US activist hedge fund Elliott Management has unveiled a list of demands for Dutch insurer NN Group, saying it should cut costs, invest in riskier assets and sell off non-core businesses.
Elliott, known for its high-profile campaigns at AT&T, Akzo Nobel and Pernod Ricard, took a 3 per cent stake in NN in February. The shares have lost almost a quarter of their value since then.
On Friday, the hedge fund said the insurer had a chance at its capital markets day later this month to take steps that could boost the share price by 80 per cent or more.
These included improving efficiency and shifting some of its investment portfolio from government bonds into corporate bonds. Together, Elliott said, these measures could boost cash flow by €435m a year.
The investor also said NN could sell its Japanese business for €2bn and release capital by passing on longevity risk — the chance that life insurance customers live for longer than expected — to other insurance companies.
The campaign marks an increasing pressure on NN by Elliott, which is known for sometimes taking a vocal and aggressive approach to force companies to change. It comes during a mixed year for the fund, which made money during the market turmoil of the first quarter but was fined €20m by the French financial regulator in April. Veteran activist Franck Tuil, who helped drive Elliott’s push into Europe, also left the firm this year.
In a statement on Friday, NN said that it has a “long tradition of conducting regular meetings with investors. In that spirit, NN has also engaged with Elliott.” The insurer added it is committed to “creating long-term value for all its stakeholders, including shareholders.”
In its presentation, Elliott hit out at the way NN presents itself to investors. “NN Group’s undervaluation is rooted in its deeply flawed approach to investor communications, marked by a lack of transparency and clarity, which in turn exacerbate the company’s complexity,” the hedge fund said.
It pointed to a €13bn longevity reinsurance deal announced by NN last month as an example. Elliott said the deal generated excess capital equivalent to 15 per cent of NN’s market value, but argued that the announcement barely moved the share price because NN gave no details on how the extra capital would be used.
It also said the insurer’s management used phrases such as “difficult to say” and “difficult to predict” far more than rival management teams did when responding to questions on calls with investors.
Elliott said it had spoken to NN’s management extensively since February and had been “encouraged by our conversations”.
NN was spun out of Dutch bank ING after the financial crisis, and now has a market capitalisation of €9bn. In April the company suspended its dividend after pressure from the Dutch central bank and Eiopa, the EU’s insurance regulator.