Annemiek van Melick: ‘You Cannot Satisfy All Stakeholders All The Time’

Sober leader
To pedal to work through wind and weather, reminiscent of the Dutch prime minister Mark Rutte who is known to be seen cycling around The Hague, instead of sitting in the backseat of a vehicle going through the business paper or meeting documents, breaks the traditional image of executives in the financial sector. Nor is Van Melick’s room on the highest floor of the office tower; the management sits in the low-rise building. These may not be deliberate choices, but at least they seem to be a good fit to Van Melick’s down-to-earth leadership style. Nine months ago, she took over as chief financial officer of AEX company NN Group: the insurance arm of ING, parent organization of Nationale-Nederlanden and Ohra, among others, which was split off in 2014. 
Van Melick began her career at Goldman Sachs and then worked for the Amsterdam branch of Lehman Brothers. In 2008, before the investment bank went bankrupt, the entrepreneurial spirit which Van Melick inherited from her parents, itched. She decided to leave investment banking and write a business plan for luxury elder care. This plan ultimately never realized, as in late 2008 Van Melick was approached by troubled SNS REAAL to become director of corporate strategy & M&A there. On being appointed CFRO of SNS Retail Bank in 2012, she was immediately able to draw on her experience of crisis management in the banking sector. Subsequent to the nationalization, Van Melick became CFO at Volksbank. After an interlude at the insurance company ASR, as CFO of NN she is now once again confronted with gathering clouds over the financial sector, following the implosion of Credit Suisse and the American Silicon Valley Bank (SVB). A déjà vu for the seasoned Van Melick? ‘I find it particularly shocking that in the United States banks with a balance sheet total of less than $250 billion fall under a lighter supervisory regime. In Europe, a heavier supervisory regime applies to all banks, including those with a balance sheet total of, say, 25 billion. I see Credit Suisse as an isolated case. But it did put everyone on red alert again,’ she tells Deloitte partner Pieter Hofman.

When you joined NN, you immediately needed to take a leap of faith with the presentation of the half-year figures in 2022. The upcoming annual meeting in June will be your first ‘real’ one as CFO. Are you busy preparing for it?
‘Of course you prepare for it well, we will start working on that soon. But this second quarter also offers room for reflection. For the other three quarters you, as CFO, are busy with the (half) year end and the budgeting cycle. In the second quarter, there is time to take a step back and together with your team consider the question: what do we want our strategic focus to be in the coming years and what does that mean for the figures? This is why the second quarter is my favorite in the CFO’s annual agenda: you are less under pressure of the demands of the day. I cherish that.’

How do you experience the current uncertain context?
‘Every CFO is confronted by a large increase in regulations, such as in the areas of sustainability and tax. As an insurance company, we also operate in a highly regulated environment: we must meet the capital and risk management requirements of Solvency II and report according to IFRS17, which is a major operation. Our products are also regulated; as a pension insurer, for example, we are facing the transition to a new pension system. All these regulations are accompanied by a great demand for data, both financial and non-financial, to be able to account properly. The risk of this is that the focus becomes too much internal. Because developments in the outside world do not stand still: the financial markets have rarely been this dynamic and digital applications such as generative ai and ChatGPT can have a major impact on the business and our way of working. This brings opportunities and risks. It is necessary to also look out the window at what is happening outside, otherwise you will miss the boat.’

To what extent do you see the role of the CFO changing?
‘The role of the CFO is becoming increasingly complex, but also more strategic in nature. For example, as CFO within the Board, I have the opportunity to think with on international growth and the resources needed to achieve that ambition. That is not just up to the CEO; it is a shared responsibility for the Board. In addition, the role of the CFO is expanding from pure financial steering and reporting to measuring and monitoring non-financial targets, such as the net zero ambition or male-female ratios. That also makes it more fun and engaging. Producing annual reports alone is insufficient challenge for a CFO. All this requires a CFO to also focus on the external environment and all stakeholders.’

How do you bring about this multi-stakeholder focus? 
‘Before you can look outward in a focused way, you must first ask your team the question: why are we doing all this? Back to the core. Customers come to us to ensure risks that are too great for them to bear themselves, or to build up a pension. They pay us premiums in exchange for coverage for themselves and others. That includes concepts of solidarity and responsibility. As an insurer, we must ensure that we can meet our obligations, even if contracts run for 30 years or more. We must always be able to keep our promise to the customer, even if there is a pandemic, banks collapse, interest rates fall or rise, or during a recession.
My father, as a retired entrepreneur, has an NN annuity policy. It is important to him that he has income security every month. It is our responsibility keep on doing what we promise, over decades: offer customers good risk coverage at a fair price, ensure motivated employees who make this possible, make a profit to ensure that shareholders want to invest in us and thus provide the necessary capital. And all this without social damage and preferably with a positive contribution to society. There you have the most important stakeholders.’

All those stakeholders have different interests. How do you deal with them?
‘It starts with putting yourself in their shoes. An insurer is a technical company, many people with a science background work here: actuaries, financial specialists, risk experts. That expertise is necessary, but people must also be able to look over their own fence to together find a balance in serving all stakeholders. This overlaps in part, by the way: investing in good and motivated employees contributes to satisfied customers, which in turn benefits shareholders. But it is also sometimes a difficult puzzle to align all stakeholder interests.’

What dilemmas do you face in the process?
‘One dilemma, for example, is the question of whether to insure risks. For example, recycling companies have difficulty getting insurance in the industry because of their high-risk profile, even though they make an important contribution in a societal sense. Therefore, we examined under what conditions we could still develop an insurance product for these types of companies. Will this be financially notably successful? No. Does it have an important societal value to insure this type of risk? Yes. Similarly, we are considering the increasing cyber and climate risks. Can we still insure these as a sector, or can we only do so in conjunction with the government? The categorical exclusion of risks, sectors or companies is not our default option, but in the long term we must of course be able to continue to meet our obligations to existing policyholders.’

As a major investor, what dilemmas do you encounter in sustainability? 
‘The ambition for our investment portfolio is net zero. We also set interim targets. We want to reduce carbon emissions in our corporate portfolio by 45 percent by 2030. Making it measurable is a challenge. All the companies we invest in have to start providing us with data to enable us to calculate their emissions. What data do you need, how do you harmonize them, how do you measure, for example, the CO2 emissions of a government bond or a corporate, in a portfolio with billions in investments? Figuring that out will be quite a job. The EU Taxonomy, a guideline for investments in sustainability, will eventually assist with this - but it is still under development.’

Environmental Protection has asked 29 companies, including NN, for a climate plan and is currently addressing directors on it at shareholder meetings. How are directors at NN dealing with this?
‘We share the urgency and see the importance for quick action to reduce greenhouse gas emissions. That ambition is also apparent from our climate action plan. But I always bring it back to the essence: we must be able to keep our promise to our policyholders in the long term. We want to do that in a socially responsible way, but it needs to be balanced. Moreover, as a major investor, we believe in engagement: as a shareholder you can influence companies and move them to operate more sustainably, but not if you step out. Although we also exclude certain categories, such as controversial weapons, the tobacco industry and tar sands oil.
I see the stakeholder debate at the AGM as our daily work. What sometimes makes it difficult is that you can never fully satisfy all stakeholders. There will always be customers who want lower premiums, employees who think they deserve more pay, shareholders who ask for more dividends and social groups who demand more radical investment choices. So as a Board we will never get a 10 from every individual stakeholder, but we see it as our job to weigh all interests and make sure we, on the whole, end up with an 8 out of 10.’

What kind of leader are you, what shaped you?  
‘I come from a Limburg entrepreneurial family. My parents owned a catering company, which is now run by my brother. The business ‘always sat with us at the dinner table,’ and at 14 I was allowed to help wash dishes and later on to serve. I really enjoyed that. I learned enormously from it: empathizing with customers, getting to know their wishes and spoiling them, but also being able to react to changing circumstances and working very hard together with a close team. Such a company is hard work, but my father always went to work with a smile on his face and so do I. What I learned at home can also be applied perfectly well in the financial sector, I have noticed. Also here at NN. ’

You have been in this role for three quarters of a year now. What are you doing differently from your predecessor, what is your specific input?
‘For me the composition of the team gets considerable focus, for example. You need insurance super experts, but also people who are good at organizing processes and people who can bring the outside in. Only then can you as a team piece together the stakeholder puzzle. We recently had our first off-site as a team. At 7:30 in the morning we stood outside in the sun on a dike in Durgerdam, each with a huge disco-headphone, for a workout, to loosen up a bit. Afterwards we shared very personal experiences from our lives. Myself too, yes, I have no problem in showing my vulnerability as a leader and as a human being.
This personal approach was new for the group, I noticed, as real financials they were not used to it at all. But it was greatly appreciated, and it helped us to get to know each other, to see someone through different eyes, to understand each other’s motivations. This allows people to work together better, and people become more willing to take on challenging roles, because that is also necessary in a good team.’

How do you stay physically and mentally fit in this tough job?
‘Physically by cycling to the office and occasionally playing sports, mentally by spending time with my six-year-old son, my husband, family, and friends. My little son wants to jump on the trampoline with me and he wants to play Minecraft with me: that keeps me fit and keeps me moving with the times. We recently purchased a server that allows the two of us to Minecraft; he is better at it than me. That is why I am consciously immersing myself in gaming: if I cannot keep up with him now when he is only six, I will be lost when he is 12.’ 

What do you want to leave behind at NN, what are you working towards?  
‘NN has a rich history and as a company is strongly rooted in Dutch society. At the same time, we operate in ten other countries besides the Netherlands. For example, we started 35 years ago in Japan, where we are now a major player in the local insurance market for SMEs. In Poland, Slovakia, and Romania, we are the market leader as a pension player. I see that as fine Dutch merchandising. In Eastern Europe there is often still underinsurance, which offers all kinds of opportunities. We want to expand that European growth further, but at the same time maintain our embeddedness in Dutch society, a solid financial basis, an eye for all stakeholders and our commitment to sustainability. Staying on course in a turbulent world and growing in an impactful way: that is something I really appreciate, and which I want to contribute to.’

Interview by Pieter Hofman, partner at Deloitte and specialized in digitalization and innovation in the financial sector. This article was published in Management Scope 06 2023.