00f3 Z\u00e1rtk\u00f6r\u00fben M\u00fbk\u00f6d\u00f5 R\u00e9szv\u00e9nyt\u00e1rsas\u00e1g Life insurance Hungary 446 253 1,148 4 3 3 NN Asigurari de Viata S.A. Life insurance Romania 488 249 989 34 6 7 NN \u017divotn\u00e1 poist\u2019ovna, a.s. Life insurance Slovak Republic 361 164 749 12 3 15 Germany 5 -1 541 -2 -3 3 France 4 21 1,116 13 31 11 Italy 3 3 266 3 -1 Denmark 15 215 13 3 United Kingdom 7 -9 606 -19 2 1 Turkey 197 19 40 -5 -1 Ireland 1 Singapore 16 Mexico 1 1 5 -1 United States 7 Switzerland 2 Argentina 2 1 1 Uruguay 1 Total 14,729 17,331 217,110 562 85 145 1 The average number of employees is on a full-time equivalent basis. 2 Taxation is the taxation amount charged to the profit and loss account . 34 Principal subsidiaries and geographical information continued Principal subsidiaries and geographical information (2021) Name of principal subsidiaries Main activity Country Average number of employees 1 Total income Total assets Result before tax Taxation 2 Income tax paid Nationale-Nederlanden Levensverzekering Maatschappij N.V. Life insurance Nationale-Nederlanden Bank N.V. Banking Nationale-Nederlanden Schadeverzekering Maatschappij N.V. General insurance REI Investment I B.V. Real estate NN Re (Netherlands) N.V. Reinsurance ABN AMRO Levensverzekering N.V. Life insurance The Netherlands 9,144 13,643 196,434 2,875 459 247 NN Life Insurance Company, Ltd. Life insurance Japan 915 3,549 21,642 253 71 55 NN Insurance Belgium nv Life insurance Belgium 673 1,093 16,129 106 21 57 Nationale Nederlanden Vida, Compania de Seguros y Reaseguros. S.A. Life insurance Nationale Nederlanden Generales, Compania de Seguros y Reaseguros, S.A. General insurance Spain 535 748 5,166 53 13 3 Nationale-Nederlanden Towarzystwo Ubezpiecze\u0144 na \u017bycie S.A. Life insurance Nationale-Nederlanden Powszechne Towarzystwo Emerytalne S.A. Pensions Poland 1,032 485 2,230 66 16 -3 NN Hellenic Life Insurance Co. S.A. Life insurance Greece 413 579 2,386 23 10 NN \u017divotn\u00ed poji\u0161\u0165ovna N.V. (pobo\u010dka pro \u010ceskou republiku) Life insurance Czech Republic 671 226 1,479 27 6 21 NN Biztos\u00edt\u00f3 Z\u00e1rtk\u00f6r\u00fben M\u00fbk\u00f6d\u00f5 R\u00e9szv\u00e9nyt\u00e1rsas\u00e1g Life insurance Hungary 404 298 1,390 9 3 3 NN Asigurari de Viata S.A. Life insurance Romania 471 257 1,106 49 8 7 Slovak Republic 334 186 859 34 8 6 Germany 9 102 392 131 20 2 France 8 129 1,255 119 29 8 Italy 6 13 278 13 -8 2 Denmark 45 196 43 7 United Kingdom 13 31 595 33 1 2 Bulgaria 66 16 3 Turkey 250 32 43 -4 1 Ireland 4 -16 Singapore 31 2 Mexico 1 4 -1 United States 13 Switzerland 4 1 Argentina 2 1 Uruguay 2 Total 14,997 21,433 251,585 3,832 669 397 1 The average number of employees is on a full-time equivalent basis. 2 Taxation is the taxation amount charged to the profit and loss account .", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-546": { "value": "35 Taxation Deferred tax (2022) Net liability 2021 Changes through equity Changes through net result Changes in the composition of the group and other changes Exchange rate differences Net liability 2022 Investments 3,271 -4,865 -126 74 -7 -1,653 Real estate investments 1,172 -10 1,162 Financial assets and liabilities at fair value through profit or loss 29 -22 -2 5 Deferred acquisition costs 460 -6 31 -19 466 Fiscal reserves 91 -91 - Depreciation 18 -2 5 -1 20 Insurance liabilities -3,273 1,703 358 -96 -9 -1,317 Cash flow hedges 3,069 -2,063 1,006 Pension and post-employment benefits 20 24 4 -1 1 48 Other provisions -27 -4 2 -29 Receivables 17 -4 -3 10 Loans 28 -3 25 Unused tax losses carried forward -81 -48 -2 -131 Other -24 14 -24 -60 1 -93 Net Deferred tax liability (asset) 4,770 -5,187 22 -51 -35 -481 Presented in the balance sheet as: Deferred tax liabilities 4,817 423 Deferred tax assets -47 -904 Net Deferred tax liability (asset) 4,770 -481 Deferred tax (2021) Net liability 2020 Changes through equity Changes through net result Changes in the composition of the group and other changes Exchange rate differences Net liability 2021 Investments 4,638 -1,230 -39 -89 -9 3,271 Real estate investments 926 248 -2 1,172 Financial assets and liabilities at fair value through profit or loss 22 7 29 Deferred acquisition costs 439 9 22 -10 460 Fiscal reserves 12 79 91 Depreciation 21 -2 -1 18 Insurance liabilities -3,778 530 -108 87 -4 -3,273 Cash flow hedges 4,073 -1,004 3,069 Pension and post-employment benefits 5 4 -1 11 1 20 Other provisions -54 19 7 1 -27 Receivables 12 1 5 -1 17 Loans -87 3 112 28 Unused tax losses carried forward -77 -6 2 -81 Other 104 -6 -20 -101 -1 -24 Net Deferred tax liability (asset) 6,256 -1,706 190 54 -24 4,770 Presented in the balance sheet as: Deferred tax liabilities 6,329 4,817 Deferred tax assets -73 -47 Net Deferred tax liability (asset) 6,256 4,770 35 Taxation continued Deferred tax on unused tax losses carried forward 2022 2021 Total unused tax losses carried forward 716 511 Unused tax losses carried forward not recognised as a deferred tax asset -196 -184 Unused tax losses carried forward recognised as a deferred tax asset 520 327 Average tax rate 25.1% 24.8% Deferred tax asset 131 81 Tax losses carried forward will expire as follows as at 31 December: Total unused tax losses carried forward analysed by term of expiration No deferred tax asset recognised Deferred tax asset recognised 2022 2021 2022 2021 Within 1 year 4 12 More than 1 year but less than 5 years 49 34 9 14 More than 5 years but less than 10 years 7 3 Unlimited 136 135 511 313 Total unused tax losses carried forward 196 184 520 327 Deferred tax assets are recognised for temporary deductible differences, for tax losses carried forward and unused tax credits only to the extent that realisation of the related tax benefit is probable", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-547": { "value": "In 2022, the effective tax rate for continuing operations of 15.2% was lower than the weighted average statutory tax rate of 25.3%. This was mainly a result of tax exempt results of associates and participations. This was partly offset by a tax expense following a reassessment of prior year tax liabilities. In 2021, the effective tax rate of 17.5% was lower than the weighted average statutory tax rate of 24.9%. This was mainly a result of tax exempt results of associates and participations. Taxation on components of other comprehensive income 2022 2021 Unrealised revaluations available-for-sale investments and other 5,127 1,189 Realised gains/losses transferred to the profit and loss account -153 235 Changes in cash flow hedge reserve 2,063 1,004 Deferred interest credited to policyholders -1,703 -530 Remeasurement of the net defined benefit asset/liability -24 -5 Income tax 5,310 1,893 Taxation on result 2022 2021 Current tax 64 480 Deferred tax 21 189 Taxation on result 85 669 NN Group N.V., together with certain of its subsidiaries, is a part of a fiscal unity for Dutch income tax purposes. The members of the fiscal unity are jointly and severally liable for any income taxes payable by the Dutch fiscal unity. Reference is made to Note 34 \u2018Principal subsidiaries and geographical information\u2019 for more information on the taxation per country. Reconciliation of the weighted average statutory tax rate to NN Group\u2019s effective tax rate 2022 2021 Result before tax from continuing operations 562 3,832 Weighted average statutory tax rate 25.3% 24.9% Weighted average statutory tax amount 142 954 Participation exemption -125 -319 Other income not subject to tax and other -14 -11 Expenses not deductible for tax purposes 30 13 Impact on deferred tax from change in tax rates 7 Deferred tax benefit for previously unrecognised amounts -3 -9 Tax for non-recognised losses 3 2 Write-off/reversal of deferred tax assets -3 1 Adjustments to prior periods 55 31 Effective tax amount 85 669 Effective tax rate 15.2% 17.5% ", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-548": { "value": "36 Fair value of financial assets and liabilities The following table presents the estimated fair value of NN Group\u2019s financial assets and liabilities. Certain balance sheet items are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of NN Group. Fair value of financial assets and liabilities Estimated fair value Balance sheet value 2022 2021 2022 2021 Financial assets Cash and cash equivalents 6,670 6,929 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 681 991 Available-for-sale investments 81,610 107,883 81,610 107,883 Loans 61,442 72,597 68,044 68,200 Total financial assets 187,417 234,080 194,019 229,683 Financial liabilities Subordinated debt 2,287 2,624 2,334 2,356 Debt securities issued 1,498 2,351 1,694 2,292 Other borrowed funds 10,683 7,364 11,118 7,301 Investment contracts with discretionary participation features for risk of policyholders 217 259 217 259 Investment contracts for risk of company 1,083 976 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Customer deposits and other funds on deposit 15,619 16,460 16,235 15,945 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 6,462 1,904 6,462 1,904 Total financial liabilities 39,906 33,387 41,284 32,459 For the other financial assets and financial liabilities not included in the table above, including short-term receivables and payables, the carrying amount is a reasonable approximation of fair value . Reference is made to Note 1 \u2018Accounting policies\u2019 for the upcoming changes as a result of IFRS 9 \u2018Financial instruments\u2019. One of the requirements in IFRS 9 is to assess whether investments in debt securities and loans meet the definition of \u2018Solely Payments of Principal and Interest\u2019, also referred to as \u2018SPPI assets\u2019. SPPI assets are financial assets with contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (as defined in IFRS 9), excluding assets that are held for trading and/or that are managed and whose performance is evaluated on a fair value basis. The table below provides a split of the fair value of financial assets into three categories: SPPI assessment applicable under IFRS 9 and conditions met (SPPI compliant assets), SPPI assessment applicable under IFRS 9 and conditions not met (SPPI non-compliant assets), and SPPI assessment not applicable. Whilst IFRS 9 becomes effective for NN Group on the same date as IFRS 17, the information in the table below is based on the assets held, and business models in place. Fair value of financial assets - SPPI assessment SPPI compliant assets SPPI non-compliant assets SPPI assessment not applicable 2022 2021 2022 2021 2022 2021 Cash and cash equivalents 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 Available-for-sale investments 69,861 94,940 5,091 4,842 6,659 8,101 Loans 60,751 71,576 45 62 645 959 Financial assets 130,612 166,516 5,136 4,904 51,669 62,660 The estimated fair value represents the price at which an orderly transaction to sell the financial asset or to transfer the financial liability would take place between market participants at the balance sheet date (exit price). The fair value of financial assets and liabilities is based on unadjusted quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available market prices are obtained from independent market vendors, brokers or market makers. Because substantial trading markets do not exist for all financial instruments, various techniques have been developed to estimate the approximate fair value of financial assets and liabilities that are not actively traded. The fair value presented may not be indicative of the net realisable value. In addition, the calculation of the estimated fair value is based on market conditions at a specific point in time and may not be indicative of the future fair value. The following methods and assumptions were used by NN Group to estimate the fair value of the financial instruments: Cash and cash equivalents Cash and cash equivalents are recognised at their nominal value which approximates the fair value. Financial assets and liabilities at fair value through profit or loss Derivatives Derivative contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments that are not actively traded, the fair value is estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principal techniques used to value these instruments are based on discounted cash flows, Black-Scholes option models and Monte Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on \u2018no arbitrage\u2019 principles. These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model calibration procedures. The inputs used include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available . 36 Fair value of financial assets and liabilities continued Available-for-sale investments Equity securities The fair value of publicly traded equity securities is determined using quoted market prices when available. Where no quoted market prices are available, fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private equity is based on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by reference to market valuations for similar entities quoted in an active market. Debt securities The fair value for debt securities is based on quoted market prices, where available. Quoted market prices may be obtained from an exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available, fair value is based on an analysis of available market inputs, which may include values obtained from one or more pricing services or by a valuation technique that discounts expected future cash flows using market interest rate curves, referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable. Loans For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying values represent a reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions. The fair value of mortgage loans is estimated by taking into account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes. Subordinated debt and debt securities issued The fair value of subordinated debt and debt securities issued is estimated using discounted cash flows based on interest rates and credit spreads that apply to similar instruments. Other borrowed funds The fair value of other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity. Investment contracts For investment contracts for risk of the company, the fair value has been estimated using a discounted cash flow approach based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For investment contracts for risk of policyholders, the fair value generally equals the fair value of the underlying assets. For other investment- type contracts, the fair value is estimated based on the cash surrender values. Customer deposits and other funds on deposit The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair value. The fair values of deposits with stated maturities have been estimated based on discounting future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions . 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at fair value The fair value of the financial instruments carried at fair value was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at fair value (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 33,593 359 610 34,562 Non-trading derivatives 130 2,322 2,452 Financial assets designated as at fair value through profit or loss 491 190 681 Available-for-sale investments 49,405 26,784 5,421 81,610 Financial assets 83,619 29,655 6,031 119,305 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 217 217 Investment contracts (for contracts at fair value) 2,057 2,057 Non-trading derivatives 3 6,440 19 6,462 Financial liabilities 2,060 6,657 19 8,736 Methods applied in determining the fair value of financial assets and liabilities at fair value (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 38,092 444 725 39,261 Non-trading derivatives 30 6,381 8 6,419 Financial assets designated as at fair value through profit or loss 823 168 991 Available-for-sale investments 69,336 34,656 3,891 107,883 Financial assets 108,281 41,649 4,624 154,554 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 259 259 Investment contracts (for contracts at fair value) 1,449 1,449 Non-trading derivatives 30 1,851 23 1,904 Financial liabilities 1,479 2,110 23 3,612 NN Group has categorised its financial instruments that are either measured in the balance sheet at fair value or for which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending on whether the fair value is determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include, for example, illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), mortgage loans and consumer lending, private equity instruments and investments in real estate funds. Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Transfers into and transfers out of levels in the fair value hierarchy are recognised on the date of the event or change of circumstances that caused the transfer . 36 Fair value of financial assets and liabilities continued Level 1 \u2013 (Unadjusted) Quoted prices in active markets This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market that NN Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. Level 2 \u2013 Valuation technique supported by observable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the model are taken from an active market or are observable. If certain inputs in the model are unobservable the instrument is still classified in this category, provided that the impact of those unobservable inputs elements on the overall valuation is insignificant. Included in this category are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other market observable external data and items whose value is derived from quoted prices but for which there was insufficient evidence of an active market. Level 3 \u2013 Valuation technique supported by unobservable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument is classified in its entirety as Level 3 if a significant portion of the instrument\u2019s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which the price at which an orderly transaction would likely occur can be derived. Changes in Level 3 financial assets (2022) 2022 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 725 8 3,891 4,624 Amounts recognised in the profit and loss account -83 -8 -21 -112 Revaluations recognised in other comprehensive income (equity) -3 -3 Purchase 1,625 1,625 Sale -32 -174 -206 Maturity/settlement -2 -2 Other transfers and reclassifications 130 130 Exchange rate differences -25 -25 Level 3 Financial assets \u2013 closing balance 610 \u2013 5,421 6,031 Changes in Level 3 financial assets (2021) 2021 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 787 22 2,680 3,489 Amounts recognised in the profit and loss account -41 -14 -18 -73 Revaluations recognised in other comprehensive income (equity) 388 388 Purchase 1,097 1,097 Sale -21 -50 -71 Maturity/settlement -116 -116 Transfers into Level 3 11 11 Transfers out of Level 3 -120 -120 Exchange rate differences 19 19 Level 3 Financial assets \u2013 closing balance 725 8 3,891 4,624 36 Fair value of financial assets and liabilities continued Changes in Level 3 financial liabilities (2022) 2022 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 23 Amounts recognised in the profit and loss account -4 Level 3 Financial liabilities \u2013 closing balance 19 Changes in Level 3 financial liabilities (2021) 2021 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 42 Amounts recognised in the profit and loss account -19 Level 3 Financial liabilities \u2013 closing balance 23 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2022) 2022 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -83 -83 Non-trading derivatives -8 -8 Available-for-sale investments -21 -21 Financial assets -112 \u2013 -112 Financial liabilities Non-trading derivatives -4 -4 Financial liabilities -4 \u2013 -4 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2021) 2021 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -41 -41 Non-trading derivatives -14 -14 Available-for-sale investments -18 -18 Financial assets -73 \u2013 -73 Financial liabilities Non-trading derivatives -19 -19 Financial liabilities -19 \u2013 -19 Level 3 Financial assets at fair value Financial assets measured at fair value in the balance sheet as at 31 December 2022 of EUR 119,305 million (2021: EUR 154,554 million) include an amount of EUR 6,031 million (5.1%) that is classified as Level 3 (2021: EUR 4,625 million (3.0%)). Changes in Level 3 are disclosed above in the table \u2018Level 3 Financial assets \u2019 36 Fair value of financial assets and liabilities continued Financial assets in Level 3 include both assets for which the fair value was determined using valuation techniques that incorporate unobservable inputs and assets for which the fair value was determined using quoted prices, but for which the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Fair values that are determined using valuation techniques using unobservable inputs are sensitive to the inputs used. Fair values that are determined using quoted prices are not sensitive to unobservable inputs, as the valuation is based on unadjusted external price quotes. These are classified in Level 3 as a result of the illiquidity in the relevant market, but are not significantly sensitive to NN Group\u2019s own unobservable inputs. Unrealised gains and losses that relate to \u2018Level 3 Financial assets\u2019 are included in the profit and loss account as follows: \u2022 Those relating to Investments for risk of policyholders are included in \u2018Underwriting expenditure\u2019 \u2022 Those relating to Non-trading derivatives are included in \u2018Valuation results on non-trading derivatives\u2019 \u2022 Those relating to financial assets designated as at fair value through profit or loss are included in \u2018Valuation results on non-trading derivatives \u2013 Valuation results on assets and liabilities designated as at fair value through profit or loss (excluding trading)\u2019 Unrealised gains and losses that relate to available-for-sale investments are recognised in other comprehensive income (equity) and included in reserves in \u2018Unrealised revaluations available-for-sale investments and other\u2019. Investments for risk of policyholders Investments for risk of policyholders classified as \u2018Level 3 Financial assets\u2019 amounted EUR 610 million as at 31 December 2022 (2021: EUR 725 million). Net result is unaffected when reasonable possible alternative assumptions would have been used in measuring these investments. Non-trading derivatives Non-trading derivatives classified as \u2018Level 3 Financial assets\u2019 are mainly used to hedge the fair value risk of the mortgage loan portfolio at NN Bank. These derivatives classified as Level 3 amounted nil as at 31 December 2022 (2021: EUR 8 million). Available-for-sale investments The available-for-sale investments classified as \u2018Level 3 Financial assets\u2019 amounted EUR 5,421 million as at 31 December 2022 (2021: EUR 3,891 million) mainly consists of investments in debt securities and shares in real estate investment funds and private equity investment funds of which the fair value is determined using (unadjusted) quoted prices in inactive markets for the securities or quoted prices obtained from the asset managers of the funds. It is estimated that a 10% change in valuation of these investments would have no significant impact on net result but would increase or reduce shareholders\u2019 equity by EUR 542 million (2021: EUR 389 million), being approximately 3.4% (before tax) (2021: 1.1% (before tax)), of total equity. Level 3 Financial liabilities at fair value Non-trading derivatives The total amount of financial liabilities classified as Level 3 at 31 December 2022 of EUR 19 million (2021: EUR 23 million) relates to non-trading derivative positions. In 2022, nil (2021: EUR 9 million) relates to derivatives used to hedge the interest rate risk associated with the funding position of NN Bank. EUR 19 million (2021: EUR 12 million) relates to longevity hedges closed by NN Group. It is estimated that a 5% increase in mortality assumptions for these longevity hedges reduces result and equity before tax by EUR 5 million (2021: EUR 13 million) and a 5% decrease in mortality assumptions increases result and equity before tax by EUR 7 million (2021: EUR 17 million) 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at amortised cost The fair value of the financial instruments carried at amortised cost in the balance sheet (where fair value is disclosed) was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,669 1 6,670 Loans 20 3,018 58,404 61,442 Financial assets 6,689 3,018 58,405 68,112 Financial liabilities Subordinated debt 2,287 2,287 Debt securities issued 1,498 1,498 Other borrowed funds 5,596 5,087 10,683 Investment contracts for risk of company 317 766 1,083 Customer deposits and other funds on deposit 10,309 5,310 15,619 Financial liabilities 20,007 10,397 766 31,170 Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,929 6,929 Loans 4 3,832 68,761 72,597 Financial assets 6,933 3,832 68,761 79,526 Financial liabilities Subordinated debt 2,624 2,624 Debt securities issued 2,351 2,351 Other borrowed funds 6,372 941 51 7,364 Investment contracts for risk of company 49 927 976 Customer deposits and other funds on deposit 9,980 6,480 16,460 Financial liabilities 21,376 7,421 978 29,775", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-549": { "value": "36 Fair value of financial assets and liabilities The following table presents the estimated fair value of NN Group\u2019s financial assets and liabilities. Certain balance sheet items are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of NN Group. Fair value of financial assets and liabilities Estimated fair value Balance sheet value 2022 2021 2022 2021 Financial assets Cash and cash equivalents 6,670 6,929 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 681 991 Available-for-sale investments 81,610 107,883 81,610 107,883 Loans 61,442 72,597 68,044 68,200 Total financial assets 187,417 234,080 194,019 229,683 Financial liabilities Subordinated debt 2,287 2,624 2,334 2,356 Debt securities issued 1,498 2,351 1,694 2,292 Other borrowed funds 10,683 7,364 11,118 7,301 Investment contracts with discretionary participation features for risk of policyholders 217 259 217 259 Investment contracts for risk of company 1,083 976 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Customer deposits and other funds on deposit 15,619 16,460 16,235 15,945 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 6,462 1,904 6,462 1,904 Total financial liabilities 39,906 33,387 41,284 32,459 For the other financial assets and financial liabilities not included in the table above, including short-term receivables and payables, the carrying amount is a reasonable approximation of fair value 36 Fair value of financial assets and liabilities continued Reference is made to Note 1 \u2018Accounting policies\u2019 for the upcoming changes as a result of IFRS 9 \u2018Financial instruments\u2019. One of the requirements in IFRS 9 is to assess whether investments in debt securities and loans meet the definition of \u2018Solely Payments of Principal and Interest\u2019, also referred to as \u2018SPPI assets\u2019. SPPI assets are financial assets with contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (as defined in IFRS 9), excluding assets that are held for trading and/or that are managed and whose performance is evaluated on a fair value basis. The table below provides a split of the fair value of financial assets into three categories: SPPI assessment applicable under IFRS 9 and conditions met (SPPI compliant assets), SPPI assessment applicable under IFRS 9 and conditions not met (SPPI non-compliant assets), and SPPI assessment not applicable. Whilst IFRS 9 becomes effective for NN Group on the same date as IFRS 17, the information in the table below is based on the assets held, and business models in place. Fair value of financial assets - SPPI assessment SPPI compliant assets SPPI non-compliant assets SPPI assessment not applicable 2022 2021 2022 2021 2022 2021 Cash and cash equivalents 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 Available-for-sale investments 69,861 94,940 5,091 4,842 6,659 8,101 Loans 60,751 71,576 45 62 645 959 Financial assets 130,612 166,516 5,136 4,904 51,669 62,660 The estimated fair value represents the price at which an orderly transaction to sell the financial asset or to transfer the financial liability would take place between market participants at the balance sheet date (exit price). The fair value of financial assets and liabilities is based on unadjusted quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available market prices are obtained from independent market vendors, brokers or market makers. Because substantial trading markets do not exist for all financial instruments, various techniques have been developed to estimate the approximate fair value of financial assets and liabilities that are not actively traded. The fair value presented may not be indicative of the net realisable value. In addition, the calculation of the estimated fair value is based on market conditions at a specific point in time and may not be indicative of the future fair value. The following methods and assumptions were used by NN Group to estimate the fair value of the financial instruments: Cash and cash equivalents Cash and cash equivalents are recognised at their nominal value which approximates the fair value. Financial assets and liabilities at fair value through profit or loss Derivatives Derivative contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments that are not actively traded, the fair value is estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principal techniques used to value these instruments are based on discounted cash flows, Black-Scholes option models and Monte Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on \u2018no arbitrage\u2019 principles. These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model calibration procedures. The inputs used include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available 36 Fair value of financial assets and liabilities continued Available-for-sale investments Equity securities The fair value of publicly traded equity securities is determined using quoted market prices when available. Where no quoted market prices are available, fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private equity is based on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by reference to market valuations for similar entities quoted in an active market. Debt securities The fair value for debt securities is based on quoted market prices, where available. Quoted market prices may be obtained from an exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available, fair value is based on an analysis of available market inputs, which may include values obtained from one or more pricing services or by a valuation technique that discounts expected future cash flows using market interest rate curves, referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable. Loans For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying values represent a reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions. The fair value of mortgage loans is estimated by taking into account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes. Subordinated debt and debt securities issued The fair value of subordinated debt and debt securities issued is estimated using discounted cash flows based on interest rates and credit spreads that apply to similar instruments. Other borrowed funds The fair value of other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity. Investment contracts For investment contracts for risk of the company, the fair value has been estimated using a discounted cash flow approach based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For investment contracts for risk of policyholders, the fair value generally equals the fair value of the underlying assets. For other investment- type contracts, the fair value is estimated based on the cash surrender values. Customer deposits and other funds on deposit The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair value. The fair values of deposits with stated maturities have been estimated based on discounting future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at fair value The fair value of the financial instruments carried at fair value was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at fair value (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 33,593 359 610 34,562 Non-trading derivatives 130 2,322 2,452 Financial assets designated as at fair value through profit or loss 491 190 681 Available-for-sale investments 49,405 26,784 5,421 81,610 Financial assets 83,619 29,655 6,031 119,305 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 217 217 Investment contracts (for contracts at fair value) 2,057 2,057 Non-trading derivatives 3 6,440 19 6,462 Financial liabilities 2,060 6,657 19 8,736 Methods applied in determining the fair value of financial assets and liabilities at fair value (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 38,092 444 725 39,261 Non-trading derivatives 30 6,381 8 6,419 Financial assets designated as at fair value through profit or loss 823 168 991 Available-for-sale investments 69,336 34,656 3,891 107,883 Financial assets 108,281 41,649 4,624 154,554 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 259 259 Investment contracts (for contracts at fair value) 1,449 1,449 Non-trading derivatives 30 1,851 23 1,904 Financial liabilities 1,479 2,110 23 3,612 NN Group has categorised its financial instruments that are either measured in the balance sheet at fair value or for which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending on whether the fair value is determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include, for example, illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), mortgage loans and consumer lending, private equity instruments and investments in real estate funds. Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Transfers into and transfers out of levels in the fair value hierarchy are recognised on the date of the event or change of circumstances that caused the transfer 36 Fair value of financial assets and liabilities continued Level 1 \u2013 (Unadjusted) Quoted prices in active markets This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market that NN Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. Level 2 \u2013 Valuation technique supported by observable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the model are taken from an active market or are observable. If certain inputs in the model are unobservable the instrument is still classified in this category, provided that the impact of those unobservable inputs elements on the overall valuation is insignificant. Included in this category are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other market observable external data and items whose value is derived from quoted prices but for which there was insufficient evidence of an active market. Level 3 \u2013 Valuation technique supported by unobservable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument is classified in its entirety as Level 3 if a significant portion of the instrument\u2019s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which the price at which an orderly transaction would likely occur can be derived. Changes in Level 3 financial assets (2022) 2022 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 725 8 3,891 4,624 Amounts recognised in the profit and loss account -83 -8 -21 -112 Revaluations recognised in other comprehensive income (equity) -3 -3 Purchase 1,625 1,625 Sale -32 -174 -206 Maturity/settlement -2 -2 Other transfers and reclassifications 130 130 Exchange rate differences -25 -25 Level 3 Financial assets \u2013 closing balance 610 \u2013 5,421 6,031 Changes in Level 3 financial assets (2021) 2021 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 787 22 2,680 3,489 Amounts recognised in the profit and loss account -41 -14 -18 -73 Revaluations recognised in other comprehensive income (equity) 388 388 Purchase 1,097 1,097 Sale -21 -50 -71 Maturity/settlement -116 -116 Transfers into Level 3 11 11 Transfers out of Level 3 -120 -120 Exchange rate differences 19 19 Level 3 Financial assets \u2013 closing balance 725 8 3,891 4,624 36 Fair value of financial assets and liabilities continued Changes in Level 3 financial liabilities (2022) 2022 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 23 Amounts recognised in the profit and loss account -4 Level 3 Financial liabilities \u2013 closing balance 19 Changes in Level 3 financial liabilities (2021) 2021 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 42 Amounts recognised in the profit and loss account -19 Level 3 Financial liabilities \u2013 closing balance 23 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2022) 2022 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -83 -83 Non-trading derivatives -8 -8 Available-for-sale investments -21 -21 Financial assets -112 \u2013 -112 Financial liabilities Non-trading derivatives -4 -4 Financial liabilities -4 \u2013 -4 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2021) 2021 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -41 -41 Non-trading derivatives -14 -14 Available-for-sale investments -18 -18 Financial assets -73 \u2013 -73 Financial liabilities Non-trading derivatives -19 -19 Financial liabilities -19 \u2013 -19 Level 3 Financial assets at fair value Financial assets measured at fair value in the balance sheet as at 31 December 2022 of EUR 119,305 million (2021: EUR 154,554 million) include an amount of EUR 6,031 million (5.1%) that is classified as Level 3 (2021: EUR 4,625 million (3.0%)). Changes in Level 3 are disclosed above in the table \u2018Level 3 Financial assets \u2019 . 36 Fair value of financial assets and liabilities continued Financial assets in Level 3 include both assets for which the fair value was determined using valuation techniques that incorporate unobservable inputs and assets for which the fair value was determined using quoted prices, but for which the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Fair values that are determined using valuation techniques using unobservable inputs are sensitive to the inputs used. Fair values that are determined using quoted prices are not sensitive to unobservable inputs, as the valuation is based on unadjusted external price quotes. These are classified in Level 3 as a result of the illiquidity in the relevant market, but are not significantly sensitive to NN Group\u2019s own unobservable inputs. Unrealised gains and losses that relate to \u2018Level 3 Financial assets\u2019 are included in the profit and loss account as follows: \u2022 Those relating to Investments for risk of policyholders are included in \u2018Underwriting expenditure\u2019 \u2022 Those relating to Non-trading derivatives are included in \u2018Valuation results on non-trading derivatives\u2019 \u2022 Those relating to financial assets designated as at fair value through profit or loss are included in \u2018Valuation results on non-trading derivatives \u2013 Valuation results on assets and liabilities designated as at fair value through profit or loss (excluding trading)\u2019 Unrealised gains and losses that relate to available-for-sale investments are recognised in other comprehensive income (equity) and included in reserves in \u2018Unrealised revaluations available-for-sale investments and other\u2019. Investments for risk of policyholders Investments for risk of policyholders classified as \u2018Level 3 Financial assets\u2019 amounted EUR 610 million as at 31 December 2022 (2021: EUR 725 million). Net result is unaffected when reasonable possible alternative assumptions would have been used in measuring these investments. Non-trading derivatives Non-trading derivatives classified as \u2018Level 3 Financial assets\u2019 are mainly used to hedge the fair value risk of the mortgage loan portfolio at NN Bank. These derivatives classified as Level 3 amounted nil as at 31 December 2022 (2021: EUR 8 million). Available-for-sale investments The available-for-sale investments classified as \u2018Level 3 Financial assets\u2019 amounted EUR 5,421 million as at 31 December 2022 (2021: EUR 3,891 million) mainly consists of investments in debt securities and shares in real estate investment funds and private equity investment funds of which the fair value is determined using (unadjusted) quoted prices in inactive markets for the securities or quoted prices obtained from the asset managers of the funds. It is estimated that a 10% change in valuation of these investments would have no significant impact on net result but would increase or reduce shareholders\u2019 equity by EUR 542 million (2021: EUR 389 million), being approximately 3.4% (before tax) (2021: 1.1% (before tax)), of total equity. Level 3 Financial liabilities at fair value Non-trading derivatives The total amount of financial liabilities classified as Level 3 at 31 December 2022 of EUR 19 million (2021: EUR 23 million) relates to non-trading derivative positions. In 2022, nil (2021: EUR 9 million) relates to derivatives used to hedge the interest rate risk associated with the funding position of NN Bank. EUR 19 million (2021: EUR 12 million) relates to longevity hedges closed by NN Group. It is estimated that a 5% increase in mortality assumptions for these longevity hedges reduces result and equity before tax by EUR 5 million (2021: EUR 13 million) and a 5% decrease in mortality assumptions increases result and equity before tax by EUR 7 million (2021: EUR 17 million) 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at amortised cost The fair value of the financial instruments carried at amortised cost in the balance sheet (where fair value is disclosed) was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,669 1 6,670 Loans 20 3,018 58,404 61,442 Financial assets 6,689 3,018 58,405 68,112 Financial liabilities Subordinated debt 2,287 2,287 Debt securities issued 1,498 1,498 Other borrowed funds 5,596 5,087 10,683 Investment contracts for risk of company 317 766 1,083 Customer deposits and other funds on deposit 10,309 5,310 15,619 Financial liabilities 20,007 10,397 766 31,170 Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,929 6,929 Loans 4 3,832 68,761 72,597 Financial assets 6,933 3,832 68,761 79,526 Financial liabilities Subordinated debt 2,624 2,624 Debt securities issued 2,351 2,351 Other borrowed funds 6,372 941 51 7,364 Investment contracts for risk of company 49 927 976 Customer deposits and other funds on deposit 9,980 6,480 16,460 Financial liabilities 21,376 7,421 978 29,77537 Fair value of non-financial assets The following table presents the estimated fair value of NN Group\u2019s non-financial assets that are measured at fair value in the balance sheet. Reference is made to Note 1 \u2018Accounting policies\u2019 in the sections \u2018Real estate investments\u2019 and \u2018Property and equipment\u2019 for the methods and assumptions used by NN Group to estimate the fair value of the non-financial assets. Fair value of non-financial assets Estimated fair value Balance sheet value 2022 2021 2022 2021 Real estate investments 2,754 2,719 2,754 2,719 Property in own use 97 71 97 71 Fair value of non-financial assets 2,851 2,790 2,851 2,790 The fair value of the non-financial assets were determined as follows: Methods applied in determining the fair value of non-financial assets at fair value (2022) 2022 Level 1 Level 2 Level 3 Total Real estate investments 2,754 2,754 Property in own use 97 97 Non-financial assets \u2013 \u2013 2,851 2,851 Methods applied in determining the fair value of non-financial assets at fair value (2021) 2021 Level 1 Level 2 Level 3 Total Real estate investments 2,719 2,719 Property in own use 71 71 Non-financial assets \u2013 \u2013 2,790 2,790 Changes in Level 3 non-financial assets (2022) 2022 Real estate investments Property in own use Level 3 non-financial assets \u2013 opening balance 2,719 71 Amounts recognised in the profit and loss account during the year -8 -2 Purchase 136 1 Revaluation recognised in equity during the year 3 Sale -100 -1 Changes in the composition of the group and other changes 7 25 Level 3 non-financial assets \u2013 closing balance 2,754 97 Changes in Level 3 non-financial assets (2021) 2021 Real estate investments Property in own use Level 3 non-financial assets \u2013 opening balance 2,444 74 Amounts recognised in the profit and loss account during the year 241 -2 Purchase 156 Sale -124 -2 Changes in the composition of the group and other changes 2 1 Level 3 non-financial assets \u2013 closing balance 2,719 71 Level 3 \u2013 Amounts recognised in the profit and loss account during the year on non-financial assets (2022) 2022 Held at balance sheet date Derecognised during the year Total Real estate investments -8 -8 Property in own use -2 -2 Level 3 Amounts recognised in the profit and loss account during the year on non-financial assets -8 -2 -10 Level 3 \u2013 Amounts recognised in the profit and loss account during the year on non-financial assets (2021) 2021 Held at balance sheet date Derecognised during the year Total Real estate investments 241 241 Property in own use -2 -2 Level 3 Amounts recognised in the profit and loss account during the year on non-financial assets 239 \u2013 239 Real estate investments and Property in own use Valuation methodology The fair value of real estate is based on regular appraisals by independent, qualified valuers. The fair value is established using valuation methods that take into account recent comparable market transactions (CMT), capitalisation of income (CI) methods and/or discounted cash flow (DCF) calculations. The underlying assumption used in the valuation is that the properties are let or sold to third parties based on the actual letting status. Future rental income is taken into account in accordance with the terms in existing leases, (expected) vacancies, estimations of the rental values for new leases when leases expire and incentives like rent-free periods. These estimated cash flows are discounted using market- based discount rates that reflect appropriately the risk characteristics of the real estate investments . Key assumptions Key assumptions in the valuation of real estate include the estimated current rental value per square metre, the estimated future rental value per square metre (ERV), the net initial yield and the vacancy rate. These assumptions were in the following ranges: Significant assumptions Fair value Valuation technique Current rent/m 2 ERV/m 2 Net initial yield % Vacancy % Average lease term in years The Netherlands Office 169 DCF 333\u2013342 364\u2013406 3.52\u20133.54 1.26 7.4 Residential 64 DCF 218.1 245.0 4.5 4.5 Residential 4 Residual approach Industrial 172 DCF 49\u201352 54\u201364 3.23\u20133.63 3.7 Retail 12 DCF 139.2 202.1 4.5 35.1 8.2 Ground positions 2 Residual approach IPUC 97 Residual approach Germany Retail 258 DCF 192\u2013321 173\u2013322 4.26\u20134.48 6.6 4.7 Industrial 258 DCF 48\u201396 60\u201397 3.9\u20134.5 2.0 6.2 France Residential 228 DCF 286\u2013429 225\u2013353 3.66\u20134.86 1.9 2.0 Industrial 339 DCF 46\u201373 46\u201373 3.86\u20134.78 5.1 Spain Retail 246 DCF 225\u2013233 195\u2013256 6.41\u20138.48 5.0 3.6 Industrial 124 DCF 0\u201345 30\u201345 0.82\u20136.56 40.2 1.7 Italy Retail 219 DCF 161\u2013760 170\u2013780 0.9\u20137.51 2.0 5.9 Industrial 37 DCF 52 55 4.6 1.4 Denmark Industrial 83 DCF 112\u2013165 142\u2013195 4.72\u20135 10.4 Residential 122 DCF 271 271 3.9 Belgium Retail 116 DCF 82\u2013365 103\u2013324 5.45\u20136.86 3.6 2.9 Industrial 34 DCF 45 48 4.6 0.7 Residential 25 DCF 189 188 26.2 Office 18 DCF 315 194 5.0 23.0 0.5 Poland Retail 82 DCF 154 157 8.2 5.0 3.3 Real estate under construction and other \u2013 Total real estate 2,709 Sensitivities Significant increases (decreases) in the estimated rental value and rent growth in isolation would result in a significantly higher (lower) fair value of the real estate investments. Significant increases (decreases) in the long-term vacancy rate and discount rate in isolation would result in a significantly lower (higher) fair value of the real estate investments. During 2022, the number of transactions in relevant real estate markets has decreased, resulting in larger uncertainties around the inputs to the valuations and, therefore, increased uncertainty in the fair value of real estate investments. ", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-550": { "value": "36 Fair value of financial assets and liabilities The following table presents the estimated fair value of NN Group\u2019s financial assets and liabilities. Certain balance sheet items are not included in the table, as they do not meet the definition of a financial asset or liability. The aggregation of the fair value presented below does not represent, and should not be construed as representing, the underlying value of NN Group. Fair value of financial assets and liabilities Estimated fair value Balance sheet value 2022 2021 2022 2021 Financial assets Cash and cash equivalents 6,670 6,929 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 681 991 Available-for-sale investments 81,610 107,883 81,610 107,883 Loans 61,442 72,597 68,044 68,200 Total financial assets 187,417 234,080 194,019 229,683 Financial liabilities Subordinated debt 2,287 2,624 2,334 2,356 Debt securities issued 1,498 2,351 1,694 2,292 Other borrowed funds 10,683 7,364 11,118 7,301 Investment contracts with discretionary participation features for risk of policyholders 217 259 217 259 Investment contracts for risk of company 1,083 976 1,167 953 Investment contracts for risk of policyholders 2,057 1,449 2,057 1,449 Customer deposits and other funds on deposit 15,619 16,460 16,235 15,945 Financial liabilities at fair value through profit or loss: \u2013 non-trading derivatives 6,462 1,904 6,462 1,904 Total financial liabilities 39,906 33,387 41,284 32,459 For the other financial assets and financial liabilities not included in the table above, including short-term receivables and payables, the carrying amount is a reasonable approximation of fair value 36 Fair value of financial assets and liabilities continued Reference is made to Note 1 \u2018Accounting policies\u2019 for the upcoming changes as a result of IFRS 9 \u2018Financial instruments\u2019. One of the requirements in IFRS 9 is to assess whether investments in debt securities and loans meet the definition of \u2018Solely Payments of Principal and Interest\u2019, also referred to as \u2018SPPI assets\u2019. SPPI assets are financial assets with contractual terms that give rise to cash flows that are solely payments of principal and interest on the principal amount outstanding (as defined in IFRS 9), excluding assets that are held for trading and/or that are managed and whose performance is evaluated on a fair value basis. The table below provides a split of the fair value of financial assets into three categories: SPPI assessment applicable under IFRS 9 and conditions met (SPPI compliant assets), SPPI assessment applicable under IFRS 9 and conditions not met (SPPI non-compliant assets), and SPPI assessment not applicable. Whilst IFRS 9 becomes effective for NN Group on the same date as IFRS 17, the information in the table below is based on the assets held, and business models in place. Fair value of financial assets - SPPI assessment SPPI compliant assets SPPI non-compliant assets SPPI assessment not applicable 2022 2021 2022 2021 2022 2021 Cash and cash equivalents 6,670 6,929 Financial assets at fair value through profit or loss: \u2013 investments for risk of policyholders 34,562 39,261 \u2013 non-trading derivatives 2,452 6,419 \u2013 designated as at fair value through profit or loss 681 991 Available-for-sale investments 69,861 94,940 5,091 4,842 6,659 8,101 Loans 60,751 71,576 45 62 645 959 Financial assets 130,612 166,516 5,136 4,904 51,669 62,660 The estimated fair value represents the price at which an orderly transaction to sell the financial asset or to transfer the financial liability would take place between market participants at the balance sheet date (exit price). The fair value of financial assets and liabilities is based on unadjusted quoted market prices, where available. Such quoted market prices are primarily obtained from exchange prices for listed instruments. Where an exchange price is not available market prices are obtained from independent market vendors, brokers or market makers. Because substantial trading markets do not exist for all financial instruments, various techniques have been developed to estimate the approximate fair value of financial assets and liabilities that are not actively traded. The fair value presented may not be indicative of the net realisable value. In addition, the calculation of the estimated fair value is based on market conditions at a specific point in time and may not be indicative of the future fair value. The following methods and assumptions were used by NN Group to estimate the fair value of the financial instruments: Cash and cash equivalents Cash and cash equivalents are recognised at their nominal value which approximates the fair value. Financial assets and liabilities at fair value through profit or loss Derivatives Derivative contracts can either be exchange-traded or over the counter (OTC). The fair value of exchange-traded derivatives is determined using quoted market prices in an active market and those derivatives are classified in Level 1 of the fair value hierarchy. For those instruments that are not actively traded, the fair value is estimated based on valuation techniques. OTC derivatives and derivatives trading in an inactive market are valued using valuation techniques because quoted market prices in an active market are not available for such instruments. The valuation techniques and inputs depend on the type of derivative and the nature of the underlying instruments. The principal techniques used to value these instruments are based on discounted cash flows, Black-Scholes option models and Monte Carlo simulation. These valuation models calculate the present value of expected future cash flows, based on \u2018no arbitrage\u2019 principles. These models are commonly used in the financial industry. Inputs to valuation models are determined from observable market data where possible. Certain inputs may not be observable in the market directly, but can be determined from observable prices via valuation model calibration procedures. The inputs used include prices available from exchanges, dealers, brokers or providers of pricing, yield curves, credit spreads, default rates, recovery rates, dividend rates, volatility of underlying interest rates, equity prices and foreign currency exchange rates. These inputs are determined with reference to quoted prices, recently executed trades, independent market quotes and consensus data, where available . 36 Fair value of financial assets and liabilities continued Available-for-sale investments Equity securities The fair value of publicly traded equity securities is determined using quoted market prices when available. Where no quoted market prices are available, fair value is determined based on quoted prices for similar securities or other valuation techniques. The fair value of private equity is based on quoted market prices, if available. In the absence of quoted prices in an active market, fair value is estimated on the basis of an analysis of the investee\u2019s financial position and results, risk profile, prospects, price, earnings comparisons and revenue multiples and by reference to market valuations for similar entities quoted in an active market. Debt securities The fair value for debt securities is based on quoted market prices, where available. Quoted market prices may be obtained from an exchange, dealer, broker, industry group, pricing service or regulatory service. If quoted prices in an active market are not available, fair value is based on an analysis of available market inputs, which may include values obtained from one or more pricing services or by a valuation technique that discounts expected future cash flows using market interest rate curves, referenced credit spreads, maturity of the investment and estimated prepayment rates where applicable. Loans For loans and advances that are repriced frequently and have had no significant changes in credit risk, carrying values represent a reasonable estimate of the fair value. The fair value of other loans is estimated by discounting expected future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions. The fair value of mortgage loans is estimated by taking into account prepayment behaviour. Loans with similar characteristics are aggregated for calculation purposes. Subordinated debt and debt securities issued The fair value of subordinated debt and debt securities issued is estimated using discounted cash flows based on interest rates and credit spreads that apply to similar instruments. Other borrowed funds The fair value of other borrowed funds is generally based on quoted market prices or, if not available, on estimated prices by discounting expected future cash flows using a current market interest rate and credit spreads applicable to the yield, credit quality and maturity. Investment contracts For investment contracts for risk of the company, the fair value has been estimated using a discounted cash flow approach based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. For investment contracts for risk of policyholders, the fair value generally equals the fair value of the underlying assets. For other investment- type contracts, the fair value is estimated based on the cash surrender values. Customer deposits and other funds on deposit The carrying values of customer deposits and other funds on deposit with no stated maturity approximate their fair value. The fair values of deposits with stated maturities have been estimated based on discounting future cash flows using a discount rate that reflects credit risk, liquidity and other current market conditions 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at fair value The fair value of the financial instruments carried at fair value was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at fair value (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 33,593 359 610 34,562 Non-trading derivatives 130 2,322 2,452 Financial assets designated as at fair value through profit or loss 491 190 681 Available-for-sale investments 49,405 26,784 5,421 81,610 Financial assets 83,619 29,655 6,031 119,305 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 217 217 Investment contracts (for contracts at fair value) 2,057 2,057 Non-trading derivatives 3 6,440 19 6,462 Financial liabilities 2,060 6,657 19 8,736 Methods applied in determining the fair value of financial assets and liabilities at fair value (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Investments for risk of policyholders 38,092 444 725 39,261 Non-trading derivatives 30 6,381 8 6,419 Financial assets designated as at fair value through profit or loss 823 168 991 Available-for-sale investments 69,336 34,656 3,891 107,883 Financial assets 108,281 41,649 4,624 154,554 Financial liabilities Investment contracts with discretionary participation features for risk of policyholders 259 259 Investment contracts (for contracts at fair value) 1,449 1,449 Non-trading derivatives 30 1,851 23 1,904 Financial liabilities 1,479 2,110 23 3,612 NN Group has categorised its financial instruments that are either measured in the balance sheet at fair value or for which the fair value is disclosed, into a three level hierarchy based on the priority of the inputs to the valuation. The fair value hierarchy gives the highest priority to (unadjusted) quoted prices in active markets for identical assets or liabilities and the lowest priority to valuation techniques supported by unobservable inputs. An active market for the asset or liability is a market in which transactions for the asset or liability occur with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. The fair value hierarchy consists of three levels, depending on whether the fair value is determined based on (unadjusted) quoted prices in an active market (Level 1), valuation techniques with observable inputs (Level 2) or valuation techniques that incorporate inputs which are unobservable and which have a more than insignificant impact on the fair value of the instrument (Level 3). Financial assets in Level 3 include, for example, illiquid debt securities, complex OTC and credit derivatives, certain complex loans (for which current market information about similar assets to use as observable, corroborated data for all significant inputs into a valuation model is not available), mortgage loans and consumer lending, private equity instruments and investments in real estate funds. Observable inputs reflect market data obtained from independent sources. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset or liability, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Transfers into and transfers out of levels in the fair value hierarchy are recognised on the date of the event or change of circumstances that caused the transfer 36 Fair value of financial assets and liabilities continued Level 1 \u2013 (Unadjusted) Quoted prices in active markets This category includes financial instruments whose fair value is determined directly by reference to published quotes in an active market that NN Group can access. A financial instrument is regarded as quoted in an active market if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service or regulatory agency and those prices represent actual and regularly occurring market transactions with sufficient frequency and volume to provide reliable pricing information on an ongoing basis. Level 2 \u2013 Valuation technique supported by observable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model), where inputs in the model are taken from an active market or are observable. If certain inputs in the model are unobservable the instrument is still classified in this category, provided that the impact of those unobservable inputs elements on the overall valuation is insignificant. Included in this category are items whose value is derived from quoted prices of similar instruments, but for which the prices are modified based on other market observable external data and items whose value is derived from quoted prices but for which there was insufficient evidence of an active market. Level 3 \u2013 Valuation technique supported by unobservable inputs This category includes financial instruments whose fair value is determined using a valuation technique (e.g. a model) for which more than an insignificant part of the inputs in terms of the overall valuation are not market observable. This category also includes financial assets and liabilities whose fair value is determined by reference to price quotes but for which the market is considered inactive. An instrument is classified in its entirety as Level 3 if a significant portion of the instrument\u2019s fair value is driven by unobservable inputs. Unobservable in this context means that there is little or no current market data available from which the price at which an orderly transaction would likely occur can be derived. Changes in Level 3 financial assets (2022) 2022 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 725 8 3,891 4,624 Amounts recognised in the profit and loss account -83 -8 -21 -112 Revaluations recognised in other comprehensive income (equity) -3 -3 Purchase 1,625 1,625 Sale -32 -174 -206 Maturity/settlement -2 -2 Other transfers and reclassifications 130 130 Exchange rate differences -25 -25 Level 3 Financial assets \u2013 closing balance 610 \u2013 5,421 6,031 Changes in Level 3 financial assets (2021) 2021 Investments for risk of policyholders Non-trading derivatives Available-for- sale investments Total Level 3 Financial assets \u2013 opening balance 787 22 2,680 3,489 Amounts recognised in the profit and loss account -41 -14 -18 -73 Revaluations recognised in other comprehensive income (equity) 388 388 Purchase 1,097 1,097 Sale -21 -50 -71 Maturity/settlement -116 -116 Transfers into Level 3 11 11 Transfers out of Level 3 -120 -120 Exchange rate differences 19 19 Level 3 Financial assets \u2013 closing balance 725 8 3,891 4,624 36 Fair value of financial assets and liabilities continued Changes in Level 3 financial liabilities (2022) 2022 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 23 Amounts recognised in the profit and loss account -4 Level 3 Financial liabilities \u2013 closing balance 19 Changes in Level 3 financial liabilities (2021) 2021 Non-trading derivatives Level 3 Financial liabilities \u2013 opening balance 42 Amounts recognised in the profit and loss account -19 Level 3 Financial liabilities \u2013 closing balance 23 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2022) 2022 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -83 -83 Non-trading derivatives -8 -8 Available-for-sale investments -21 -21 Financial assets -112 \u2013 -112 Financial liabilities Non-trading derivatives -4 -4 Financial liabilities -4 \u2013 -4 Level 3 \u2013 Amounts recognised in the profit and loss account during the year (2021) 2021 Held at balance sheet date Derecognised during the period Total Financial assets Investments for risk of policyholders -41 -41 Non-trading derivatives -14 -14 Available-for-sale investments -18 -18 Financial assets -73 \u2013 -73 Financial liabilities Non-trading derivatives -19 -19 Financial liabilities -19 \u2013 -19 Level 3 Financial assets at fair value Financial assets measured at fair value in the balance sheet as at 31 December 2022 of EUR 119,305 million (2021: EUR 154,554 million) include an amount of EUR 6,031 million (5.1%) that is classified as Level 3 (2021: EUR 4,625 million (3.0%)). Changes in Level 3 are disclosed above in the table \u2018Level 3 Financial assets 36 Fair value of financial assets and liabilities continued Financial assets in Level 3 include both assets for which the fair value was determined using valuation techniques that incorporate unobservable inputs and assets for which the fair value was determined using quoted prices, but for which the market was not actively trading at or around the balance sheet date. Unobservable inputs are inputs which are based on NN Group\u2019s own assumptions about the factors that market participants would use in pricing an asset, developed based on the best information available in the circumstances. Unobservable inputs may include volatility, correlation, spreads to discount rates, default rates and recovery rates, prepayment rates and certain credit spreads. Fair values that are determined using valuation techniques using unobservable inputs are sensitive to the inputs used. Fair values that are determined using quoted prices are not sensitive to unobservable inputs, as the valuation is based on unadjusted external price quotes. These are classified in Level 3 as a result of the illiquidity in the relevant market, but are not significantly sensitive to NN Group\u2019s own unobservable inputs. Unrealised gains and losses that relate to \u2018Level 3 Financial assets\u2019 are included in the profit and loss account as follows: \u2022 Those relating to Investments for risk of policyholders are included in \u2018Underwriting expenditure\u2019 \u2022 Those relating to Non-trading derivatives are included in \u2018Valuation results on non-trading derivatives\u2019 \u2022 Those relating to financial assets designated as at fair value through profit or loss are included in \u2018Valuation results on non-trading derivatives \u2013 Valuation results on assets and liabilities designated as at fair value through profit or loss (excluding trading)\u2019 Unrealised gains and losses that relate to available-for-sale investments are recognised in other comprehensive income (equity) and included in reserves in \u2018Unrealised revaluations available-for-sale investments and other\u2019. Investments for risk of policyholders Investments for risk of policyholders classified as \u2018Level 3 Financial assets\u2019 amounted EUR 610 million as at 31 December 2022 (2021: EUR 725 million). Net result is unaffected when reasonable possible alternative assumptions would have been used in measuring these investments. Non-trading derivatives Non-trading derivatives classified as \u2018Level 3 Financial assets\u2019 are mainly used to hedge the fair value risk of the mortgage loan portfolio at NN Bank. These derivatives classified as Level 3 amounted nil as at 31 December 2022 (2021: EUR 8 million). Available-for-sale investments The available-for-sale investments classified as \u2018Level 3 Financial assets\u2019 amounted EUR 5,421 million as at 31 December 2022 (2021: EUR 3,891 million) mainly consists of investments in debt securities and shares in real estate investment funds and private equity investment funds of which the fair value is determined using (unadjusted) quoted prices in inactive markets for the securities or quoted prices obtained from the asset managers of the funds. It is estimated that a 10% change in valuation of these investments would have no significant impact on net result but would increase or reduce shareholders\u2019 equity by EUR 542 million (2021: EUR 389 million), being approximately 3.4% (before tax) (2021: 1.1% (before tax)), of total equity. Level 3 Financial liabilities at fair value Non-trading derivatives The total amount of financial liabilities classified as Level 3 at 31 December 2022 of EUR 19 million (2021: EUR 23 million) relates to non-trading derivative positions. In 2022, nil (2021: EUR 9 million) relates to derivatives used to hedge the interest rate risk associated with the funding position of NN Bank. EUR 19 million (2021: EUR 12 million) relates to longevity hedges closed by NN Group. It is estimated that a 5% increase in mortality assumptions for these longevity hedges reduces result and equity before tax by EUR 5 million (2021: EUR 13 million) and a 5% decrease in mortality assumptions increases result and equity before tax by EUR 7 million (2021: EUR 17 million) . 36 Fair value of financial assets and liabilities continued Financial assets and liabilities at amortised cost The fair value of the financial instruments carried at amortised cost in the balance sheet (where fair value is disclosed) was determined as follows: Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2022) 2022 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,669 1 6,670 Loans 20 3,018 58,404 61,442 Financial assets 6,689 3,018 58,405 68,112 Financial liabilities Subordinated debt 2,287 2,287 Debt securities issued 1,498 1,498 Other borrowed funds 5,596 5,087 10,683 Investment contracts for risk of company 317 766 1,083 Customer deposits and other funds on deposit 10,309 5,310 15,619 Financial liabilities 20,007 10,397 766 31,170 Methods applied in determining the fair value of financial assets and liabilities at amortised cost (2021) 2021 Level 1 Level 2 Level 3 Total Financial assets Cash and cash equivalents 6,929 6,929 Loans 4 3,832 68,761 72,597 Financial assets 6,933 3,832 68,761 79,526 Financial liabilities Subordinated debt 2,624 2,624 Debt securities issued 2,351 2,351 Other borrowed funds 6,372 941 51 7,364 Investment contracts for risk of company 49 927 976 Customer deposits and other funds on deposit 9,980 6,480 16,460 Financial liabilities 21,376 7,421 978 29,77538 Derivatives and hedge accounting Use of derivatives and hedge accounting NN Group uses derivatives for effective portfolio management and the management of its asset and liability portfolios. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure. The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and reported in accordance with the nature of the hedged item and the type of IFRS-EU hedge model that is applicable. The three models applicable under IFRS-EU are: cash flow hedge accounting, fair value hedge accounting and net investment hedge accounting. The company\u2019s detailed accounting policies for these three hedge models are set out in Note 1 \u2018Accounting policies\u2019 in the section on \u2018Accounting policies for specific items\u2019. To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non- qualifying hedges are taken to the profit and loss account. However, in certain cases, NN Group mitigates the profit and loss account volatility by designating hedged assets and liabilities at fair value through profit or loss. If hedge accounting is applied under IFRS-EU, it is possible that a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot be continued, even if the hedge remains economically effective. As a result, the volatility arising from undertaking economic hedging in the profit and loss account may be higher than would be expected from an economic point of view. With respect to exchange rate and interest rate derivative contracts, the notional or contractual amount of these instruments is indicative of the nominal value of transactions outstanding at the balance sheet date; however, they do not represent amounts at risk. In 2017, NN Group entered into a longevity hedge, based on a general index of Dutch mortality. The maximum pay-out of the hedge amounts to EUR 100 million, payable after 20 years. The hedge is financed by annual premium payments to the counterparty. The longevity hedge is accounted for as derivative. The hedge reduces the impact of longevity trend scenarios implying more improvement in life expectancy. The regulator gave approval to include the effects of this specific hedge on the SCR. The purpose of the hedge is to reduce the longevity risk. Cash flow hedge accounting NN Group\u2019s hedge accounting consists mainly of cash flow hedge accounting. NN Group\u2019s cash flow hedges principally consist of Euribor based (forward) interest rate swaps and cross-currency interest rate swaps that are used to protect against its exposure to variability in future interest cash flows on assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors including estimates of prepayments and defaults. Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders\u2019 equity. Interest income and expenses on these derivatives are recognised in the profit and loss account consistent with the manner in which the forecast cash flows affect Net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the profit and loss account. For the year ended 31 December 2022, NN Group recognised EUR -5,942 million (2021: EUR -3,383 million) in equity as effective fair value changes on derivatives under cash flow hedge accounting. The balance of the cash flow hedge reserve in equity as at 31 December 2022 is EUR 3,901 million (2021: EUR 11,906 million) gross and EUR 2,895 million (2021: EUR 8,837 million) after deferred tax. This cash flow hedge reserve will fluctuate with the fair value of the underlying derivatives and will be reflected in the profit and loss account under Interest income/expenses over the remaining term of the underlying hedged items. The cash flow hedge reserve relates to a large number of derivatives and hedged items with varying maturities up to 48 years with the largest concentrations in the range 1 year to 13 years. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in EUR 75 million loss (2021: EUR 10 million loss) which was recognised in the profit and loss account . As at 31 December 2022, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR -2,986 million (2021: EUR 3,718 million), presented in the balance sheet as EUR 256 million (2021: EUR 4,622 million) positive fair value under assets and EUR 3,242 million (2021: EUR 904 million) negative fair value under liabilities. As at 31 December 2022 and 2021, there were no non-derivatives designated as hedging instruments for cash flow hedge accounting purposes. Included in \u2018Interest income and Interest expenses on non-trading derivatives\u2019 is EUR 137 million (2021: EUR 164 million) and EUR 127 million (2021: EUR 98 million), respectively, relating to derivatives used in cash flow hedges. Fair value hedge accounting NN Group\u2019s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments due to movements in market interest rates. Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting ineffectiveness has an impact on the net result. For the year ended 31 December 2022, NN Group recognised EUR 1,701 million (2021: EUR 481 million) of fair value changes on derivatives designated under fair value hedge accounting in the profit and loss account. This amount was offset by EUR -1,692 million (2021: EUR\u2219-486 million) fair value changes recognised on hedged items. This resulted in EUR 9 million income (2021: EUR 5 million loss) net accounting ineffectiveness recognised in the profit and loss account. As at 31 December 2022, the fair value of outstanding derivatives designated under fair value hedge accounting was EUR 62 million (2021: EUR 25 million), presented in the balance sheet as EUR 62 million (2021: EUR 29 million) positive fair value under assets and EUR 0 million (2021: EUR 4 million) negative fair value under liabilities. NN Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 for macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under- hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to core deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. NN Group applies the IFRS-EU \u2018carve-out\u2019 to hedge the interest rate risk of mortgage loans. The hedging activities are designated under a portfolio fair value hedge on the mortgages, under IFRS-EU", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-557": { "value": "38 Derivatives and hedge accounting Use of derivatives and hedge accounting NN Group uses derivatives for effective portfolio management and the management of its asset and liability portfolios. The objective of economic hedging is to enter into positions with an opposite risk profile to an identified exposure to reduce that exposure. The accounting treatment of hedge transactions varies according to the nature of the instrument hedged and whether the hedge qualifies under the IFRS-EU hedge accounting rules. Derivatives that qualify for hedge accounting under IFRS-EU are classified and reported in accordance with the nature of the hedged item and the type of IFRS-EU hedge model that is applicable. The three models applicable under IFRS-EU are: cash flow hedge accounting, fair value hedge accounting and net investment hedge accounting. The company\u2019s detailed accounting policies for these three hedge models are set out in Note 1 \u2018Accounting policies\u2019 in the section on \u2018Accounting policies for specific items\u2019. To qualify for hedge accounting under IFRS-EU, strict criteria must be met. Certain hedges that are economically effective from a risk management perspective do not qualify for hedge accounting under IFRS-EU. The fair value changes of derivatives relating to such non- qualifying hedges are taken to the profit and loss account. However, in certain cases, NN Group mitigates the profit and loss account volatility by designating hedged assets and liabilities at fair value through profit or loss. If hedge accounting is applied under IFRS-EU, it is possible that a hedge relationship no longer qualifies for hedge accounting and hedge accounting cannot be continued, even if the hedge remains economically effective. As a result, the volatility arising from undertaking economic hedging in the profit and loss account may be higher than would be expected from an economic point of view. With respect to exchange rate and interest rate derivative contracts, the notional or contractual amount of these instruments is indicative of the nominal value of transactions outstanding at the balance sheet date; however, they do not represent amounts at risk. In 2017, NN Group entered into a longevity hedge, based on a general index of Dutch mortality. The maximum pay-out of the hedge amounts to EUR 100 million, payable after 20 years. The hedge is financed by annual premium payments to the counterparty. The longevity hedge is accounted for as derivative. The hedge reduces the impact of longevity trend scenarios implying more improvement in life expectancy. The regulator gave approval to include the effects of this specific hedge on the SCR. The purpose of the hedge is to reduce the longevity risk. Cash flow hedge accounting NN Group\u2019s hedge accounting consists mainly of cash flow hedge accounting. NN Group\u2019s cash flow hedges principally consist of Euribor based (forward) interest rate swaps and cross-currency interest rate swaps that are used to protect against its exposure to variability in future interest cash flows on assets and liabilities that bear interest at variable rates or are expected to be refunded or reinvested in the future. The amounts and timing of future cash flows, representing both principal and interest flows, are projected for each portfolio of financial assets and liabilities, based on contractual terms and other relevant factors including estimates of prepayments and defaults. Gains and losses on the effective portions of derivatives designated under cash flow hedge accounting are recognised in Shareholders\u2019 equity. Interest income and expenses on these derivatives are recognised in the profit and loss account consistent with the manner in which the forecast cash flows affect Net result. The gains and losses on ineffective portions of such derivatives are recognised immediately in the profit and loss account. For the year ended 31 December 2022, NN Group recognised EUR -5,942 million (2021: EUR -3,383 million) in equity as effective fair value changes on derivatives under cash flow hedge accounting. The balance of the cash flow hedge reserve in equity as at 31 December 2022 is EUR 3,901 million (2021: EUR 11,906 million) gross and EUR 2,895 million (2021: EUR 8,837 million) after deferred tax. This cash flow hedge reserve will fluctuate with the fair value of the underlying derivatives and will be reflected in the profit and loss account under Interest income/expenses over the remaining term of the underlying hedged items. The cash flow hedge reserve relates to a large number of derivatives and hedged items with varying maturities up to 48 years with the largest concentrations in the range 1 year to 13 years. Accounting ineffectiveness on derivatives designated under cash flow hedge accounting resulted in EUR 75 million loss (2021: EUR 10 million loss) which was recognised in the profit and loss account As at 31 December 2022, the fair value of outstanding derivatives designated under cash flow hedge accounting was EUR -2,986 million (2021: EUR 3,718 million), presented in the balance sheet as EUR 256 million (2021: EUR 4,622 million) positive fair value under assets and EUR 3,242 million (2021: EUR 904 million) negative fair value under liabilities. As at 31 December 2022 and 2021, there were no non-derivatives designated as hedging instruments for cash flow hedge accounting purposes. Included in \u2018Interest income and Interest expenses on non-trading derivatives\u2019 is EUR 137 million (2021: EUR 164 million) and EUR 127 million (2021: EUR 98 million), respectively, relating to derivatives used in cash flow hedges. Fair value hedge accounting NN Group\u2019s fair value hedges principally consist of interest rate swaps and cross-currency interest rate swaps that are used to protect against changes in the fair value of fixed-rate instruments due to movements in market interest rates. Gains and losses on derivatives designated under fair value hedge accounting are recognised in the profit and loss account. The effective portion of the fair value change on the hedged item is also recognised in the profit and loss account. As a result, only the net accounting ineffectiveness has an impact on the net result. For the year ended 31 December 2022, NN Group recognised EUR 1,701 million (2021: EUR 481 million) of fair value changes on derivatives designated under fair value hedge accounting in the profit and loss account. This amount was offset by EUR -1,692 million (2021: EUR\u2219-486 million) fair value changes recognised on hedged items. This resulted in EUR 9 million income (2021: EUR 5 million loss) net accounting ineffectiveness recognised in the profit and loss account. As at 31 December 2022, the fair value of outstanding derivatives designated under fair value hedge accounting was EUR 62 million (2021: EUR 25 million), presented in the balance sheet as EUR 62 million (2021: EUR 29 million) positive fair value under assets and EUR 0 million (2021: EUR 4 million) negative fair value under liabilities. NN Group applies fair value hedge accounting for portfolio hedges of interest rate risk (macro hedging) under the EU \u2018carve out\u2019 of IFRS-EU. The EU \u2018carve-out\u2019 for macro hedging enables a group of derivatives (or proportions) to be viewed in combination and jointly designated as the hedging instrument and removes some of the limitations in fair value hedge accounting relating to hedging core deposits and under- hedging strategies. Under the IFRS-EU \u2018carve-out\u2019, hedge accounting may be applied to core deposits and ineffectiveness only arises when the revised estimate of the amount of cash flows in scheduled time buckets falls below the designated amount of that bucket. NN Group applies the IFRS-EU \u2018carve-out\u2019 to hedge the interest rate risk of mortgage loans. The hedging activities are designated under a portfolio fair value hedge on the mortgages, under IFRS-EU", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralHedgeAccountingExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-558": { "value": "Assets not freely disposable of EUR 118 million (2021: EUR 136 million) relates to the mandatory reserve deposit at De Nederlandsche Bank and cash balances held at BNG Bank regarding the structured entities Arena NHG, Hypenn RMBS entities and the Covered Bond companies", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-559": { "value": "42 Transferred, but not derecognised financial assets The majority of NN Group\u2019s financial assets that have been transferred, but do not qualify for derecognition, are debt instruments used in securities lending. NN Group retains substantially all risks and rewards of those transferred assets. The assets are transferred in return for cash collateral or other financial assets. Non-cash collateral is not recognised in the balance sheet. Cash collateral is recognised as an asset and an offsetting liability is established for the same amount as NN Group is obligated to return this amount upon termination of the lending arrangement. Transfer of financial assets not qualifying for derecognition 2022 2021 Transferred assets at carrying value Available-for-sale investments 8,703 17,761 Associated liabilities at carrying value Other borrowed funds 250 580 The table above does not include assets transferred to consolidated securitisation entities, as these related assets are not transferred from a consolidated perspective. Reference is made to Note 47 \u2018Structured entities\u2019 .", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialAssetsTransferredDuringPeriodWhichDoNotQualifyForDerecognitionExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-560": { "value": "43 Offsetting of financial assets and liabilities The following tables include information about rights to offset and the related arrangements. The amounts included consist of all recognised financial instruments that are presented net in the balance sheet under the IFRS-EU offsetting requirements (legal right to offset and intention to settle on a net basis) and amounts presented gross in the balance sheet but subject to enforceable master netting arrangements or similar arrangement. Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2022) 2022 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial assets Gross financial liabilities offset in the balance sheet Net financial assets in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 2,405 2,405 -1,642 -735 28 Financial assets at fair value through profit or loss 2,405 \u2013 2,405 -1,642 -735 28 Other items where offsetting is applied in the balance sheet 158 \u2013 158 -110 -48 \u2013 Total financial assets 2,563 \u2013 2,563 -1,752 -783 28 Financial assets subject to offsetting, enforceable master netting arrangements and similar agreements (2021 ) 2021 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial assets Gross financial liabilities offset in the balance sheet Net financial assets in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 6,411 6,411 -1,152 -5,231 28 Financial assets at fair value through profit or loss 6,411 \u2013 6,411 -1,152 -5,231 28 Other items where offsetting is applied in the balance sheet 127 \u2013 127 -56 -70 1 Total financial assets 6,538 \u2013 6,538 -1,208 -5,301 29 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2022) 2022 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial liabilities Gross financial assets offset in the balance sheet Net financial liabilities in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 6,321 6,321 -1,643 -4,610 68 Financial liabilities at fair value through profit or loss 6,321 \u2013 6,321 -1,643 -4,610 68 Other items where offsetting is applied in the balance sheet 4,291 4,291 -110 -4,129 52 Total financial liabilities 10,612 \u2013 10,612 -1,753 -8,739 120 Financial liabilities subject to offsetting, enforceable master netting arrangements and similar agreements (2021) 2021 Related amounts not offset in the balance sheet Balance sheet line item Financial instrument Gross financial liabilities Gross financial assets offset in the balance sheet Net financial liabilities in the balance sheet Financial instruments Cash and financial instruments collateral Net amount Non-trading derivatives Derivatives 1,679 1,679 -1,152 -495 32 Financial liabilities at fair value through profit or loss 1,679 \u2013 1,679 -1,152 -495 32 Other items where offsetting is applied in the balance sheet 58 58 -56 -2 \u2013 Total financial liabilities 1,737 \u2013 1,737 -1,208 -497 32 ", "dimensions": { "concept": "ifrs-full:DisclosureOfOffsettingOfFinancialAssetsAndFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-561": { "value": "44 Contingent liabilities and commitments In the normal course of business (excluding investment commitments) NN Group is party to activities whose risks are not reflected in whole or in part in the Consolidated annual accounts. In response to the needs of its customers, NN Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. Contingent liabilities and commitments (2022) 2022 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 669 1,255 2,601 225 18 63 4,831 Guarantees 18 3 21 Contingent liabilities and commitments 669 1,255 2,619 228 18 63 4,852 Contingent liabilities and commitments (2021) 2021 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 505 989 2,132 244 21 343 4,234 Guarantees 20 1 21 Contingent liabilities and commitments 505 989 2,152 245 21 343 4,255 Next to this NN Group has committed amounts to investments of EUR 4,310 million (2021: 3,713 million) where it is uncertain when those amounts will be invested . 44 Contingent liabilities and commitments continued NN Group has issued certain guarantees, other than those included in \u2018Insurance contracts\u2019, which are expected to expire without being drawn on and therefore does not necessarily represent future net cash outflows. In addition to the items included in \u2018Contingent liabilities\u2019, NN Group has issued guarantees as a participant in collective arrangements of national industry bodies and as a participant in government required collective guarantee schemes which apply in different countries. ING Group During 2016, ING Group, NN Group\u2019s former parent company, sold its remaining stake in NN Group. Therefore, ING Group has ceased to be a related party of NN Group in the course of 2016. The following agreements with ING Group are still relevant: Master claim agreement In 2012, ING Groep N.V., Voya Financial Inc. (formerly ING U.S., Inc.) and ING Insurance Eurasia N.V. entered into a master claim agreement to (a) allocate existing claims between these three parties and (b) agree on criteria for how to allocate future claims between the three parties. The master claim agreement contains further details on claim handling, conduct of litigation and dispute resolution. Indemnification and allocation agreement ING Groep N.V. and NN Group N.V. have entered into an indemnification and allocation agreement, in which ING Group has agreed to indemnify NN Group for certain liabilities that relate to the business of or control over certain (former) U.S. and Latin American subsidiaries of NN Group in the period until 30 September 2013 or, if the relevant subsidiary was divested by NN Group after 30 September 2013, such later date of divestment. These liabilities mainly include contingent liabilities that may arise as a result of the initial public offering of ING U.S. (such as prospectus liability), the sales of the Latin American businesses (such as claims under warranties and other buyer protection clauses) and the liabilities for the claims concerning the performance of certain interest-sensitive products that were sold by a former subsidiary of NN\u2219Group in Mexico. Other agreements In connection with the initial public offering of NN Group N.V., ING Groep N.V. entered in 2014 into several other agreements with NN Group N.V. which are currently, partly or wholly, in force, such as a joinder agreement, an equity administration agreement and a Risk Management Programme (RMP) indemnity agreement. In 2015, NN Group N.V. and ING Groep N.V. entered into an agreement providing amongst others for allocation between them of insurance payments under the public offering securities insurance taken out by ING Groep N.V. with respect to the IPO of NN Group N.V. 45 Legal proceedings General NN Group is involved in litigation and arbitration proceedings in the Netherlands and in a number of foreign jurisdictions, involving claims by and against NN Group which arise in the ordinary course of its business, including in connection with its activities as insurer, lender, seller, broker-dealer, underwriter, issuer of securities and investor and its position as employer and taxpayer. In certain of such proceedings, very large or indeterminate amounts are sought, including punitive and other damages. While it is not feasible to predict or determine the ultimate outcome of all pending or threatened legal and regulatory proceedings, NN Group believes that some of the proceedings set out below may have, or have in the recent past had, a significant effect on the financial condition, profitability or reputation of NN Group. Because of the geographic spread of its business, NN Group may be subject to tax audits in numerous jurisdictions at any point in time. Although NN Group believes that it has adequately provided for its tax positions, the ultimate outcome of these audits may result in liabilities that are different from the amounts recognised. Unit-linked products in the Netherlands Since the end of 2006, unit-linked products (commonly referred to in Dutch as \u2018beleggingsverzekeringen\u2019) have received negative attention in the Dutch media, from the Dutch Parliament, the Netherlands Authority for the Financial Markets (Autoriteit Financi\u00eble Markten) and consumer protection organisations. Costs of unit-linked products sold in the past are perceived as too high and Dutch insurers are in general being accused of being less transparent in their offering of such unit-linked products. On 29 April 2015, the European Court of Justice issued its judgment on preliminary questions submitted by the District Court in Rotterdam, upon request of parties, including Nationale- Nederlanden, to obtain clarity on principal legal questions with respect to cost transparency in relation to unit-linked products. The main preliminary question considered by the European Court of Justice was whether European law permits the application of information requirements based on general principles of Dutch law that extend beyond information requirements as explicitly prescribed by laws and regulations in force at the time the policy was written. The European Court of Justice ruled that the information requirements prescribed by the applicable European directive may be extended by additional information requirements included in national law, provided that these requirements are necessary for a policyholder to understand the essential characteristics of the commitment and are clear, accurate and foreseeable. Dutch courts will need to take the interpretation of the European Court of Justice into account in relevant proceedings. 45 Legal proceedings continued In 2013 Woekerpolis.nl and in 2017 Consumentenbond and Wakkerpolis, all associations representing the interests of policyholders of Nationale-Nederlanden, individually initiated so-called \u2018collective proceedings\u2019 against Nationale-Nederlanden. These claims are all based on similar grounds and have been rejected by Nationale-Nederlanden and Nationale-Nederlanden defends itself in these legal proceedings. Woekerpolis.nl requested the District Court in Rotterdam to declare that Nationale-Nederlanden sold products which are defective in various respects. Woekerpolis.nl alleges that Nationale-Nederlanden failed to meet the required level of transparency regarding, cost charges and other product characteristics, failed to warn policyholders of certain product related risks, such as considerable stock depreciations, the inability to realise the projected final policy value, unrealistic capital projections due to differences in geometric versus arithmetic returns and that certain general terms and conditions regarding costs were unfair. On 19 July 2017, the District Court in Rotterdam rejected all claims of Woekerpolis. nl and ruled that Nationale-Nederlanden has generally provided sufficient information on costs and deductions. Woekerpolis.nl has lodged an appeal with the Court of Appeal in The Hague against the judgment of the District Court in Rotterdam. On 23 February 2021, the Court of Appeal in The Hague rendered an interim judgment submitting preliminary questions to the Dutch Supreme Court to obtain clarity on the interpretation of certain principle questions of law that are relevant in disputes concerning unit-linked policies. The questions concern the relationship between the specific Dutch regulations applicable to insurers regarding the provision of (pre)contractual information, and Dutch civil law and the impact thereon by European law. On 11 February 2022, the Supreme Court answered the questions of law submitted to it by the Court of Appeal in The Hague. The Supreme Court primarily considers that Dutch civil law is applicable to the legal relationship between insurer and policyholder. It is up to lower courts to decide whether Dutch civil law entails obligations to provide information in addition to the obligations arising from specific regulations and, if so, which obligations. The Supreme Court holds that if the lower courts were to decide that additional information obligations apply, such obligations must satisfy the criteria formulated by the European Court of Justice in the abovementioned judgment of 2015. This means that the courts have to judge whether these information obligations 1) pertain to information that is clear and accurate, 2) are necessary for a proper understanding of the essential characteristics of the unit-linked policy, and 3) enable the insurer to identify with sufficient foreseeability the additional information that must be provided and that the policyholder may expect. (Only) in case any potential obligation to provide additional information satisfies the aforementioned criteria, the policyholder can claim legal protection before the court. The judgment has no direct consequences for customers with a unit-linked policy. The Court of Appeal in The Hague resumed the collective proceedings between Woekerpolis.nl and Nationale-Nederlanden. Under Dutch law, judgments rendered by lower (including appellate) courts have no legal status as precedent and only bind parties in the respective legal proceedings. The Court of Appeal in The Hague is to independently asses all facts, circumstances, arguments, claims and counter arguments brought forward in the collective proceedings between Woekerpolis.nl and Nationale-Nederlanden. A judgment in appeal is expected in the first half of 2023. Any final judgment by the Court of Appeal is subject to cassation proceedings at the Dutch Supreme Court. Consumentenbond alleges that Nationale-Nederlanden failed to adequately inform policyholders on cost charges, deductions for life insurance cover and the leverage and capital consumption effect and that Nationale-Nederlanden provided misleading capital projections. Consumentenbond requested the District Court in Rotterdam to order a recalculation of certain types of unit-linked insurance products and to declare that Nationale-Nederlanden is liable for any damage caused by a lack of information and misleading capital projections. On 29 July 2020, the District Court in Rotterdam rejected all claims of Consumentenbond. The court ruled that Nationale-Nederlanden has provided sufficient information on the effect of costs and deductions for life insurance cover included in the gross premium, leading to consensus between parties (\u2018wilsovereenstemming\u2019) on these costs and deductions and on the manner in which these costs components are set off during the term of the insurance. Consumentenbond has lodged an appeal with the Court of Appeal in The Hague against the judgment of the District Court. The appeal proceedings commenced on 29 June 2021 and are expected to resume in due course after a deferral in anticipation of the judgment in the preliminary proceedings before the Supreme Court mentioned above. Wakkerpolis\u2019 and several individual policyholders\u2019 claims primarily concentrate on the recovery of initial costs for policyholders, claiming that there is no contractual basis for settling these initial costs. In an interim judgment rendered on 22 April 2020, the District Court in Rotterdam in principle dismissed Wakkerpolis\u2019 most important claim to recalculate unit-linked insurance policies without initial costs for policies taken out after 1 July 1994. In its final judgment (in first instance) of 20 July 2022, the District Court in Rotterdam considered that for policies taken out after 1 July 1994, Nationale-Nederlanden has generally complied with its information obligations towards its policyholders, leading to consensus between parties on initial costs. Only with respect to policies taken out before 1 July 1994, the District Court in Rotterdam concluded that Nationale-Nederlanden did not (fully) comply with its information obligations and, therefore, a contractual basis for settling initial costs is absent. Nationale-Nederlanden has to recalculate these policies, as if the initial costs were never incurred, unless consensus between parties on initial costs can otherwise be established. For premium policies taken out between 1 July 1994 and 1 August 1999 that were surrendered early or converted into a paid-up policy, the District Court in Rotterdam ruled that settlement of initial costs upon surrender or conversion was allowed, but that Nationale-Nederlanden should apply a settlement period of five years instead of a settlement period of five to ten years, if that is more favourable for the policyholder. For policies taken out in the period 1 August 1999 onwards, the District Court in Rotterdam found that Nationale-Nederlanden sufficiently informed policyholders of the consequences of early surrender or conversion into a paid-up policy for the value of the policy. Wakkerpolis lodged an appeal against the judgment of 20 July 2022. Although the judgment is largely in line with Nationale-Nederlanden\u2019s views, Nationale-Nederlanden disagrees with the District Court in Rotterdam on a number of points and will lodge a cross appeal. In the context of the ongoing proceedings against Nationale-Nederlanden, Nationale-Nederlanden does not disclose further details on the (potential) financial impact of this judgment . 45 Legal proceedings continued There has been for some time and there continues to be political, regulatory and public attention focused on the unit-linked issue in general. Elements of unit-linked policies are being challenged or may be challenged on multiple legal grounds in current and future legal proceedings. There is a risk that one or more of those legal challenges will succeed. Customers of NN Group\u2019s Dutch insurance subsidiaries have claimed, among others, that (a) the investment risk, costs charged or the deductions was or were not, or not sufficiently, made clear to the customer, (b) the product costs charged on initial sale and on an ongoing basis were so high that the expected return on investment was not realistically achievable, (c) the product sold to the customer contained specific risks that were not, or not sufficiently, made clear to the customer (such as the leverage capital consumption risk) or was not suited to the customer\u2019s personal circumstances, (d) the insurer owed the customer a duty of care which the insurer has breached, (e) the insurer failed to warn of the risk of not realising the projected policy values and/or that these projected policy values were incorrect, (f) the policy conditions were unfair, or (g) the costs charged or the deductions had no contractual basis. These claims may be based on general standards of contract or securities law, such as reasonableness and fairness, error, duty of care, or standards for proper customer treatment or due diligence, such as relating to the fairness of terms in consumer contracts and may be made by customers, or on behalf of customers, holding active policies or whose policies have lapsed, matured or been surrendered. There is no assurance that further proceedings for damages based on aforementioned legal grounds or other grounds will not be brought. The timing of reaching any finality in last instance on these pending legal claims and proceedings is uncertain and such uncertainty is likely to continue for some time. Rulings or announcements made by courts or decision-making bodies or actions taken by regulators or governmental authorities against NN Group\u2019s Dutch insurance subsidiaries or other Dutch insurance companies in respect of unit-linked products, or settlements or any other actions to the benefit of customers (including product improvements or repairs) by other Dutch insurance companies towards consumers, consumer protection organisations, regulatory or governmental authorities or other decision-making bodies in respect of the unit-linked products, may affect the (legal) position of NN Group\u2019s Dutch insurance subsidiaries and may force such subsidiaries to take (financial) measures that could have a substantial impact on the financial condition, results of operations, solvency or reputation of NN Group and its subsidiaries. As a result of the public and political attention the unit-linked issue has received, it is also possible that sector-wide measures may be imposed by governmental authorities or regulators in relation to unit-linked products in the Netherlands. The impact on NN Group\u2019s Dutch insurance subsidiaries of rulings made by courts or decision-making bodies, actions taken by regulators or governmental bodies against other Dutch insurance companies in respect of unit-linked products, or settlements or any other actions to the benefit of customers (including product improvements or repairs), may be determined not only by market share but also by portfolio composition, product features, terms and conditions and other factors. Adverse decisions or the occurrence of any of the developments as described above could result in outcomes materially different than if NN Group\u2019s Dutch insurance subsidiaries or its products had been judged or negotiated solely on their own merits. The book of policies of NN Group\u2019s Dutch insurance subsidiaries dates back many years, and in some cases several decades. Over time, the regulatory requirements and expectations of various stakeholders, including customers, regulators and the public at large, as well as standards and market practice, have developed and changed, increasing customer protection. As a result, policyholders and consumer protection organisations have initiated and may in the future initiate proceedings against NN Group\u2019s Dutch insurance subsidiaries alleging that products sold in the past fail to meet current requirements and expectations. In any such proceedings, it cannot be excluded that the relevant court, regulator, governmental authority or other decision-making body will apply current norms, requirements, expectations, standards and market practices on laws and regulations to products sold, issued or advised on by NN Group\u2019s Dutch insurance subsidiaries. Although the financial consequences of any of these factors or a combination thereof could be substantial for the Dutch insurance business of NN Group and, as a result, may have a material adverse effect on NN Group\u2019s business, reputation, revenues, results of operations, solvency, financial condition and prospects, it is not possible to reliably estimate or quantify NN Group\u2019s overall exposures at this time. Dispute on reinsurance agreement NN Group had reinsured with another insurance company part of the exposure on certain insured pension obligations. The counterparty acknowledged the existence of a reinsurance arrangement, but disputed the applicability of fundamental aspects of the reinsurance agreement. NN Group started legal proceedings in 2019. A provision was recognised in 2019. In 2021, both parties agreed on a settlement. As a result, the reinsurance was cancelled and a settlement amount was received. The net positive impact of the settlement was recognised in 2021. Argentina On 10 April 2019, NN Group filed a claim with the International Centre for Settlement of Investment Disputes (ICSID) under the Bilateral Investment Treaty between Argentina and the Netherlands, in order to resolve a dispute with the Argentine Republic. The dispute relates to the nationalisation of Or\u00edgenes \u2013 NN Group\u2019s former pension fund manager in Argentina - by the Argentine Government in 2008. These proceedings may last for several years. As the case is still pending, it is unclear at this stage whether and to what extent any compensation will be granted to NN Group and therefore no compensation has been recognised .", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-562": { "value": "44 Contingent liabilities and commitments In the normal course of business (excluding investment commitments) NN Group is party to activities whose risks are not reflected in whole or in part in the Consolidated annual accounts. In response to the needs of its customers, NN Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. Contingent liabilities and commitments (2022) 2022 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 669 1,255 2,601 225 18 63 4,831 Guarantees 18 3 21 Contingent liabilities and commitments 669 1,255 2,619 228 18 63 4,852 Contingent liabilities and commitments (2021) 2021 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 505 989 2,132 244 21 343 4,234 Guarantees 20 1 21 Contingent liabilities and commitments 505 989 2,152 245 21 343 4,255 Next to this NN Group has committed amounts to investments of EUR 4,310 million (2021: 3,713 million) where it is uncertain when those amounts will be invested 44 Contingent liabilities and commitments continued NN Group has issued certain guarantees, other than those included in \u2018Insurance contracts\u2019, which are expected to expire without being drawn on and therefore does not necessarily represent future net cash outflows. In addition to the items included in \u2018Contingent liabilities\u2019, NN Group has issued guarantees as a participant in collective arrangements of national industry bodies and as a participant in government required collective guarantee schemes which apply in different countries. ING Group During 2016, ING Group, NN Group\u2019s former parent company, sold its remaining stake in NN Group. Therefore, ING Group has ceased to be a related party of NN Group in the course of 2016. The following agreements with ING Group are still relevant: Master claim agreement In 2012, ING Groep N.V., Voya Financial Inc. (formerly ING U.S., Inc.) and ING Insurance Eurasia N.V. entered into a master claim agreement to (a) allocate existing claims between these three parties and (b) agree on criteria for how to allocate future claims between the three parties. The master claim agreement contains further details on claim handling, conduct of litigation and dispute resolution. Indemnification and allocation agreement ING Groep N.V. and NN Group N.V. have entered into an indemnification and allocation agreement, in which ING Group has agreed to indemnify NN Group for certain liabilities that relate to the business of or control over certain (former) U.S. and Latin American subsidiaries of NN Group in the period until 30 September 2013 or, if the relevant subsidiary was divested by NN Group after 30 September 2013, such later date of divestment. These liabilities mainly include contingent liabilities that may arise as a result of the initial public offering of ING U.S. (such as prospectus liability), the sales of the Latin American businesses (such as claims under warranties and other buyer protection clauses) and the liabilities for the claims concerning the performance of certain interest-sensitive products that were sold by a former subsidiary of NN\u2219Group in Mexico. Other agreements In connection with the initial public offering of NN Group N.V., ING Groep N.V. entered in 2014 into several other agreements with NN Group N.V. which are currently, partly or wholly, in force, such as a joinder agreement, an equity administration agreement and a Risk Management Programme (RMP) indemnity agreement. In 2015, NN Group N.V. and ING Groep N.V. entered into an agreement providing amongst others for allocation between them of insurance payments under the public offering securities insurance taken out by ING Groep N.V. with respect to the IPO of NN Group N.V. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-563": { "value": "44 Contingent liabilities and commitments In the normal course of business (excluding investment commitments) NN Group is party to activities whose risks are not reflected in whole or in part in the Consolidated annual accounts. In response to the needs of its customers, NN Group offers financial products related to loans. These products include traditional off-balance sheet credit-related financial instruments. Contingent liabilities and commitments (2022) 2022 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 669 1,255 2,601 225 18 63 4,831 Guarantees 18 3 21 Contingent liabilities and commitments 669 1,255 2,619 228 18 63 4,852 Contingent liabilities and commitments (2021) 2021 Less than 1 month 1-3 months 3-12 months 1-5 years Over 5 years Maturity not applicable Total Commitments 505 989 2,132 244 21 343 4,234 Guarantees 20 1 21 Contingent liabilities and commitments 505 989 2,152 245 21 343 4,255 Next to this NN Group has committed amounts to investments of EUR 4,310 million (2021: 3,713 million) where it is uncertain when those amounts will be invested . 44 Contingent liabilities and commitments continued NN Group has issued certain guarantees, other than those included in \u2018Insurance contracts\u2019, which are expected to expire without being drawn on and therefore does not necessarily represent future net cash outflows. In addition to the items included in \u2018Contingent liabilities\u2019, NN Group has issued guarantees as a participant in collective arrangements of national industry bodies and as a participant in government required collective guarantee schemes which apply in different countries. ING Group During 2016, ING Group, NN Group\u2019s former parent company, sold its remaining stake in NN Group. Therefore, ING Group has ceased to be a related party of NN Group in the course of 2016. The following agreements with ING Group are still relevant: Master claim agreement In 2012, ING Groep N.V., Voya Financial Inc. (formerly ING U.S., Inc.) and ING Insurance Eurasia N.V. entered into a master claim agreement to (a) allocate existing claims between these three parties and (b) agree on criteria for how to allocate future claims between the three parties. The master claim agreement contains further details on claim handling, conduct of litigation and dispute resolution. Indemnification and allocation agreement ING Groep N.V. and NN Group N.V. have entered into an indemnification and allocation agreement, in which ING Group has agreed to indemnify NN Group for certain liabilities that relate to the business of or control over certain (former) U.S. and Latin American subsidiaries of NN Group in the period until 30 September 2013 or, if the relevant subsidiary was divested by NN Group after 30 September 2013, such later date of divestment. These liabilities mainly include contingent liabilities that may arise as a result of the initial public offering of ING U.S. (such as prospectus liability), the sales of the Latin American businesses (such as claims under warranties and other buyer protection clauses) and the liabilities for the claims concerning the performance of certain interest-sensitive products that were sold by a former subsidiary of NN\u2219Group in Mexico. Other agreements In connection with the initial public offering of NN Group N.V., ING Groep N.V. entered in 2014 into several other agreements with NN Group N.V. which are currently, partly or wholly, in force, such as a joinder agreement, an equity administration agreement and a Risk Management Programme (RMP) indemnity agreement. In 2015, NN Group N.V. and ING Groep N.V. entered into an agreement providing amongst others for allocation between them of insurance payments under the public offering securities insurance taken out by ING Groep N.V. with respect to the IPO of NN Group N.V. ", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-564": { "value": "46 Companies and businesses acquired and divested Acquisitions (2022) MetLife\u2019s businesses in Poland and Greece In July 2021, NN Group announced it had reached agreement to acquire 100% of MetLife\u2019s businesses in Poland and Greece as part of the strategy to strengthen NN Group\u2019s position in these growth markets. The acquisition was completed in the first half of 2022: Greece in January 2022 and Poland in April 2022. The amounts in the acquisition balance sheets are as follows: Acquisition accounting amounts for the MetLife transaction MetLife Greece MetLife Poland Total Consideration paid -123 -427 -550 Investments 1,823 940 2,763 Other assets 123 68 191 Insurance liabilities 1,846 928 2,774 Other liabilities 49 59 108 New intangible assets 22 187 209 Fair value of net assets acquired 73 208 281 Goodwill 50 219 269 The amount of revenue and profit of Metlife Greece and Poland since acquisition date and if the acquisition date had been at the start of 2022 are not significant. ABN AMRO Levensverzekering In February 2022 NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen announced that they had reached an agreement to sell the life insurance subsidiary of ABN AMRO Verzekeringen to Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NN Life). This transaction was completed in July 2022. ABN AMRO Verzekeringen is a joint venture between NN Group (51%) and ABN AMRO Bank (49%). The life insurance subsidiary of ABN AMRO Verzekeringen was already consolidated by NN Group and, therefore, this transaction did not have significant impact on NN Group. Acquisitions (2021) Heinenoord In July 2021, NN Group announced that it had reached an agreement to acquire a 70% stake in Dutch insurance broker and service provider Heinenoord, for a total consideration of EUR 179 million. In addition, NN Group refinanced the outstanding debt granted to Heinenoord for an amount of EUR 129 million. Furthermore, the agreement includes a put option and call option structure on the remaining 30% of shares. The put option can be exercised as from 1 January 2024 and the call option can be exercised by NN as from 1 January 2025. The acquisition closed in October 2021 and was accounted for in 2021. Heinenoord is consolidated 100% by NN Group; a liability was recognised for the estimated remaining price to be paid under the put option of EUR 85 million, which was subsequently remeasured to EUR 53 million at 31 December 2022. Intangible assets for the brand name and customer relationships were recognised for an amount of EUR 120 million. In addition, goodwill was recognised for an amount of EUR 310 million. There are no other assets and liabilities in the balance sheet of Heinenoord that are significant to NN Group. Heinenoord is included in the segment Netherlands Non-life. Divestments (2022) NN IP In August 2021, NN Group announced that it had reached an agreement to sell its asset management activities executed by NN Investment Partners (NN IP) to Goldman Sachs for total cash proceeds of EUR 1.7 billion closed in April 2022 resulting in a gain of EUR 1,062 million. Following the announced disposal, the asset management activities were classified as Held for sale in 2021. Reference is made to Note 12 \u2018Assets and liabilities held for sale\u2019. The results from NN IP and the divestment result are presented as Result from discontinued operations. Reference is made to Note 31 \u2018Discontinued operations\u2019. Closed book portfolio NN Belgium In November 2021, NN Group\u2019s subsidiary NN Insurance Belgium sold a closed book life portfolio to Athora Belgium. The closed book portfolio, comprising life insurance policies that are no longer being sold, reflected approximately EUR 3.3 billion of assets and liabilities. The transaction was completed on 4 October 2022. Following the announced disposal, the closed book life portfolio was classified as Held for sale. Therefore, the assets and liabilities of the closed book life portfolio were presented in \u2018Assets held for sale\u2019 and \u2018Liabilities held for sale\u2019 in the balance sheet in 2021. Reference is made to Note 12 \u2018Assets and liabilities held for sale\u2019. 46 Companies and businesses acquired and divested continued Divestments (2021) Bulgaria In February 2021, NN Group announced that it has reached an agreement with KBC Group N.V. (KBC) to sell its Bulgarian operations for a total consideration of EUR 78 million to KBC\u2019s Bulgarian insurance business DZI. The transaction closed in July 2021. The sale did not have a significant impact on the net result, equity or the Solvency II ratio of NN Group. ", "dimensions": { "concept": "ifrs-full:DisclosureOfBusinessCombinationsExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-565": { "value": "47 Structured entities NN Group\u2019s activities involve transactions with structured entities in the normal course of business. A structured entity is an entity that has been designed so that voting or similar rights are not the dominant factor in deciding who controls the entity, such as when any voting rights relate to administrative tasks only and the relevant activities are directed through contractual arrangements. NN Group\u2019s involvement in these entities varies and includes both debt financing and equity financing of these entities as well as other relationships. Based on its accounting policies, as disclosed in Note 1 \u2018Accounting policies\u2019, NN Group establishes whether these involvements result in no significant influence, significant influence, joint control or control over the structured entity. The structured entities over which NN Group can exercise control are consolidated. NN Group may provide support to these consolidated structured entities as and when appropriate, however, this is fully reflected in the Consolidated annual accounts of NN Group as all assets and liabilities of these entities are included in the Consolidated balance sheet and off-balance sheet commitments are disclosed. NN Group\u2019s activities involving structured entities are explained below in the following categories: \u2022 Consolidated NN Group originated liquidity management securitisation and covered bond programmes \u2022 Investments \u2013 NN Group managed investment funds \u2022 Investments \u2013 Third-party managed structured entities Consolidated NN Group originated liquidity management securitisation and covered bond programmes Mortgage loans issued are partly funded by issuing residential mortgage-backed securities under NN Group\u2019s Dutch residential mortgage- backed securities programmes (Hypenn and Arena) and covered bonds. The mortgage loans transferred to these securitisation vehicles continue to be recognised in the balance sheet of NN Group. Total amounts of mortgage loans securitised (notes issued) and notes held by third parties as at 31 December is as follows: Mortgage loans securitised Related mortgage loans RMBS issued and held by third parties Maturity year 2022 2021 2022 2021 Hypenn RMBS I 2024 1,048 1,169 Hypenn RMBS VI 503 333 Hypenn RMBS VII 2026 1,302 1,563 NN Conditional Pass-Through Covered Bond Company 2024-2039 2,925 2,587 Soft Bullet Covered Bonds 2024-2041 5,819 1,900 4,826 1,742 Total 8,169 8,060 4,826 4,662 NN Group companies hold the remaining notes. NN Group managed investment funds NN Group originates investment funds. NN Group may hold investments in these funds for its own account through the general account investment portfolio of the insurance operations. Other investments in these funds may be held for the risk of policyholders or by third parties. For the majority of these funds, NN Group also acts as the fund manager. NN Group considers both NN Group\u2019s financial interests for own risk and its role as asset manager to establish whether control exists and whether the fund is consolidated. In general, NN Group maintains a minority interest in these funds and NN Group receives a fixed fee over assets under management, at arm\u2019s length basis, for its asset management activities. These funds are generally not consolidated by NN Group. Financial interests for risk of policyholders are not taken into account when the policyholders decide on the investment allocations of their insurance policies (i.e. the policyholder has the \u2018power\u2019) and assume all risks and benefits on these investments (i.e. the policyholder assumes the variable returns). Reference is made to Note 5 \u2018Available-for-sale investments\u2019 in which investments in equity securities are specified by NN Group managed investment funds and Third-party managed investment funds. The maximum exposure to loss for NN Group is equal to the reported carrying value of the investment recognised in the balance sheet of NN Group 47 Structured entities continued Third-party managed structured entities As part of its investment activities, NN Group invests both in debt and equity instruments of structured entities originated by third parties. Most of the investments in debt instruments of third-party managed structured entities relate to Asset-backed securities (ABS), classified as loans. Reference is made to Note 5 \u2018Available-for-sale investments\u2019 where the ABS portfolio is disclosed. The majority of the investments in equity instruments of third-party managed structured entities relate to interests in investment funds that are not originated or managed by NN Group. Reference is made to Note 5 \u2018Available-for-sale investments\u2019 in which investments in equity securities are specified by NN Group managed investment funds and Third-party managed investment funds. NN Group has significant influence for some of its real estate investment funds as disclosed in Note 7 \u2018Associates and joint ventures\u2019. The maximum exposure to loss for NN Group is equal to the reported carrying value of the investment recognised in the balance sheet of NN Group", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutConsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-566": { "value": "48 Related parties In the normal course of business, NN Group enters into various transactions with related parties. Parties are considered to be related if one party has the ability to control or exercise significant influence over the other party in making financial or operating decisions. Related parties of NN Group include, among others, associates, joint ventures, key management personnel and close family members and the defined benefit and defined contribution plans. Transactions between related parties have taken place on an arm\u2019s length basis and include distribution agreements, sourcing and procurement agreements, human resources-related arrangements, and rendering and receiving of services. There are no significant provisions for doubtful debts or individually significant bad debt expenses recognised on outstanding balances with related parties. NN Group identifies the following (groups of) related party transactions: Transactions with key management personnel Transactions with members of NN Group\u2019s Executive Board, Management Board and Supervisory Board and close family members are considered to be transactions with key management personnel. Reference is made to Note 49 \u2018Key management personnel compensation\u2019 for more information on these transactions. Transactions with consolidated entities Entities over which NN Group can exercise control are considered to be related parties of NN Group. These entities are consolidated by NN Group. Transactions with or between entities controlled by NN Group are eliminated in the Consolidated annual accounts. More information on the NN Group originated liquidity management securitisation programmes is disclosed in Note 47 \u2018Structured entities\u2019. Transactions with associates and joint ventures Associates and joint ventures of NN Group are related parties of NN Group. The transactions with associates and joint ventures can be summarised as follows: Transactions with associates and joint ventures 2022 2021 Assets 85 210 Income 5 8 Transactions with post-employment benefit plans Entities administering or executing post-employment benefit plans of the employees of NN Group are considered to be related parties of NN\u2219Group. This relates to NN Group\u2019s pensions funds, i.e. the ING Group DB pension fund (joint with ING Bank), the Stichting Pensioenfonds Delta Lloyd, the NN CDC pension fund and BeFrank in the Netherlands and Instelling voor Bedrijfspensioenvoorziening Delta Lloyd Life OFP in Belgium. For more information on the post-employment benefit plans, reference is made to Note 28 \u2018Staff expenses\u201948 Related parties continued Transactions with other related parties Investment funds Other related parties include NN Group managed investment funds. Reference is made to Note 47 \u2018Structured entities\u2019 for more information. Pension entities NN Group operates several pension entities in the Netherlands, including BeFrank PPI N.V. and De Nationale Algemeen Pensioenfonds. For these entities, all asset management and other services are provided by NN Group entities on an arm\u2019s length basis. NN Group has no financial interest in the pension schemes that are executed by these entities. These entities are considered related parties. ", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-567": { "value": "49 Key management personnel compensation Transactions with key management personnel (Executive Board, Management Board and Supervisory Board) are transactions with related parties. These transactions are disclosed in more detail as required by Part 9 Book 2 of the Dutch Civil Code in sections II and III in the remuneration report in the financial report. These sections of the remuneration report are therefore part of the annual accounts. 2022 Executive Board and Management Board (2022) Amounts in thousands of euros Executive Board Management Board Total Fixed compensation: \u2013 base salary (cash) 2,555 3,820 6,375 \u2013 base salary (fixed shares) 639 955 1,594 \u2013 pension costs 1 49 151 200 \u2013 individual saving allowance 1 690 950 1,640 Variable compensation: \u2013 upfront cash 100 151 251 \u2013 upfront shares 100 151 251 \u2013 deferred cash 150 227 377 \u2013 deferred shares 150 227 377 Fixed and variable compensation 4,433 6,632 11,065 Other benefits 411 294 705 Employer cost social security 3 138 260 398 Total compensation 4,982 7,186 12,168 1 The pension costs consist of an amount of employer contribution (EUR 200 thousand) and an individual savings allowance (EUR 1,640 thousand), which is 23.3% of the amount of base salary above EUR\u2219114,866. 2 Annemiek van Melick was appointed Chief Financial Officer and Member of the Executive Board NN Group on 1 July 2022, succeeding Delfin Rueda, who as he stepped down on 1 July 2022. 3 The employer cost social security does not impact the overall remuneration received by the Executive Board and Management Board members. In the table above, \u2018Executive Board\u2019 refers to the two members of the Executive Board as at 31 December 2022. The two members of the Executive Board are also members of the Management Board. In the table above, \u2018Management Board\u2019 refers to the six members of the Management Board as at 31 December 2022, i.e. those members that are not also member of the Executive Board. In the table above \u2018Total\u2019 refers to all members of the Management Board during 2022. Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in \u2018Staff expenses\u2019 as part of \u2018Total expenses\u2019. The total remuneration as disclosed in the table above (for 2022: EUR 12.2 million) includes all variable remuneration related to the performance year 2022. Under IFRS-EU, certain components of variable remuneration are not recognised in the profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses in 2022 and therefore included in \u2018Total expenses\u2019 in 2022, relating to the fixed expenses of 2022 and the vesting of variable remuneration of 2022 and earlier performance years, is EUR 12.9 million. As at 31 December 2022, members of the Executive Board and Management Board held a total of 186,891 NN Group N.V. shares. In 2022, 13,764 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board Supervisory Board (2022) Amounts in thousands of euros Supervisory Board Fixed fees 822 Expense allowances 70 Compensation Supervisory Board 892 As at 31 December 2022, members of the Supervisory Board held no NN Group N.V. shares. Loans and advances to members of the Management Board (2022) Amounts in thousands of euros Amount outstanding 31 December Average interest rate Repayments Management Board members 223 1.90% 178 Loans and advances 223 178 As at 31 December 2022, no loans and advances were provided to members of the Executive Board and Supervisory Board. 2021 Executive Board and Management Board (2021) Amounts in thousands of euros Executive Board Management Board 3 Total Fixed compensation: \u2013 base salary (cash) 2,557 3,947 6,504 \u2013 base salary (fixed shares) 639 889 1,528 \u2013 pension costs1 49 162 211 \u2013 individual saving allowance1 692 953 1,645 Variable compensation: \u2013 upfront cash 118 206 324 \u2013 upfront shares 118 206 324 \u2013 deferred cash 176 241 417 \u2013 deferred shares 176 309 485 Other 2 67 67 Fixed and variable compensation 4,525 6,980 11,505 Other benefits 350 322 672 Employer cost social security4 131 270 401 Total compensation 5,006 7,572 12,578 1 The pension costs consist of an amount of employer contribution (EUR\u2219211 thousand) and an individual savings allowance (EUR\u22191,645 thousand), which is 23.3% of the amount of base salary above EUR\u2219112,189. 2 For the NN Investment Partners business, 50% of deferred awards are made in a deferred investment in funds managed by the business instead of awarding deferred cash. In this way, alignment of interests is achieved between staff working in the NN Investment Partners business and the clients who invest in funds managed by that business. 3 Satish Bapat was appointed to the Management Board as CEO NN Investment Partners on 1 April 2017 and stepped down on 19 August 2021. 4 The employer cost social security does not impact the overall remuneration received by the Executive Board and Management Board members. In the table above, \u2018Executive Board\u2019 refers to the two members of the Executive Board as at 31 December 2021. The two members of the Executive Board were also members of the Management Board. In the table above, \u2018Management Board\u2019 refers to the six members of the Management Board as at 31 December 2021, i.e. those members who were not also member of the Executive Board. In the table above \u2018Total\u2019 refers to all members of the Management Board during 2021 Remuneration of the members of the Executive Board and the Management Board is recognised in the profit and loss account in \u2018Staff expenses\u2019 as part of \u2018Total expenses\u2019. The total remuneration as disclosed in the table above (for 2021: EUR 12.6 million) includes all variable remuneration related to the performance year 2021. Under IFRS-EU, certain components of variable remuneration are not recognised in the profit and loss account directly, but are allocated over the vesting period of the award. The comparable amount recognised in staff expenses in 2021 and therefore included in \u2018Total expenses\u2019 in 2021, relating to the fixed expenses of 2021 and the vesting of variable remuneration of 2021 and earlier performance years, is EUR 13.4 million. As at 31 December 2021, members of the Executive Board and Management Board held a total of 166,577 NN Group N.V. shares. In 2021, 35,645 share awards on NN Group N.V. (both deferred and upfront) were granted to the Executive Board and Management Board. Supervisory Board (2021) Amounts in thousands of euros Supervisory Board Fixed fees 831 Expense allowances 71 Compensation Supervisory Board 902 The above mentioned amounts include VAT of EUR 37 thousand for 2021. NN Group does not provide for any pension arrangement, termination arrangements (including termination or retirement benefits) or variable remuneration, for members of the Supervisory Board. As at 31 December 2021, members of the Supervisory Board held no NN Group N.V. shares. Loans and advances to members of the Executive Board and Management Board (2021) A mounts in thousands of euros Amount outstanding 31 December Average interest rate Repayments Executive Board members 5.28% 320 Management Board members 401 1.77% 74 Loans and advances 401 394 As at 31 December 2021, no loans and advances were provided to members of the Supervisory Board ", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-569": { "value": "50 Fees of auditors Fees of auditors 2022 2021 Audit fees 17 18 Audit related fees 10 4 Fees of auditors 27 22 Fees as disclosed above relate to the network of the NN Group\u2019s auditors and are the amounts related to the respective years, i.e. on an accrual basis (excluding VAT). The audit related fees include mainly fees related to the implementation of IFRS 9 and IFRS 17 and the audit procedures on the 2022 comparatives, as well as services in relation to prospectuses, internal control reports provided to external parties and reporting to regulators. Auditor fees are included in \u2018External advisory fees\u2019 as part of Other operating expenses", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-570": { "value": "51 Subsequent events Share buyback On 16 February, NN Group announced that it will execute an open market share buyback programme for an amount of EUR 250 million. The programme will be executed within 12 months and commenced on 1 March 2023. NN Group intends to cancel any repurchased NN Group shares under the programmes unless used to cover obligations under share-based remuneration arrangements or to deliver stock dividend", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-572": { "value": "5. Market risk Market risk comprises the risks related to the impact of changes in various financial markets indicators on NN Group\u2019s balance sheet. Market risks are taken in pursuit of returns for the benefit of customers and shareholders. Accordingly, risk and return consideration and optimisation are paramount for both policyholder and shareholder. In general, Market risks are managed through a well-diversified portfolio under a number of relevant policies within clearly defined and monitored limits. NN Group reduces downside risk through various hedging programmes, in particular risks for which NN Group has no or only a limited appetite, such as Interest rate, Inflation, and Foreign exchange risks. NN Group also integrates Environmental, Social, and Governance (ESG) factors in the investment decision-making framework (see section Facts and Figures). Impact from in particular, climate change may become more relevant over time for so-called transitional risk, where the value of NN Group\u2019s asset investments may be impacted. This potential impact is currently in the process of being assessed. In managing our assets, we apply the prudent person principle, which means that we only invest in assets and instruments whose risks we properly identify, measure, monitor, manage, control and report and take into account in the assessment of our overall solvency needs. Market risk capital requirements 2022 2021 Interest rate risk 440 1,455 Equity risk 2,436 3,474 Credit spread risk 3,332 4,725 Real estate risk 2,098 2,124 Foreign exchange risk 620 730 Inflation risk 270 135 Basis risk 58 74 Diversification market risk -2,530 -5,320 Market risk 6,724 7,397 In 2022, the Market risk SCR decreased from EUR 7,397 million to EUR 6,724 million, mainly driven by lower equity markets as well as the sale of equities and reduction of the NN Group equity book exposure. The decrease of standalone Interest rate risk SCR and Spread risk SCR due to lower asset valuation driven by higher interest rates is largely offset by lower diversification after aggregation with other Market risk SCR\u2019s. Diversification within Market risk decreased as Real estate risk SCR became more dominant, as a result of decreased Interest rate risk SCR, Credit spread risk SCR and Equity risk SCR. The table below sets out NN Group\u2019s market value of assets for each asset class as at the end of 2022 and 2021. The values in these tables may differ from those included in the consolidated IFRS balance sheet as derivatives are excluded from this overview and furthermore due to classification and valuation differences to reflect a risk management view
Investment assets
Market value % of total Market value % of total
2022 2022 2021 2021
Fixed income 139,893 83% 163,876 83%
Government bonds and loans 42,276 25% 63,126 32%
Financial bonds and loans 8,125 5% 10,063 5%
Corporate bonds and loans 23,065 14% 26,838 13%
Asset-backed securities 3,225 2% 3,850 2%
Mortgages
1
62,066 36% 58,499 30%
Other retail loans 1,136 1% 1,500 1%
Non-fixed income 20,698 12% 22,512 11%
Common & preferred stock
2
3,654 2% 5,830 3%
Private equity 182 0% 1,215 1%
Real estate
3
12,887 8% 12,492 6%
Mutual funds (money market funds excluded)
4
3,975 2% 2,975 1%
Money market instruments (money market funds included)
5
9,295 5% 11,455 6%
Total investments 169,886 100% 197,843 100%
1 Mortgages are on amortised cost value. The mortgage value on the consolidated IFRS balance sheet differs from the value in the current table due to the acquisition premium of mortgages and the inclusion
of mortgages underlying the mortgage structure vehicles.
2 All preference shares are included in \u2018common & preferred stock\u2019, even when preference shares are modelled as bonds.
3 The real estate values exclude the real estate forward commitments, since NN Group has no price risk related to them.
4 Fixed income mutual funds are included in mutual funds.
5 Money market mutual funds and commercial papers are included in the Money market instruments.
Total investment assets have decreased from EUR 197,843 million at the end of 2021 to EUR 169,886 million at the end of 2022. The decrease
is mainly due to a lower NN Group valuation of the fixed income investments subsequent to higher yield curves. Main developments in the
NN Group risk profile in 2022 reflect the strategy of NN Group to maintain a relatively conservative investment portfolio to ensure a resilient
balance sheet: exposures in high yielding corporate bonds and mortgage loans are currently close to target.
5.1 Interest rate risk
Interest rate risk is defined as the possibility of decrease in the Solvency II Own Funds due to adverse changes in the level or shape of the
risk-free interest rate curve used for discounting assets and liabilities cash flows. Exposure to Interest rate risk arises from asset or liability
positions that are sensitive to changes in this risk-free interest rate curve.
5.1.1 Risk profile
The Interest rate risk SCR of NN Group decreased from EUR 1,455 million in 2021 to EUR 440 million in 2022. The decrease is mainly driven
by the sharp increase in the interest rates and changes in the shape of the interest rate curve. In addition, widening of spreads for assets
and mortgages led to lower asset valuation and further decrease in the Interest rate risk SCR. This was partly offset by an increase of the
VOLA by 16bps, from 3bps to 19bps at the end of 2022. The decrease of Interest rate risk SCR is the main driver of the decrease of the
diversification across Market risks.
5.1.2 Risk mitigation
The Interest rate SCR indicates to what extent assets and liabilities are matched on a Solvency II basis. The majority of NN Group liability
cash flows are predictable and stable, since exposure to policyholder behaviour and profit-sharing mechanisms is very limited. To manage
Interest rate risk, NN Group applies cash flow matching on economic basis. Until year 30, where markets for fixed income instruments are
sufficiently deep and liquid, best estimate liability cash flows (excluding risk margin) are closely matched with government bonds, corporate
bonds, mortgages and loans. Cash flows after 30 years are partially hedged on a duration basis with long-term government bonds and
interest rate swaps, due to price and illiquidity of markets.
NN Group has implemented limits and tolerances for Interest rate risk exposures at NN Group level as well as for relevant Business Units.
We continuously monitor and work on mitigating solutions for our new business and products, such as a development of defined contribution
pension products in the Netherlands and a shift towards protection products in our markets in general.
5.1.3 Risk measurement For the purpose of discounting EUR-denominated asset cash flows, NN Group uses market swap curves to value assets. For the asset cash flows denominated in other currencies, the relevant swap or government curve is used for that specific currency. For the purpose of discounting the EUR-denominated liability cash flows NN Group uses a swap curve less Credit Risk Adjustment (CRA) plus VOLA in line with definitions under the Solvency II. For the liability cash flows denominated in other currencies, the relevant swap or government curve is used where this curve is also lowered by the Credit Risk Adjustment and adding the VOLA specific for each currency. In line with Solvency II regulations, NN Group extrapolates the EUR swap curve starting from the Last Liquid Point (LLP) onwards to the Ultimate Forward Rate for each relevant currency in its portfolio. The LLP used for EUR is 20 years. As such, the sensitivity of SCR for Interest rate risk primarily depends on the level of cash flow matching between assets and liabilities up to the 20-year point, and the difference between the swap curve and the curve extrapolated to the UFR for longer cash flows. The sensitivity of the Solvency II ratio to changes in interest rates is monitored on a quarterly basis. The table below presents the Eligible Own Funds, SCR, and Solvency II ratio sensitivities to various changes in interest rates. Solvency II Ratio sensitivities for interest rate comprise the following set of shocks, each of them is calculated independently as a standalone scenario: a parallel up and a parallel down shifts of the discount curve, and a steepening scenario for the interest rates used to discount asset cash flows after the LLP. Solvency II ratio sensitivities: Interest rate risk at 31 December 2022 2022 Own Funds impact SCR impact Solvency II ratio impact Interest rate: Parallel shock +50 bps -219 -145 1% Interest rate: Parallel shock -50 bps 290 224 -2% Interest rate: 10 bps steepening between 20y-30y -242 39 -4% Solvency II ratio sensitivities: Interest rate risk at 31 December 2021 2021 Own Funds impact SCR impact Solvency II ratio impact Interest rate: Parallel shock +50 bps -624 -101 -4% Interest rate: Parallel shock -50 bps 803 153 5% Interest rate: 10 bps steepening between 20y-30y -580 96 -8% Changes in the Solvency II ratio sensitivities to interest rates are primarily driven by increased interest rates in combination with the changes in the Interest rate risk profile. Under the parallel shock scenarios, the base risk-free interest rate curves for each currency are shocked by +/-50 bps for all tenors up until the LLP. The other components of the basic risk-free interest rate curve \u2013 namely UFR, Credit Risk Adjustment, VOLA and extrapolation technique towards UFR remain unchanged. The asset interest rate curves are shocked with the parallel shocks for all tenors. In the interest rate steepening scenario, the EUR asset valuation curve is shocked after the LLP (the LLP for EUR is set at 20 years under Solvency II). The steepening is applied for interest rate curve tenors between 20 and 30 years (a linear increase from 0 to 10 bps of 1bp per tenor). After the 30 years point, the shift in the interest rate curve remains constant at 10bps. As the EIOPA risk-free curve is extrapolated after the LLP, the steepening sensitivity only affects the asset discount curve. 5.2 Equity risk Equity risk is defined as the possibility of decrease Solvency II Own Funds due to adverse changes in the level of equity market prices. Exposure to Equity risk arises from direct or indirect asset or liability positions, including equity derivatives such as futures and options, that are sensitive to equity prices. 5.2.1 Risk profile The table below sets out the market value of NN Group\u2019s equity assets as at the 31 December 2022 and 2021, respectively Equity assets 2022 2021 Common & preferred stock 3,654 5,830 Private equity 182 1,215 Mutual funds (money market funds are excluded, fixed income mutual funds are included) 3,975 2,975 Total 7,811 10,020 NN Group is mostly exposed to public listed equity but also invests in private equity funds and equity exposures through mutual funds. The direct equity exposure is spread mainly across the Netherlands (32% in 2022 compared with 25% in 2021) and remaining exposure in other countries, predominantly in core EU countries (52% in 2022 compared with 54% in 2021, including The Netherlands). Note that mutual funds are classified as equity in the table above but include predominantly fixed income funds. In case economic conditions deteriorate, investments into equities might lose value. About 34% of NN Group\u2019s common equities are invested in defensive sectors, which are less sensitive to economic downturn. 2023 estimates for equity values have already been priced; more downward revisions might be expected if economic growth forecasts decline. Valuations gains are not expected before end of 2023. As shown in the \u2018Market risk capital requirements\u2019 table above, the Equity risk SCR of NN Group decreased from EUR 3,474 million in 2021 to EUR 2,436 million in 2022 mainly driven by lower equity markets as well as the sale of equities. 5.2.2 Risk mitigation Exposure to equities provides additional diversification and upside return potential in the asset portfolio of an insurance company with long- term illiquid liabilities. The Concentration risk on individual issuers is mitigated by having issuer risk limits in place in investment mandates as well as at NN Group level. There is no natural hedge for Equity risk on the liability side of the balance sheet. NN Group has the possibility to protect the downside risk of the equity portfolio by selling equity or buying put options. 5.2.3 Risk measurement The sensitivity of the Solvency II ratio to changes in the value of equity is monitored on a quarterly basis. This scenario estimates the impact of an instantaneous shock of -25% applied to the value of direct equity and equity mutual funds. Derivatives like equity options or equity forwards which have equity as underlying are also revalued using the same shock applied to the underlying equities or equity indices. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in equity prices at 31 December 2022 and 2021. Solvency II ratio sensitivities: Equity risk Own Funds impact SCR impact Solvency II ratio impact 2022 2021 2022 2021 2022 2021 Equity Downward shock -25% -1,464 -1,840 -326 -489 -9% -9% 5.3 Credit spread risk Credit spread risk is defined as the possibility of a decrease in Solvency II Own Funds due to adverse movements in the credit spreads of fixed income assets. The credit spread widening (or narrowing) reflects market supply and demand, rating migration of the issuer and changes in expectation of default. Changes in liquidity and other risk premiums that are relevant to specific assets can play a role in the value changes as well. In the calculation of the SCR for the Partial Internal Model entities, NN Group assumes no change to the VOLA on the liability side of the balance sheet after a shock-event, but instead reflects the illiquidity of liabilities in the asset shocks to ensure appropriate Solvency Capital Requirements. This approach ensures appropriate risk incentives and is approved by DNB. NN Group also shocks all government bonds and its mortgage portfolio in the calculation of Credit spread risk capital requirements for the Partial Internal Model entities. The main asset classes in scope of the Credit spread risk module for Partial Internal Model entities are government and corporate bonds, mortgages and loans. For the calculation of the SCR for Credit spread risk of the Standard Formula insurance entities, the main asset classes in scope are corporate bonds and loans Market value government bond and loans exposures (2022) The table below sets out the market value of NN Group\u2019s assets invested in government bonds and loans by country and maturity. Market value of government bond and loans in 2022 by number of years to maturity 4 2022 Rating 1 Domestic exposure 2 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2022 Japan A+ 100% 790 460 468 727 1,909 2,190 1,626 676 8,846 France AA 0% 76 25 28 123 253 1,886 676 2,926 5,993 Germany AAA 0% 49 326 18 187 1,301 2,043 344 207 4,475 Belgium AA- 25% 31 5 11 71 453 1,951 949 609 4,080 Netherlands AAA 99% 551 142 16 418 2,427 47 9 3,610 Austria AA+ 0% 6 171 512 3 307 582 1,030 2,611 Spain A- 27% 74 104 65 600 1,140 463 60 2,506 United States AAA 0% 1 223 1,498 1,722 Multilateral 3 AAA 0% 18 63 5 156 275 772 315 21 1,625 Finland AA+ 0% 7 146 3 65 611 170 1,002 Italy BBB 0% 71 16 14 131 467 229 40 27 995 Other 5 \u2013 Above Investment Grade 275 294 300 560 1,467 616 526 45 4,083 Other 5 \u2013 Below Investment Grade 137 43 64 146 171 145 22 728 Total 2,011 1,477 1,301 2,697 7,382 14,540 7,258 5,610 42,276 1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds. 2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands. 3 Includes EIB, ECB, EFSF, EU and ESM. 4 Based on legal maturity date. 5 Investment Grade reflects a rating of BBB- or higher; Below Investment Grade reflects a rating below BBB-. Market value government bond and loans exposures (2021) Market value of government bond and loans in 2021 by number of years to maturity 4 2021 Rating 1 Domestic exposure 2 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021 France AA 0% 47 68 52 129 212 3,881 750 5,290 10,429 Japan A+ 98% 644 461 503 889 1,919 2,571 1,682 737 9,406 Belgium AA- 35% 401 243 37 173 790 3,723 1,218 950 7,535 Germany AAA 0% 30 95 488 140 1,977 3,030 733 396 6,889 Netherlands AAA 99% 45 618 210 404 2,339 2,034 13 5,663 Austria AA+ 0% 171 11 190 517 737 1,303 1,048 2,012 5,989 Spain A- 26% 24 15 136 155 420 1,999 648 59 3,456 Multilateral 3 AAA 0% 194 48 135 175 202 969 732 15 2,470 United States AAA 0% 1 1 282 2,085 2,369 Italy BBB 0% 43 101 35 50 745 283 11 1,268 Finland AA+ 0% 5 3 166 82 981 1,237 Other 5 \u2013 Above Investment Grade 551 180 258 899 2,029 1,139 462 20 5,538 Other 5 \u2013 Below Investment Grade 107 119 141 144 208 139 19 877 Total 2,263 1,962 1,975 3,648 9,725 21,658 12,403 9,492 63,126 1 NN Group uses the second-best rating across Fitch, Moody\u2019s and S&P to determine the credit rating label of its bonds. 2 Percentage of the bonds held in the local unit, e.g., percentage of Dutch bonds held by entities registered in the Netherlands. 3 Includes EIB, ECB, EFSF, EU and ESM. 4 Based on legal maturity date. 5 Investment Grade reflects a rating of BBB or higher; Below Investment Grade reflects a rating below BBB. 52% (or EUR 22 billion) of NN Group total sovereign debt exposure is invested in AAA and AA rated eurozone countries in 2022 as compared to 60% in 2021. Of the EUR 22 billion core eurozone government bonds and loans held by NN Group, 76% will mature after year 10 and 35% after year 20 in 2022 while those for 2021 were EUR 38 billion, 78% and 40% respectively. With regard to Central and Eastern Europe, the government bond exposures are mainly domestically held. In the Partial Internal Model, all government bonds contribute to Credit spread risk, including those rated AAA. The tables below show the market value of non-government fixed-income securities (excluding mortgages and derivatives) by rating and maturity .
Market value non-government bond securities and loans (2022)
Market value of non-government bond securities and loans in 2022 by number of years to maturity
2022 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2022
AAA 150 231 307 424 279 996 1,070 1,597 5,054
AA 267 115 190 587 449 271 174 128 2,181
A 1,095 1,104 1,294 2,174 3,055 1,051 718 498 10,989
BBB 1,288 2,053 1,176 2,338 2,903 1,481 693 84 12,016
BB 317 192 417 660 937 21 49 2,593
B and below 57 118 198 449 234 12 1,068
No rating available 208 72 5 116 81 3 29 514
Total 3,382 3,885 3,587 6,748 7,938 3,832 2,707 2,336 34,415
Market value non-government bond securities and loans (2021)
Market value of non-government bond securities and loans in 2021 by number of years to maturity
2021 0-1 1-2 2-3 3-5 5-10 10-20 20-30 30+ Total 2021
AAA 153 201 257 597 352 1,017 1,365 2,097 6,039
AA 507 358 139 540 663 569 241 173 3,190
A 1,270 1,543 1,210 2,691 3,468 1,204 810 614 12,810
BBB 1,204 1,650 2,113 2,602 3,260 1,781 1,050 118 13,778
BB 271 242 282 777 1,253 51 31 30 2,937
B and below 126 262 219 661 500 21 1,789
No rating available 138 3 4 63 208
Total 3,669 4,259 4,220 7,868 9,500 4,643 3,497 3,095 40,751
The table below shows NN Group\u2019s holdings of loans and other debt securities as at 31 December 2022 and 31 December 2021, respectively.
Market value all loans and other debt securities (per credit rating)
2022 2021
AAA 16,054 22,479
AA 17,675 30,545
A 23,430 27,772
BBB 14,547 17,181
BB 3,217 3,868
B and below 1,254 1,824
No rating available 377 70
Mortgages
1
62,066 58,499
Other Retail Loans 1,273 1,638
Total 139,893 163,876
1 Mortgages refer to all mortgages using the same criteria and is aligned with the Mortgages figure in Investment assets above.
5.3.2 Mortgages
The required capital for mortgages within entities under the Partial Internal Model is calculated in the credit spread risk module while the
required capital for mortgages within entities under Standard Formula is calculated in the counterparty default risk module. The credit spread
risk module within the Partial Internal Model captures the behaviour of Own Funds when the valuation of mortgages changes with market
mortgage rates, while the counterparty default risk module within Standard Formula captures the behaviour of Own Funds as a result of
unexpected loss or default of mortgages.
The Loan-to-Value (LTV) for residential mortgages (which is based on the net average loan to property indexed value) at NN Life, the Banking
business, NN Non-life and NN Belgium stood at 53%, 53%, 59% and 54% respectively at the end of 2022 while those were 59%, 57%, 65%
and 60% respectively at the end of December 2021. The average LTV for NN Group portfolio is 54% 2022 (59% in 2021). The migration
towards lower LTV bucket is due to the house price increase in 2022 (11.9%) .
The inherent credit risk of mortgages is backed primarily by means of the underlying property, but also through the inclusion of mortgages
guaranteed by the Nationale Hypotheek Garantie (NHG) and other secondary covers like savings, investments and life insurance policies.
Mortgages with NHG accounted for 24%, 31%, 18% and 28% at NN Life, the Banking business, NN Non-life, and NN Belgium respectively
at the end of 2022 and 26%, 32%, 20% and 28% at NN Life, the Banking business, NN Non-life and NN Belgium respectively at the end of
2021. The relative NHG coverage is decreasing in the portfolios mostly due to the high house prices, so overall less mortgages are eligible for
NHG coverage.
Loan-to-Value on mortgage loans
1
2022 2021
NHG 27% 28%
LTV <= 80% 69% 65%
LTV 80%-90% 3% 5%
LTV 90%-100% 1% 1%
LTV > 100% 0% 1%
Total NN Group 100% 100%
1 Risk figures and parameters do not include third party originated mortgages and collateralised mortgages although they are on the balance sheet of NN Group.
The mortgage portfolio is under regular review to ensure troubled assets are identified early and managed properly. The loan is categorised
as a non-performing loan (NPL) if the loan is 90 days past due, or the client was in default the previous month, and the minimum holding
period (MHP) is active or the loan is classified as Unlikely To Pay (UTP) by the problem loans department.
The main criterion for lifting the default status will be that no arrears greater than EUR 250 occurred during the Minimum Holding Period
(MHP). For defaulted clients that are classified as \u2018distressed restructuring\u2019, the MHP is 12 months. For all other defaulted clients, the MHP is
3 months.
The impact of the recent geopolitical developments and increasing inflation are limited on the creditworthiness of the portfolio.
Combined with low levels of unemployment, the outstanding non-performing loans decreased in 2022. Provisions decreased due to sharply
increasing house prices between 2021-Q3 and 2022-Q3 (+11.9%) (Q4 figures are unavailable per 2022 year-end, hence Q3 figures are used
and based on CBS) and a decrease in non-performing loans. This decrease is partly offset by a EUR 2.2 million management overlay related
to high levels of inflation and sharply increasing mortgage interest rates.
The net exposure decreased after deduction of capped collaterals and guarantees because of an increase in the house price. The NHG
guarantee value slightly increased because calculation of the guarantee value was aligned with the NHG terms.
Credit quality: NN Group mortgage portfolio, outstanding
1,2,5
Life business Banking business Other
3
Total
2022 2021 2022 2021 2022 2021 2022 2021
Performing mortgage loans that are not
past due 26,316 25,285 21,117 20,322 5,255 5,304 52,688 50,911
Performing mortgage loans that are past due 111 128 127 161 18 24 256 313
Non-performing mortgage Loans
4
85 77 99 104 13 12 197 193
Total 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417
Provisions for performing mortgage loans 1 2 2 2 1 1 4 5
Provisions for non-performing mortgage loans 4 5 1 1 5 6
Total
4
5 7 3 3 1 1 9 11
1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million).
2 Amounts are excluding partial transfer of mortgages and DRMF.
3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities.
4 The non-performing loans include \u2018unlikely to pay\u2019 mortgage loans, which may not be past due.
5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits .
Collateral on mortgage loans 1,5 Life business Banking business Other 3 Total 2022 2021 2022 2021 2022 2021 2022 2021 Carrying value 2 26,512 25,490 21,343 20,587 5,286 5,340 53,141 51,417 Indexed value of real estate 58,286 49,536 47,885 41,478 10,717 9,685 116,888 100,699 Savings held 6 1,144 985 1,462 1,408 76 75 2,682 2,468 NHG guarantee value 4 5,600 5,480 5,518 5,328 1,117 1,113 12,235 11,921 Total cover value + including NHG guarantee capped at carrying value 26,500 25,474 21,335 20,576 5,285 5,337 53,120 51,387 Net exposure 12 16 8 11 1 3 21 30 1 The total value for Mortgages is different in this table vs. Investment Assets Table because of exclusion of mortgage not managed by NN Bank of EUR 7,318 million in 2022 (2021: EUR 6,188 million) . 2 Amounts are excluding partial transfer of mortgages and DRMF. 3 \u2018Other\u2019 column includes numbers for the Non-life entities, Belgium business and other small entities. 4 The NHG guarantee value follows an annuity scheme and is corrected for the 10% own risk (on the granted NHG claim). 5 From 2022 the carrying value includes the accrued interest, past due amount, and deduction of construction deposits. 6 Savings held includes life policies. 5.3.3 Risk mitigation Our mortgages are subject to strict underwriting criteria and are well collateralised. NN Group has Concentration risk limits for individual issuers which depend on the credit quality of the issuer. These limits ensure that large risk concentrations are avoided. In order to diversify the Credit spread risk further, NN Group has increased its investments in non-listed assets. 5.3.4 Risk measurement The sensitivity of the Solvency II ratio to changes in credit spreads is monitored on a quarterly basis. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivities to various changes in credit spreads. Solvency II ratio sensitivities: Credit spread risk at 31 December 2022 2022 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -343 43 -5% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -417 64 -6% Credit spread: Parallel shock spreads corporates +50 bps 291 -111 6% Credit spread: Parallel shock spreads mortgages +50 bps -880 22 -10% Solvency II ratio sensitivities: Credit spread risk at 31 December 2021 2021 Own Funds impact SCR impact Solvency II ratio impact Credit spread: Parallel shock for AAA-rated government bonds +50 bps -628 89 -8% Credit spread: Parallel shock for AA and lower-rated government bonds +50 bps -938 120 -12% Credit spread: Parallel shock spreads corporates +50 bps 697 -209 12% Credit spread: Parallel shock spreads mortgages +50 bps -1,075 31 -12% Solvency II ratio sensitivities to credit spreads decreased primarily due to increased interest rates resulting in lower asset exposure. For the mortgage spreads sensitivity this was partially offset by increase in the mortgage exposure. NN Group has exposure to government, corporate and financial debt and is exposed to spread changes for these instruments. Furthermore, the VOLA in the valuation of liabilities introduces an offset to the valuation changes on the asset side (except for the mortgages). The Solvency II sensitivities for spread changes cover four possible scenarios \u2013 spread widening for AAA rated government bonds, spread widening for non-AAA rated government bonds, spread widening for corporates and spread widening for mortgages. For all scenarios, a parallel widening of the respective spread curves of +50bps is assumed. There is a corresponding translation of the spread widening on asset valuations on the VOLA according to EIOPA\u2019s reference portfolio in each of the scenarios. Government bond shocks are applied to the following asset classes: government bonds and loans, government-linked instruments (sub- sovereigns and supranational). Corporate spread shocks are applied to the following asset classes: corporate bonds (financials and non-financials), covered bonds, subordinated bonds, asset-backed securities and loans. Mortgages are subject to spread shocks in a separate scenario NN Group\u2019s sensitivity to credit spread changes is mainly driven by the difference between NN\u2019s investment portfolio and the EIOPA reference portfolio. The reference portfolio represents the weights of an average European insurers\u2019 portfolio to different fixed income assets and is used to determine the level of the VOLA to be applied for the valuation of liabilities. Asset spread changes impact the level of the VOLA and therefore also the valuation of liabilities, and thus provide an offset to asset valuation changes. NN Group is exposed to widening in government bond spreads due to a higher exposure to well rated government debt compared with the reference portfolio. At the same time, the exposure to widening of credit spreads on corporate bonds has a positive impact on the ratio due to a lower exposure of NN Group to these asset classes compared with the reference portfolio. Mortgages spread widening has a negative impact on the Solvency II ratio, as mortgages are not part of the reference portfolio. 5.4 Real estate risk Real estate risk is defined as the possibility of decrease in Solvency II Own Funds due to adverse changes in the value of real estate. Exposure to Real estate risk arises mainly from holding direct real estate properties or positions in real estate mutual funds. With the long- term nature of the liabilities of NN Group, illiquid assets such as real estate play an important role in the asset allocation. 5.4.1 Risk profile NN Group\u2019s real estate exposure (excluding forward commitments) increased mainly due to new investments, from EUR 12,492 million at the end of 2021 to EUR 12,887 million at the end of 2022. The real estate exposure is mainly present in the portfolios of NN Life, NN Non-life and NN Belgium Life. NN Group has various categories of real estate: investments in real estate funds and joint-ventures, real estate directly owned and investments in buildings occupied by NN Group. Several of the real estate funds, in which NN Group participates, include leverage and therefore the actual real estate exposure is larger than NN Group\u2019s value of participation in real estate funds. The real estate portfolio is held for the long-term and is illiquid. Furthermore, there are no hedge instruments available in the market to effectively reduce the impact of market volatility. Rental income is increasing with inflation and occupancy rates in 2022 are close to 100%. Indexation of prices has kept up with inflation in a large portion of our portfolio. Real estate valuations, because of the evidencing that is required, have a lag to market developments and tend to show prolonged negative movement in case of economic downturn. As such, continued pressure on real estate valuations is expected in 2023. The table below sets out NN Group\u2019s real estate exposure per region as at 31 December 2022 and 2021, respectively. Real estate assets per region 2022 2021 Western Europe 58% 60% Southern Europe 18% 17% Nordics 8% 7% Central and Eastern Europe 5% 5% UK and Ireland 11% 11% Other 0% 0% Total 100% 100% Real estate exposure is mainly concentrated in Western Europe. Main underlying types are residential real estate (38%) and industrial real estate (30%). Retail and office real estate represents respectively 17% and 10% of NN total real estate exposure. As shown in the \u2018Market risk capital requirements\u2019 table, the Real estate risk SCR of NN Group decreased from EUR 2,124 million in 2021 to EUR 2,098 million in 2022 primarily due to modelling refinements partially offset by an increase in the real estate exposure. 5.4.2 Risk mitigation Exposure to real estate provides for additional diversification for the asset portfolio. The Concentration risk on individual assets is limited under the relevant investment mandates. Real estate portfolio is also well diversified across European countries and sectors. 5.4.3 Risk measurement The sensitivity of the Solvency II ratio to changes in the value of real estate is monitored on a quarterly basis. This scenario estimates the impact of an instantaneous shock of -10% to the value of direct real estate exposures and real estate within mutual funds. The table below presents the Eligible Own Funds, SCR and Solvency II ratio sensitivity to a downward shock in the value of real estate at 31 December 2022 and 2021. Solvency II ratio sensitivities: Real estate risk Own Funds impact SCR impact Solvency II ratio impact 2022 2021 2022 2021 2022 2021 Real estate Downward shock -10% -1,057 -921 -78 -58 -10% -8% Solvency II ratio sensitivity to changes in the value of real estate increased due to an increase in proportion of real estate investments in the total portfolio. 5.5 Foreign exchange risk Foreign exchange (FX) risk measures the impact of losses related to changes in currency exchange rates. 5.5.1 Risk profile FX transaction risk can occur on a local entity level, while FX translation risk can occur when non-Euro entities are consolidated at the level of NN Group and show a risk in regard to NN Group\u2019s reporting currency, the Euro. The SCR for Foreign exchange risk decreased from EUR 730 million in 2021 to EUR 620 million in 2022. This is mainly due to a decrease in equity markets and widening of the asset spread for the non-EUR denominated bonds which decreased the valuation. 5.5.2 Risk mitigation The FX risk at the local entity level is mitigated by limiting investment to the non-local currency assets or by hedging through FX forwards and cross currency swaps. 5.6 Inflation risk Inflation risk is defined as the risk of adverse changes in inflation that result into a decrease in Solvency II Own Funds. Inflation risk is calculated for the Dutch entities applying the Partial Internal Model for the SCR calculation. 5.6.1 Risk profile The SCR for Inflation risk increased to EUR 270 million from EUR 135 million at the end of 2021. The increase is primarily driven by an increase in the expected inflation rates. Inflation risk is limited and hedged to a large extent with inflation-linked swaps or bonds, which are exposed to lower inflation rates. Furthermore, with the long-term nature of the liabilities, the effect of the short-term inflation changes on NN Group remains limited. 5.6.2 Risk mitigation The Inflation risk is managed through the use of inflation swaps and investments in inflation bonds. In particular, the exposure to inflation linked liabilities is limited and hedged. 5.7 Basis risk The SCR Basis risk is defined as a risk that the underlying asset or liability behaves differently than the underlying hedge instrument, which results in the loss in the Solvency II balance sheet. 5.7.1 Risk profile The SCR for Basis risk decreased from EUR 74 million in 2021 to EUR 58 million in 2022, mostly due to a decrease in the hedge equity exposure within the separate account business in the Netherlands. 5.7.2 Risk mitigation The Basis risk is mitigated by fund mapping of the underlying funds to risk factors, and also by constant monitoring of the fund performance compared to the benchmark. 5.8 Concentration risk For the Standard Formula entities there is an additional SCR for Concentration risk calculated under Standard Formula, which is defined as the risk of loss in the Basic Own Funds as a result of the default of an issuer in which NN Group has a concentrated investment position. 5.8.1 Risk profile The SCR for Concentration risk remained at nil in 2022.
5.8.2 Risk mitigation
This Concentration risk is mitigated by Concentration risk limits aiming to have a well-diversified portfolio with Credit risk concentrations in
any particular issuer within the NN Group risk appetite.
5.9 Market risks within separate account businesses
The separate account businesses are those in which the policyholder bears the majority of the Market and Credit risk. NN Group\u2019s earnings
from the separate account businesses are primarily driven by fee income. However, in the case of variable annuities and the guaranteed
separate account pension business in the Netherlands, NN Group retains risk associated with the guarantees provided to its policyholders.
Businesses in this separate account category are (i) the group pension business in the Netherlands for which guarantees are provided and (ii)
other separate account business, primarily the unit-linked business and variable annuities (VA).
5.9.1 Separate account guaranteed group pension business in NN Life
Risk profile
In the Dutch separate account guaranteed group pension portfolio, investments are held in separate accounts on behalf of the sponsor
employer who concluded their contract with a Business Unit of NN Group. Regardless of actual returns on these investments, pension
benefits for the beneficiaries are guaranteed under the contract. The value of the provided guarantee is sensitive to interest rates,
movements in the underlying funds and the volatility of those funds.
The Assets under management for NN Life\u2019s portfolio decreased from EUR 2.9 billion as at 31 December 2021 to EUR 2.4 billion as at
31 December 2022 mainly driven by higher interest rate. In general, the materiality of the separate account business within NN Group has
reduced in the past few years due to the run-off of the portfolio.
Risk mitigation
NN Group currently hedges the value of the guarantees it provided under group pension contracts in the Netherlands. For the purpose of
hedging, the exposure under such guarantees is discounted at the swap curve without the extrapolation to the UFR. The hedge programme
includes interest rate swaps and equity futures. Upon contract renewal, NN Group offers policyholders defined contribution products with
investments in portfolios that NN Group can more easily hedge, thus reducing the risk to NN Group.
5.9.2 Other separate account businesses
Risk profile
The other separate account business primarily consists of unit-linked insurance policies and variable annuity (VA) portfolios. Unit-linked
insurance policies provide policyholders with selected fund returns combined with an insurance cover. The Investment risk is borne by
the policyholder, although there are some unit-linked products where NN Group has provided guarantees on the performance of specific
underlying funds. Unit-linked products without guarantees do not expose NN Group to Market risk, except to the extent that the present
value of future fees is affected by market movements of the underlying policyholder funds. The variable annuities in the Japan Closed Block
VA and VA Europe business consist of guaranteed minimum accumulation benefit products, guaranteed minimum death benefit products
and guaranteed minimum withdrawal benefit products.
Risk mitigation
The Market risks of the unit-linked and other separate account business are managed by the design of the product. Currently, NN Group
does not hedge the Market risks related to the present value of future fee income derived from this business (with the exception of the Japan
Closed Block VA). For the Japan Closed Block VA business and European VA business NN Group has hedging programmes in place targeting
Equity, Interest rate, Credit spread, and FX risk as well as Volatility risk.
Risk measurement
NN Group determines Eligible Own Funds for the Market and Credit risks of the separate account business through modelling the risks of the
fee income and the guarantees including the impact of the hedge programmes.
5.3.1 Risk profile As shown in the \u2018Market risk capital requirements\u2019 table, the Credit spread risk SCR of NN Group decreased from EUR 4,725 million in 2021 to EUR 3,332 million in 2022. This decrease is mainly driven by a sharp increase in interest rates, widening of asset and mortgage spreads, an increase of mortgage cash flow duration due to lower prepayment rates, and refinement of the Credit spread SCR modelling. The government securities market value delta can mostly be explained by valuation changes (60%). Transactions and redemptions count for 40% of the decrease. The corporate securities market value delta is explained by valuation (50%) and transactions (50%). The table below shows the market value of NN Group\u2019s fixed-income bonds which are subject to Credit spread risk SCR by type of issuer as at 31 December 2022 and 31 December 2021, respectively. Fixed-income bonds and loans by type of issuer Market value Percentage 2022 2021 2022 2021 Sovereign 42,275 63,126 55% 61% Manufacturing 6,432 8,022 8% 8% Finance and Insurance 8,125 10,063 11% 9% Asset-backed securities 3,225 3,850 4% 4% Utilities 2,463 2,928 3% 3% Transportation and Warehousing 2,261 2,947 3% 3% Information 1,841 2,365 3% 2% Real Estate and Rental and Leasing 2,146 2,070 2% 2% Other 7,923 8,506 11% 8% Total 76,691 103,877 100% 100% ", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-573": { "value": "6 Counterparty default risk Counterparty default risk is the risk of loss due to default or deterioration in the credit standing of the counterparties and debtors (including reinsurers) of NN Group. The SCR for Counterparty default risk is primarily based on the issuer\u2019s probability of default (PD) and the loss-given- default (LGD) of each individual position taking into account diversification across these positions. The Counterparty default risk module also covers any Credit risk exposures which are not covered in the Credit spread risk sub-module . 6.1 Risk profile As shown in the \u2018Solvency Capital Requirements\u2019 table above, the Counterparty default risk SCR of NN Group decreased from EUR 200 million at the end of 2021 to EUR 163 million at the end of 2022, driven primarily by the lower market value of the mortgage portfolio in NN Belgium. In the Partial Internal Model the mortgages do not get the capital charge under the Counterparty default risk and are under Credit spread risk SCR sub module for these Business Units. 6.2 Risk mitigation NN Group uses different Credit risk mitigation techniques. For over the counter derivatives, the exchange of collateral under the International Swaps and Derivatives Associations contracts accompanied with Credit Support Annexes is an important example of risk mitigation. Other forms of Credit risk mitigation include reinsurance collateral exchange. For cash and money market funds, limits per counterparty are put in place. 6.3 Risk measurement The Counterparty default risk (CDR) module comprises two sub-modules: \u2022 CDR Type I: applicable to exposures which might not be diversified and where the counterparty is likely to be (externally) rated, e.g., reinsurance contracts, derivatives and money market exposures. The underlying model is the Ter Berg model (which was also the basis for Standard Formula calibration under Solvency II). \u2022 CDR Type II: applicable to exposures that are usually (well) diversified and where the counterparty is likely to be unrated, like retail loans, but also other forms of term lending not covered in Type I The capital charges for CDR Type I and CDR Type II exposures are calculated separately and subsequently aggregated ", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-574": { "value": "7 Liquidity risk Liquidity risk is the risk that one of NN Group\u2019s entities does not have sufficient liquid assets to meet its financial obligations when they become due and payable, at reasonable cost and in a timely manner. Liquidity in this context is the availability of funds, or certainty that funds will be available without significant losses, to honour all commitments when due. NN Group manages Liquidity risk via a Liquidity risk framework: ensuring that \u2013 even after shock \u2013 NN Group\u2019s businesses can meet immediate obligations. Liquidity stress events can be caused by a market-wide event or an idiosyncratic NN Group specific event. These events can be short-term or long-term and can both occur on a local, regional or global scale. Subsidiaries that trade derivatives are responsible for maintaining sufficient liquidity levels to meet their collateral requirements. For this purpose, liquidity buffers are set to ensure sufficient liquidity is available in an adverse scenario and to ensure the liquidity thresholds are being met. 7.1 Risk profile Liquidity risk covers three areas of attention. Operational liquidity risk is the risk that funds are unavailable to meet financial obligations when due. Market liquidity risk, is the risk that an asset cannot be sold on short-term without significant losses. Funding risk is the risk related to not being able to refinance maturing debt instruments and may lead to higher funding costs. The connection between Market and Operational liquidity risk stems from the fact that when payments are due and not enough cash is available, investment positions need to be converted into cash. If market liquidity is low or an adverse market movement took place in this situation, this could lead to a loss. In 2022, liquidity risk has increased due to the rise in interest rates, leading to additional collateral requirements on NN Group\u2019s interest rate derivatives portfolio. In case of a significant increase of interest rates, NN Group is exposed to the risk of having to sell assets which contribute to capital generation or to the hedging of liability cash flows. NN Group has a robust liquidity risk management framework in place to manage this risk. A minimum buffer of immediately available liquidity (cash and committed facilities) is maintained. Repos, Group cash capital and the Revolving Credit Facility at Group can further support the liquidity position if needed . 7.2 Risk mitigation NN Group aims to match day-to-day cash in- and outflows and at the same time wants to be able to have sufficient cash in case of a liquidity stress event. NN Group holds a minimum buffer of cash which is immediately available in order to be able to meet collateral calls from derivatives exposures in the case of significant market movements. Furthermore, NN Group has a wide range of options to generate additional liquidity if necessary, amongst which committed repo facilities which are available at all times and a revolving credit facility NN Group Liquidity Management Principles defines three levels of Liquidity Management: \u2022 Short-term liquidity (including operational liquidity) management covers the day-to-day cash requirements under normal business conditions \u2022 Long-term liquidity management considers business conditions, in which Market liquidity risk materialises \u2022 Stress liquidity management looks at the company\u2019s ability to respond to a potential crisis situation 7.3 Risk measurement NN Group Liquidity Risk Management Standard measures Liquidity risk in a stress event through the gap between liquidity needs and liquidity sources compared to available liquid assets for sale. This is calculated for different time horizons and different levels of availability of liquidity sources. Liquidity risk is not part of NN Group\u2019s Partial Internal Model. ", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:724500OHYNDT9OY6Q215", "period": "2022-01-01T00:00:00/2023-01-01T00:00:00" } }, "fact-575": { "value": "53 Capital and liquidity management Objectives, policies and processes Objective The goal of NN Group\u2019s capital and liquidity management is to adequately capitalise NN Group and its operating entities at all times to meet the interests of our stakeholders, including our customers and shareholders. The balance sheet is assessed in line with our capital management framework which is based on regulatory, economic and rating agency requirements. NN Group closely monitors and manages the following metrics: Own Funds/Solvency Capital Requirement (SCR), cash capital at the holding company, financial leverage, fixed cost coverage, capital generation and liquidity. Governance The NN Group Capital Management and Corporate Treasury Department reports to the NN Group CFO. Activities of the department are executed on the basis of established policies, guidelines and procedures. Capital Management is responsible for the sufficient capitalisation of NN Group entities, which involves the management, planning and allocation of capital within NN Group. Corporate Treasury is responsible for the management and execution of debt capital market transactions, term (capital) funding, cash management and risk management transactions. Capital management and framework The capital framework takes into account regulatory, economic and rating agency requirements: \u2022 As a first principle, NN Group aims to capitalise its operating entities adequately at all times. Operating entities have to comply with the local statutory capital frameworks that are under supervision of local regulators. To ensure adequate capitalisation, they are managed to commercial capital target levels which are set in accordance with the risk associated with the business activities, commercial requirements and other relevant factors. The commercial capital target levels are set in local legal entity capital policies and approved by the Management Board of NN Group. Capital adequacy is ensured through the capital planning process which starts with the annual budgeting process in which a capital plan is prepared for NN Group and its operating entities with a time horizon of 5 years. NN Group\u2019s risk appetite statements, as further described in Note 52 \u2018Risk management\u2019, drive the target setting and are cascaded down to the operating entities in line with NN Group\u2019s risk management strategy. Other important factors which are considered in the capital plan are efficient capital allocation, the cost of capital and capital generation. Capital positions of operating entities are closely monitored and, if necessary, measures are taken to ensure capital adequacy. At the end of 2022, all operating entities were capitalised above their local regulatory requirements. NN Group defines a comfort zone between 150%-200% Group Solvency II ratio where NN Group intends to pay a progressive dividend per share and execute an annual share buyback of up to EUR 250 million. In the case of a ratio sustainably above 200% Group Solvency, there is an opportunity to increase the share buyback further. \u2022 In addition, cash capital is held at the holding company. The cash capital position is available to cover capital needs of the entities after a stress event and to cover financial leverage costs and holding company expenses for a period of at least 12 months. Stress tests are based on 1-in-20 year scenarios and specific stress scenarios that might change from time to time. The free cash flow to the holding is the cash made available to NN Group, which can be distributed to shareholders (reference is made to Note 14 \u2018Equity\u2019 for information on distributable reserves), used to reduce debt or for other corporate purposes. The free cash flow to the holding is closely monitored and forecasted on a regular basis. \u2022 NN Group assesses its corporate financing mix via the financial leverage and fixed-cost coverage ratio. Financial leverage measures the amount of debt that NN Group issued to capitalise its businesses. Debt used for funding of operating activities or liquidity needs is not considered financial leverage. The fixed-cost coverage ratio measures the ability of NN Group to pay its fixed financing expenses and is defined as the earnings before interest and tax (EBIT) divided by interest before tax on financial leverage. Special items, revaluations on derivatives that are non-eligible for hedge accounting, market and other impacts and amortisation of acquisition intangibles are excluded from EBIT 53 Capital and liquidity management continued Liquidity management NN Group monitors and manages its liquidity risk based on certain severe stress scenarios, assessed by operating entities and aggregated at the group level. Liquidity positions are periodically reported and monitored both on an individual entity and on a consolidated basis. Liquidity risk is measured through the Required Sales Ratio, calculated as: (i) the difference between liquidity needs and liquidity sources in certain stress scenarios, divided by (ii) the available liquid assets for sale, subject to a reduction applied to the value of assets. This ratio is calculated for different time horizons and different levels of liquidity sources. The ratios of the entities should meet the predefined tolerance levels on a standalone entity basis. At 31 December 2022, the liquidity position of all entities was adequate and within the risk tolerance (reference is made to Note 52 \u2018Risk management\u2019 for more information on liquidity risk management). For the Banking business, the Dutch Central Bank (DNB) requires an annual internal evaluation of capital adequacy, liquidity position and the risk management framework, including stress testing. This internal evaluation is performed using an Internal Capital and Liquidity Adequacy Assessment Process (ICAAP and ILAAP) and reviewed by DNB in its Supervisory Review & Evaluation Process (SREP). The ICAAP, ILAAP, and SREP show that NN Bank has a robust capital and liquidity position. NN Group has a syndicated revolving credit facility in place with maximum size of EUR 1,896 billion which will mature in 2027. The revolving credit facility was renewed and the maturity was extended with two years in January 2023. Per year-end 2022 (and year-end 2021) the maximum size of the revolving credit facility was EUR 1,750 billion. There was no amount drawn from the facility in 2022 or 2021. Significant events of 2022 are listed below in chronological order On 31 January 2022, NN Group completed the acquisition of MetLife\u2019s businesses in Greece. On 15 February 2022, NN Group, ABN AMRO Bank and their joint venture ABN AMRO Verzekeringen (AAV) announced that they reached an agreement to sell the life insurance subsidiary of AAV to NN Life. The transaction was completed on 15 July 2022. The former life insurance subsidiary of AAV will be integrated into NN Life and is expected to legally merge with NN Life over the course of 2023. On 17 February 2022, NN Group announced an open market share buyback programme for an amount of EUR 250 million within 12 months, which commenced on 1 March 2022. This share buyback was executed by financial intermediaries under an open market share buyback programme and was completed on 20 December 2022. On 17 February 2022, NN Group announced an additional open market share buyback programme for an amount of EUR 750 million following the completion of the sale of NN IP. This additional share buyback programme commenced on 13 April 2022 and was completed on 20 December 2022. On 18 March 2022, NN Group repaid EUR 600 million senior unsecured notes that matured on 18 March 2022. The repayment followed the issuance of EUR 600 million senior unsecured notes on 23 November 2021 with a fixed coupon of 0.875% per annum and a maturity of 10 years. On 11 April 2022, NN Group announced the completion of the sale of NN IP to Goldman Sachs which generated cash proceeds of around EUR 1.7 billion. The completion of the transaction followed the fulfilment of the customary closing conditions, including receipt of all necessary regulatory approvals. The agreement on the sale of NN IP and a ten-year strategic partnership with Goldman Sachs Asset Management were announced on 19 August 2021. On 22 April 2022, NN Group announced the completion of the acquisition of MetLife\u2019s businesses in Poland, after obtaining regulatory approvals on 14 April 2022. On 15 June 2022, NN Group paid a 2021 final dividend of EUR 1.56 per ordinary share, equivalent to EUR 469 million in total. To neutralise the dilutive effect of the stock dividend on earnings per share, NN Group announced the repurchase of ordinary shares for a total amount of EUR 218 million. This share buyback was executed by financial intermediaries under an open market share buyback programme which was completed on 24 August 2022. On 29 August 2022, NN Life redeemed the outstanding EUR 500 million 9% Fixed to Floating Rate Subordinated Notes due 2042. The aforementioned notes were redeemed in full at their principal amount at their first call date, 29 August 2022 . 53 Capital and liquidity management continued On 30 August 2022, NN Group announced that it had priced EUR 500 million of subordinated notes. It was the first issuance under NN Group\u2019s Sustainability Bond Framework, which was established in February 2022 with the aim to finance green and social projects. The EUR 500 million subordinated notes have a maturity of 20.5 years and are first callable after 10 years on 30 August 2032, subject to redemption conditions. The coupon is fixed at 5.25% per annum until the first reset date on 1 March 2033 and will be floating thereafter. The subordinated notes qualify as Tier 2 regulatory capital. The subordinated notes are rated by Standard & Poor\u2019s (BBB-) and Fitch (BBB+) and listed on Euronext Amsterdam. On 7 September 2022, NN Group paid a 2022 interim dividend of EUR 1.00 per ordinary share, equivalent to EUR 293 million. To neutralise the dilutive effect of the stock dividend on earnings per share, NN Group announced the repurchase of ordinary shares for a total amount of EUR 131 million. This share buyback was executed by financial intermediaries under an open market share buyback programme which was completed on 12 October 2022. On 13 September 2022, NN Group announced the sale of the former MetLife pension business in Poland to Generali. The pension business is part of the former MetLife activities in Poland that were acquired by NN Group in April 2022. The transaction was completed in the first quarter of 2023. On 4 October 2022, NN Group announced that its subsidiary NN Insurance Belgium has completed the sale of a closed book life portfolio to Athora Belgium. The completion follows the fulfilment of customary closing conditions, including receipt of all necessary regulatory approvals and competition clearances. On 11 October 2022, NN Group announced that it had reached an agreement with Rockbridge to sell the former MetLife asset management business in Poland. The transaction was completed in December 2022. On 2 January 2023, NN Group announced the completion of the legal mergers of the former MetLife businesses in Poland and Greece. The legal mergers follow the completion of the acquisition process of the former MetLife business operations in both countries. In Greece, the legal merger became effective on 29 December 2022. In Poland, the life insurance companies of Nationale-Nederlanden Poland and the former MetLife Poland were legally merged on 2 January 2023. On 13 January 2023, NN Group repaid EUR 500 million of unsecured senior notes that matured on 13 January 2023. Solvency II Solvency II is the regulatory framework for (re-)insurance undertakings and groups domiciled in the EU. Under the Solvency II regime, required capital (Solvency Capital Requirement) is risk-based and calculated as the post-tax value-at-risk at the confidence interval of 99.5% on a one-year horizon. Available capital (Own Funds) is determined as the excess of assets over liabilities, both based on economic valuations, plus qualifying subordinated debt. The EU Solvency II directive requires that (re-)insurance undertakings and groups hold sufficient Eligible Own Funds to cover the SCR. NN Group is the holding company of licensed insurers and banking businesses. Regulated entities which from local regulatory perspective are not subject to the Solvency II regime (e.g. pension funds in Central Europe, NN Bank, BeFrank and BeFrank PPI) are included in Own Funds based on their local available capital and in SCR based on required capital defined by sectoral supervisory rules. NN Life Japan is included in Own Funds and SCR based on its available and required capital determined according to the local solvency regime recognised by the European Commission as provisionally equivalent. NN Group uses the Partial Internal Model (PIM) to calculate capital requirements under Solvency II. The group capital model is named as such due to the fact that an Internal Model is used to calculate the capital requirements for the Dutch insurance entities (namely NN Life, NN Non-life and NN Re in the Netherlands), while the Standard Formula is used to calculate capital requirements for operational risk (across the group), for the international insurance entities that fall under Solvency II, for ABN AMRO Non-life, and for ABN AMRO Life. Further details on the NN Group capital requirements at 31 December 2022 are provided in Note 52 \u2018Risk management\u2019. The Solvency II ratios of NN Group and its Dutch insurance entities do not include any contingent liability potentially arising from unit-linked products sold, issued or advised on by NN Group\u2019s insurance entities (including ABN AMRO Life) in the past, as this potential liability cannot be reliably estimated or quantified at this point. Reference is made to Note 45 \u2018Legal proceedings\u2019 for more information 53 Capital and liquidity management continued On 17 December 2020, EIOPA published its opinion to the European Commission (the \u2018Opinion\u2019). The Opinion, which consists of a proposed package of measures, was used as input for the European Commission to draft a legislative proposal. On 22 September 2021, the European Commission published its draft proposals on the Solvency II 2020 review. The proposal deviates in several areas from the EIOPA Opinion which may have positive impact on the solvency of NN Group, e.g. regarding the Risk Margin, risk correction for credit spread and the interest rate extrapolation. Some proposals with potential negative impact on NN Group and the wider industry are still part of the legislative proposal and ongoing discussions. In June 2022, the European Council reached consensus on their view on the Opinion. In the first half of 2023 the European Parliament will negotiate on their position, followed by the trialogue negotiations. The proposed changes are currently expected to be implemented at the earliest in 2026. Based on the draft proposals by the European Commission and current market conditions, NN Group remains comfortable with its Solvency position and does not expect changes to its dividend policy caused by the issuance of the Opinion, including proposed changes. Eligible Own Funds and Solvency Capital Requirement 2022 2021 Shareholders\u2019 equity 16,005 32,888 Minority interest 63 266 Elimination of deferred acquisition costs and other intangible assets -2,530 -2,149 Valuation differences on assets -6,947 2,268 Valuation differences on liabilities, including insurance and investment contracts 9,554 -18,687 Deferred tax effect on valuation differences -129 4,649 Difference in treatment of non-Solvency II regulated entities -141 -951 Excess assets/liabilities 15,876 18,284 Qualifying subordinated debt 3,985 4,383 Foreseeable dividends and distributions -623 -646 Basic Own Funds 19,237 22,021 Non-available Own Funds 1,415 1,094 Eligible Own Funds to cover Solvency Capital Requirements (a) 17,822 20,927 \u2013 of which Tier 1 unrestricted 10,904 13,377 \u2013 of which Tier 1 restricted 1,716 1,875 \u2013 of which Tier 2 2,189 2,422 \u2013 of which Tier 3 910 848 \u2013 of which non-Solvency II regulated entities 2,104 2,404 Solvency Capital Requirements (b) 9,040 9,840 \u2013 of which from Solvency II entities 7,677 8,506 \u2013 of which from non-Solvency II entities 1,363 1,334 NN Group Solvency II ratio (a/b)1 197% 213% 1 The Solvency II ratio is not final until filed with the regulator. NN Group was adequately capitalised at 31 December 2022 with a Solvency II ratio of 197% based on the Partial Internal Model. The Solvency II ratio of NN Group decreased to 197% at the end of 2022 from 213% at the end of 2021. The decrease mainly reflects unfavourable market impacts, capital flows to shareholders as well as the impact of UFR reduction from 3.60% to 3.45%. This was partly offset by operating capital generation, the net positive impact from the sale of NN IP and the acquisition of MetLife\u2019s businesses in Greece and Poland, as well as other movements including model and assumption changes (reference is made to Note 52 \u2018Risk management\u2019 for more information about model changes). Market impacts mainly reflect movements in credit spreads and negative equity revaluations, partly offset by changes in interest rates. 53 Capital and liquidity management continued Eligible Own Funds decreased to EUR 17,822 million from EUR 20,927 million at 31 December 2021. The decrease was mainly driven by the capital flows to shareholders and the negative impact of equity revaluations and movements in credit spreads. This was partly offset by operating capital generation, the net positive impact from the sale of NN IP and the acquisition of MetLife\u2019s businesses in Greece and Poland, as well as model and assumption changes. The SCR of NN Group decreased to EUR 9,040 million from EUR 9,840 million at 31 December 2021 mainly driven by the impact of changes in interest rates and negative equity revaluations. Structure, amount and quality of Own Funds Subordinated liabilities included in NN Group Own Funds Solvency II value Interest rate Issue Year of issue Notional Due date First call date Own Funds tier 2022 2021 4.500% NN Group N.V. 2014 1,000 Perpetual 15 January 2026 Tier 1 969 1,078 4.375% NN Group N.V. 1 2014 750 Perpetual 13 June 2024 Tier 1 747 797 4.625% NN Group N.V. 2014 1,000 8 April 2044 8 April 2024 Tier 2 1,012 1,075 4.625% NN Group N.V. 2017 850 13 January 2048 13 January 2028 Tier 2 793 912 5.250% NN Group N.V. 2 2022 500 1 March 2043 30 August 2032 Tier 2 464 9.000% Nationale-Nederlanden Levensverzekering Maatschappij N.V. 3 2012 500 29 August 2042 29 August 2022 Tier 2 521 1 These securities were originally issued by Delta Lloyd N.V. which was merged into NN Group N.V. at the end of 2017. 2 These securities were issued on 30 August 2022. 3 These securities were originally issued by Delta Lloyd Levensverzekeringen N.V. which was merged into Nationale-Nederlanden Levensverzekering Maatschappij N.V. (NN Life) on 1 January 2019. These notes were redeemed by Nationale-Nederlanden Levensverzekering Maatschappij N.V. at their first call date, 29 August 2022. The perpetual subordinated notes issued in 2014 with a notional amount of EUR 1 billion have a coupon of 4.50% and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 15 January 2026 or on any interest payment date thereafter. The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering). These subordinated notes are grandfathered for a maximum period of 10 years until 1 January 2026. The perpetual subordinated notes (originally issued by Delta Lloyd N.V. in 2014) with a notional amount of EUR 750 million have a coupon of 4.375% and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 June 2024 or on any interest payment date thereafter. The subordinated notes are classified as Restricted Tier 1 capital based on the transitional provisions (grandfathering). These notes are grandfathered for a maximum period of 10 years until 1 January 2026. The dated subordinated notes issued in 2014 with a notional amount of EUR 1 billion have a coupon of 4.625% and maturity date on 8 April 2044 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 8 April 2024 or on any interest payment date thereafter. These subordinated notes are classified as Tier 2 capital based on the transitional provisions (grandfathering). The subordinated notes are grandfathered for a maximum period of 10 years until 1 January 2026. The dated subordinated notes issued in 2017 with a notional amount of EUR 850 million have a coupon of 4.625% with maturity date on 13 January 2048 and are fully paid in. NN Group N.V. has the right to redeem these notes on the first call date on 13 January 2028 or on any interest payment date thereafter. These subordinated notes are classified as Tier 2 capital. On 30 August 2022, NN Group N.V. issued subordinated notes with a notional amount of EUR 500 million and a coupon of 5.25% with a maturity on 1 March 2043. NN Group N.V. has the right to redeem these notes on the first call date of 30 August 2032 or any other interest payment date thereafter. These subordinated notes are classified as Tier 2 capital. The dated subordinated notes of EUR 500 million originally issued by Delta Lloyd Levensverzekering N.V. in 2012 and assumed by Nationale-Nederlanden Levensverzekering Maatschappij N.V. following the legal merger effective as of 1 January 2019 were redeemed on 29 August 2022
53 Capital and liquidity management continued
Eligible Own Funds
NN Group Own Funds are classified into three tiers as follows:
\u2022 The excess of assets over liabilities on the basis of consolidated accounts excluding net Deferred Tax Asset is classified as (unrestricted)
Tier 1
\u2022 The proportional share in the Own Funds of BeFrank, BeFrank PPI and pension funds in Central Europe is classified as (unrestricted) Tier 1
\u2022 The proportional share in the Eligible Own Funds of NN Life Japan is classified as (unrestricted) Tier 1 (European Commission recognised
the solvency regime applied to the insurance undertakings in Japan as provisionally equivalent to Solvency II according to Commission
Delegated Decision (EU) 2016/310 of 26 November 2015)
\u2022 The proportional share in the Own Funds of NN Bank is classified as (unrestricted) Tier 1 with the exception of the subordinated loans which
are classified as Tier 2
\u2022 Perpetual subordinated notes are classified as (restricted) Tier 1 based on the transitional provisions (grandfathering)
\u2022 Dated subordinated debt is classified as Tier 2 including that based on the transitional provisions (grandfathering)
\u2022 The Net Deferred Tax Asset (Deferred tax assets and liabilities are offset only where such assets and liabilities relate to taxes levied by the
same tax authority on the same taxable undertaking) is classified as Tier 3
As at 31 December 2022 and 2021, NN Group had no ancillary Own Funds.
There are a number of regulatory restrictions on the amounts classified as Restricted Tier 1, Tier 2 and Tier 3 capital. The following restrictions
have to be taken into account:
\u2022 Restricted Tier 1 capital cannot exceed 20% of the total Tier 1 amount
\u2022 The proportion of Tier 1 items in the Eligible Own Funds should be higher than one third of the total amount of Eligible Own Funds
\u2022 Tier 2 and Tier 3 capital together cannot exceed 50% of the SCR
\u2022 Tier 3 capital cannot exceed 15% of the Solvency Capital Requirements
\u2022 Tier 3 capital cannot exceed one third of the total amount of Eligible Own Funds
The application of the regulatory restrictions as at 31 December 2022 is reflected in the table below.
Eligible Own Funds to cover the Solvency Capital Requirement
Available
Own Funds
2022
Eligibility
Own Funds
2022
Available
Own Funds
2021
Eligibility
Own Funds
2021 Eligibility restriction
Tier 1 12,620 12,620 15,252 15,252 More than one third of total EOF
Of which:
\u2013 Unrestricted Tier 1 10,904 10,904 13,377 13,377 Not applicable
\u2013 Restricted Tier 1 1,716 1,716 1,875 1,875 Less than 20% of Tier 1
Tier 2 + Tier 3 3,098 3,098 3,270 3,270 Less than 50% of SCR
Tier 2 2,189 2,189 2,422 2,422
Tier 3 910 910 848 848
Less than 15% of SCR;
Less than one third of total EOF
Non-Solvency II regulated entities 2,104 2,104 2,404 2,404
Total Own Funds 17,822 17,822 20,927 20,927
53 Capital and liquidity management continued
Transferability and fungibility of Own Funds
NN Group adjusts the group Own Funds taking into account the value of own fund items that cannot effectively be made available to cover
the group SCR. These are the own fund items of related undertakings subject to legal and regulatory constraints that restrict the ability of
those items to absorb all types of loss within the group and/or transferability of assets. Based on NN Group\u2019s assessment these own fund
items mainly include:
\u2022 Differences between valuations of assets and liabilities based on Solvency II principles and according to principles that related undertakings
use to prepare respective local annual accounts
\u2022 For NN Life Japan, own fund items according to local rules but which are not part of shareholders\u2019 equity
\u2022 For NN Bank, own funds covering pillar II guidance issued by regulator
\u2022 The transitional measures on risk-free interest rates and technical provisions
\u2022 Legal reserves set up according to local company law
\u2022 Any minority interest in a related undertaking
These own fund items are included in NN Group Own Funds to the extent they are eligible for covering contribution of the respective related
undertaking to the NN Group\u2019s SCR. On 31 December 2022 excess non-available own funds amounted to EUR 1,415 million. On 31 December
2021, this amount was EUR 1,094 million.
Cash capital position at the holding company
NN Group holds a cash capital position in the holding company to cover stress events and to fund holding company expenses and interest
expenses. Cash capital is defined as net current assets available at the holding company. A related metric is the free cash flow at the holding
which is defined as the change in the cash capital position at the holding company over the period, excluding acquisitions, divestments, and
capital transactions with shareholders and debtholders.
Cash capital position at the holding company
2022 2021
Cash capital position \u2014 opening balance 1,998 1,170
Remittances from subsidiaries
1
1,753 1,835
Capital injections into subsidiaries
2
-545 -19
Other
3
-315 -344
Free cash flow to the holding
4
893 1,472
Cash divestment proceeds 1,626 76
Acquisitions -524 -358
Capital flow from/to shareholders -1,806 -960
Increase/decrease in debt and loans -106 597
Cash capital position \u2014 closing balance 2,081 1,998
1 Includes interest on intragroup subordinated loans provided to subsidiaries by the holding company.
2 Includes the change of subordinated loans provided to subsidiaries by the holding company.
3 Includes interest on subordinated loans and debt with external debtholders, holding company expenses and other cash flows.
4 Free cash flow to the holding company is defined as the change in cash capital position of the holding company over the period, excluding acquisitions, divestment proceeds and capital transactions with
shareholders and debtholders.
The cash capital position at the holding company increased to EUR 2,081 million at 31 December 2022 from EUR 1,998 million at 31 December
2021. The increase is mainly due to EUR 1,753 million of remittances from subsidiaries and EUR 1,626 million of proceeds from the sale of NN IP.
These are partly offset by EUR 1,806 million of capital flows to shareholders, EUR 545 million injections into subsidiaries, EUR 524 million paid
for acquisitions mainly reflecting the acquisition of MetLife\u2019s businesses in Poland and Greece, and other movements of EUR 315 million that
include holding company expenses, interest on loans and debt and other holding company cash flows. NN Group issued EUR 500 million
of subordinated notes on 30 August 2022 and used the proceeds of the issuance for providing an intercompany loan to NN Life for the
repayment of its EUR 500 million external legacy Tier 2 debt that was redeemed on 29 August 2022. The intercompany loan is reflected
in capital injections into subsidiaries. Adjusting for the EUR 500 million intercompany loan to NN Life, the free cash flow to the holding was
EUR 1,393 million for full-year 2022. Capital flows to shareholders comprise the cash part of the 2021 final dividend and the 2022 interim
dividend for a total amount of EUR 413 million and the repurchase of EUR 1,393 million of own shares. The debt position decreased with
EUR 106 million which reflects the redemption of EUR 600 million of senior debt on 18 March 2022, partly offset by the proceeds of the
issuance of EUR 500 million of subordinated notes on 30 August .
53 Capital and liquidity management continued
Financial leverage
The financial leverage and fixed-cost coverage ratio are managed in accordance with a single A financial strength rating target.
Financial leverage
2022 2021
Shareholders\u2019 equity 16,005 32,888
Adjustment for revaluation reserves
1
3,382 -11,730
Minority interests 63 266
Capital base for financial leverage (a) 19,450 21,424
\u2013 Undated subordinated notes
2
1,764 1,764
\u2013 Subordinated debt 2,334 2,356
Total subordinated debt 4,098 4,120
Debt securities issued 1,694 2,292
Financial leverage (b) 5,792 6,412
Total debt 5,792 6,412
Financial leverage ratio (b/(a+b)) 22.9% 23.0%
Fixed-cost coverage ratio
3
7.6x 19.9x
1 Includes revaluations on debt securities, on the cash flow hedge reserve and on the reserves crediting to life policyholders.
2 The undated subordinated notes classified as equity are considered financial leverage in the calculation of the financial leverage ratio. The related interest is included on an accrual basis in the calculation of
the fixed-cost coverage ratio.
3 Measures the ability of earnings before interest and tax (EBIT) to cover funding costs on financial leverage. Special items, revaluations on derivatives that are non-eligible for hedge accounting, market and
other impacts and amortisation of acquisition intangibles are excluded from EBIT.
The financial leverage ratio of NN Group decreased to 22.9% at 31 December 2022 from 23.0% at 31 December 2021, reflecting the
decrease of the financial leverage, partly offset by the decrease of the capital base. The financial leverage decreased mainly driven by the
redemption of EUR 600 million of senior debt on 18 March 2022. The capital base for financial leverage decreased with EUR 1,974 million
mainly due to capital flows to shareholders of EUR 1,806 million and negative equity revaluations of EUR 1,475 million, partly offset by the 2022
net results of EUR 1,562 million.
In January 2023, NN Group repaid EUR 500 million of unsecured senior notes that matured on 13 January 2023. NN Group will consider
various options in the context of optimising the capital and leverage structure.
The fixed-cost coverage ratio decreased to 7.6x at the end of 2022, from 19.9x at the end of 2021 (on a last 12-months basis), driven by the
decrease of earnings before interest and tax due to lower capital gains on the sale of public equities and government bonds, impairments on
equities and lower revaluations on real estate.
53 Capital and liquidity management continued
Proposed 2022 final dividend
At the annual general meeting on 2 June 2023, a final dividend will be proposed of EUR 1.79 per ordinary share, or approximately
EUR 504 million in total based on the current number of outstanding shares (net of treasury shares). The final dividend will be paid either fully
in cash, after deduction of withholding tax if applicable, or fully in ordinary shares, at the election of the shareholders. Dividends paid in the
form of ordinary shares will be delivered from NN Group treasury shares or issued at the expense of the share premium reserve. To neutralise
the dilutive effect of the stock dividend, NN Group will repurchase ordinary shares for an amount equivalent to the stock dividend. If the
proposed dividend is adopted by the General Meeting, NN Group ordinary shares will be quoted ex-dividend on 6 June 2023. The record date
for the dividend will be 7 June 2023. The election period will run from 8 June 2023 up to and including 22 June 2023. The stock fraction for the
stock dividend will be based on the volume weighted average price of NN Group ordinary shares on Euronext Amsterdam for the five trading
days from 16 June through 22 June 2023. The dividend will be payable on 29 June 2023. (For more information: https://www.nn-group.com/
investors/share-information/dividend-policy-and-dividend-history.htm).
On 7 September 2022, NN Group paid an interim dividend of EUR 1.00 per ordinary share, equivalent to EUR 293 million in total. The proposed
2022 final dividend of EUR 1.79 per ordinary share plus the 2022 interim dividend of EUR 1.00 per ordinary share gives a total dividend for
2022 of EUR 2.79 per ordinary share.
On 15 June 2022, NN Group paid a 2021 final dividend of EUR 1.56 per ordinary share, equivalent to EUR 469 million in total.
Share buyback
On 16 February 2023, NN Group announced that it will execute an open market share buyback programme for an amount of EUR 250 million.
The programme will be executed within 12 months and commenced on 1 March 2023. The share buyback will be deducted in full from
Solvency II Own Funds in the first half of 2023 and is estimated to reduce NN Group\u2019s Solvency II ratio by approximately 3%-points.
In addition to the announced share buyback programme, NN group intends to repurchase shares to neutralise the dilutive effect of any stock
dividends. NN Group intends to cancel any repurchased NN Group shares under the programmes unless used to cover obligations under
share-based remuneration arrangements or to deliver stock dividend.
The share buyback programmes will be executed within the limitations of the existing authority granted by the General Meeting on 19 May
2022 and such authority to be granted by the General Meeting on 2 June 2023. The shares will be repurchased at a price that does not
exceed the last independent trade or the highest current independent bid on the relevant trading platform. The programmes will be executed
by financial intermediaries and will be performed in compliance with the safe harbour provisions for share buybacks.
On 17 February 2022, NN Group announced an open market share buyback programme for an amount of EUR 250 million within 12 months,
commencing on 1 March 2022. NN Group also announced an additional open market share buyback programme for an amount of
EUR 750 million after completion of the sale of NN IP. This additional share buyback programme commenced on 13 April 2022. These share
buyback programmes were completed on 20 December 2022.
NN Group neutralised the dilutive effect of the 2021 final dividend that was paid in the form of ordinary shares for a total amount of
EUR 218 million and the 2022 interim dividend that was paid in the form of ordinary shares for a total amount of EUR 131 million. These share
buyback programmes were completed on 24 August 2022 and 12 October 2022, respectively.
NN Group reports on the progress of the share buyback programmes on its corporate website (https://www.nn-group.com/investors/share-
information/share-buyback-programme.htm) on a weekly basis .
53 Capital and liquidity management continued
Share capital
On 4 May 2022 and 25 November 2022, respectively 7,878,210 and 15,000,000 NN Group treasury shares which were repurchased under the
share buyback programmes were cancelled.
In 2022, a total number of 32,439,329 ordinary shares for a total amount of EUR 1,393 million were repurchased (reference is made to Note 14
\u2018Equity\u2019 regarding the number of shares repurchased and the total amount in 2021).
On 3 March 2023, the total number of NN Group shares outstanding (net 13,689,804 of treasury shares) was 281,310,196.
Credit ratings
On 18 May 2022, Standard & Poor\u2019s published a report affirming NN Group\u2019s \u2018A\u2019 financial strength rating and \u2018BBB+\u2019 credit rating with a
positive outlook.
On 3 March 2023, Fitch Ratings published a report affirming NN Group\u2019s \u2018AA-\u2019 financial strength rating and \u2018A+\u2019 credit rating with a
stable outlook.
Credit ratings on NN Group N.V. on 8 March 2023
Financial
Strength
Rating
NN Group N.V.
Counterparty
Credit Rating
Standard & Poor\u2019s A BBB+
Positive Positive
Fitch AA- A+
Stable Stable
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