European, Japanese And Dutch Expansion Will Fuel Future Success

Key Takeaways

• Expansion in key European and Asian markets, supported by strong distribution and new product launches, is expected to drive recurring income and future earnings growth.
  
• Ongoing investment in digitalization and disciplined capital allocation is improving efficiency, supporting margin expansion, and underpinning shareholder returns.
  
• Persistent margin pressures, increased regulatory costs, climate risks, and concentrated geographic exposure threaten NN Group's profitability and revenue growth amid intensifying digital competition.

Catalysts

A financial services company, provides life and non-life insurance products in the Netherlands and internationally.

• The ongoing expansion in Europe, Japan, and Netherlands Non-life segments-with double-digit new business growth and NN Group's strong distribution networks-positions the company to capitalize on increasing demand for retirement, health, and protection products as European populations age, likely driving sustained premium revenue and supporting future earnings growth.
  
• Persistent investment in digitalization (including the Future Ready program and major use of AI for claims, customer engagement, and distribution) is facilitating scalable, cost-effective sales channels, lowering acquisition costs, and improving retention, which should support margin expansion and improved operational efficiency over time.
  
• Strong commercial momentum in growth markets and successful launches of long-term savings products in Japan indicate strengthening share in underpenetrated, high-margin markets-expected to boost assets under management and drive higher recurring fee and premium income.
  
• A disciplined capital allocation strategy, with a clearly articulated roadmap for rising shareholder returns via progressive dividends and ongoing share buybacks, is likely to compound earnings per share and create a supportive floor for the stock's valuation.
  
• Demonstrated execution of expense reduction and automation initiatives-targeting €200 million in annual benefits by 2027-combined with above-average solvency ratios and improved investment returns, is set to drive higher net margins and reinforce long-term profitability.

NN Group Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming NN Group's revenue will grow by 2.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 8.7% today to 12.6% in 3 years time.
• Analysts expect earnings to reach €2.0 billion (and earnings per share of €7.74) by about September 2028, up from €1.3 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as €1.5 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 9.5x on those 2028 earnings, down from 12.0x today. This future PE is lower than the current PE for the GB Insurance industry at 11.6x.
• Analysts expect the number of shares outstanding to decline by 0.82% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 5.73%, as per the Simply Wall St company report.

NN Group Future Earnings Per Share Growth

Risks

• Continued pressure on NN Group's banking business-driven by net interest margin (NIM) compression and further expected NIM pressure in 2025-could negatively impact group operating capital generation and long-term revenue growth from the bank segment.
  
• The sustainability of current high profitability in Non-life is partly attributed to benign weather and unusually low claims; any normalization to typical storm or claims levels (estimated at ~€50m impact per event) or increased frequency of climate-related losses could compress net margins and earnings volatility.
  
• Growing regulatory and compliance requirements (e.g., Solvency II 2020 review, Basel IV, sustainability/ESG targets) may drive up administrative expenses and operational complexity, potentially eroding net margins as ongoing programs like "Future Ready" may not sufficiently offset structural cost increases.
  
• Heavy reliance on specific geographies-notably the Dutch market and performance in key segments like Netherlands Life-exposes NN Group to sluggish economic growth, changes in Dutch pension reform, or market-specific downturns, which may inhibit revenue expansion and put long-term targets at risk.
  
• Heightened competition from digital-first insurers, insurtechs, and larger players in rapidly digitalizing markets could erode NN Group's traditional market share and margin, particularly if ROI from ongoing AI/digital investments (like the "Future Ready" program) does not translate into sustainable, superior revenue or cost advantages.

Valuation

• The analysts have a consensus price target of €61.8 for NN Group based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €75.0, and the most bearish reporting a price target of just €52.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €15.7 billion, earnings will come to €2.0 billion, and it would be trading on a PE ratio of 9.5x, assuming you use a discount rate of 5.7%.
• Given the current share price of €57.36, the analyst price target of €61.8 is 7.2% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.