Aegon Ltd. · EURONEXT:AGN
Aegon — Morgan Stanley Financials Conference, London 2010
41 slides from Aegon's conference presentation, Mar 25, 2010
Slide 1: Execution of strategy
Execution of strategy Jan Nooitgedagt CFO Morgan Stanley financials conference, London, March 25, 2010
Slide 2: AEGON at a glance
AEGON at a glance o Life insurance, pensions and investment products o Over 40 million customers across the globe o Presence in markets throughout the Americas, Europe and Asia o Approximately 28,000 employees worldwide Underlying earnings before tax (2009) Value of new business (2009) 7% 6% 1% 5% A
Slide 3: Building on leading market positions
Building on leading market positions # 2 Life reinsurance # 2 Group pensions # 2 Group pensions # 2 Life in Hungary # 6 of foreign-owned life # 4 Term life # 3 Annuities # 5 Individual life # 2 Pensions in Hungary insurers in China # 4 Universal life # 4 Individual # 5 Accident & health # 4 Property
Slide 4: AEGON's ambition
AEGON’s ambition “To be a global leader in helping customers secure their financial futures” o Rebalance capital allocation o Improve growth and returns o Reduce financial markets risks o Manage AEGON as an international company …resulting in sustainable profitable growth Local knowledge. Global pow
Slide 5: Continued focus on execution of strategy
Continued focus on execution of strategy Full repayment to the Dutch State o Repaid one-third of the EUR 3 billion Reallocate capital towards businesses with higher growth and return prospects o Freed-up EUR 3.3 billion in 2009 – 60% capital efficiency and 40% de-risking o Running off institutional
Slide 6: Execution of strategy demonstrated by increased results
Execution of strategy demonstrated by increased results Underlying earnings before tax Value of new business (EUR million) (EUR million) 233 404 427 216 351 201 181 169 -22 -181 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Revenue-generating investments New life sales (EUR billion) (E
Slide 7: Focus on operational excellence
Focus on operational excellence o Achieved significant improvement in customer service levels – Invest in improving operational capabilities o Building on strong brand names AEGON and Transamerica o Continue to be cost efficient operator – Enhance web capabilities – Reduce number of administration p
Slide 8: Successful cost reduction measures
Successful cost reduction measures o Cost reduction measures of EUR 250 million in 2009 o Exceeding target for 2009 of EUR 150 million o Decrease of 5% (EUR 150 million) on a comparable basis* mainly as a result of – Reduction of headcount – More efficient distribution o Cost reduction measures are
Slide 9: Impairments at lowest level in six quarters
Impairments at lowest level in six quarters o Impairments are trending down, but continue at elevated levels o Full year US net credit impairments of 120 bps, above the long-term average Impairments (EUR million) 501 407 393 146 386 82 63 102 285 93 209 355 330 64 284 325 192 145 Q3 08 Q4 08 Q1 09 Q
Slide 10: Continued strong capital position
Continued strong capital position Excess capital above AA capital adequacy requirements EUR 3.7 billion Capital preservation initiatives in 2009 EUR 3.3 billion 60% is capital efficiency with generally no material earnings impact 40% is de-risking Insurance Group Directive: Capital surplus EUR 6.7 b
Slide 11: AEGON is well prepared for Solvency II
AEGON is well prepared for Solvency II o AEGON supports the principles of Solvency II o AEGON has been preparing since 2005 – Internal economic capital model more conservative than QIS 4 – Economic pricing embedded in product pricing o Outcome QIS 5 remains uncertain – Outstanding issues well known:
Slide 12: Impact of Solvency II varies across products
Impact of Solvency II varies across products Product type Spread products Investment spread not recognized upfront Fee products Low risk; positive impact Protection products Attractive risk; high diversification benefits Significant positive impact Variable annuities Market risk hedged and priced in
Slide 13: Reduced exposure to spread-based income
Reduced exposure to spread-based income o US spread-based income has been reduced – Institutional-spread based business in run-off – Fixed annuity flows actively managed down o Growing fee-based income – Leveraging on strong position in pension Institutional spread-based balances (USD billion) 30 20
Slide 14: Managing AEGON as an international company
Managing AEGON as an international company Local knowledge. Global power. 14
Slide 15: Conclusions
Conclusions o Successful execution of strategy and restructuring continues o Robust sales demonstrating solid franchise o Strong increase in underlying earnings and net income o Continued strong capital position Local knowledge. Global power. 15
Slide 16: Q&A
Q&A Local knowledge. Global power. 16
Slide 17: Upcoming AEGON events in 2010
Upcoming AEGON events in 2010 April 12 Press release new reporting structure 13 New disclosure presentation, London (CFO) 29 Annual General Meeting of Shareholders, the Hague May 12 Q1 2010 results & European Embedded Value 2009 (CFO) June 23 Analyst and Investor Day – London August 12 Q2 2010 resul
Slide 18: Appendix
Appendix A break down of the general account investment portfolio can be found in the Financial Supplement Local knowledge. Global power. 18
Slide 19: Strong increase in underlying earnings and net income
Strong increase in underlying earnings and net income o Solid underlying earnings in all country units o Net income driven by – Solid underlying earnings development – Continued decrease of impairments – Investment gains resulting from trading in bond portfolio Underlying earnings before tax Net inc
Slide 20: Net income driven by solid underlying earnings
Net income driven by solid underlying earnings o Solid underlying earnings in all country units o Fair value items impacted by hedges, interest rates, credit spreads o Investment gains resulting from bond trading o Impairments at lowest level in six quarters Underlying earnings to net income develop
Slide 21: Continued strong capital position
Continued strong capital position o Repayment of one-third of the EUR 3 billion to the Dutch State o Capital preservations of EUR 0.8 billion in Q4, totalling EUR 3.3 billion in 2009 o Other is mainly related to higher regulatory and rating agency capital requirements o No material impact from ratin
Slide 22: Net income most important contributor to improved equity
Net income most important contributor to improved equity o Shareholders' equity doubled in 2009 due to strong improvement in revaluation reserve o As a result of the contribution of net income, shareholders’ equity increased 4% sequentially o Shareholders’ equity per common share of EUR 5.88 Shareho
Slide 23: Robust life sales demonstrating solid franchise
Robust life sales demonstrating solid franchise o Strong increase in new life sales driven by all country units o Gross deposits* continue to be resilient as a result of strong pensions, saving and variable annuities deposits o Fixed annuities managed lower o Value of new business rises in all count
Slide 24: Robust new life sales demonstrates solid franchise
Robust new life sales demonstrates solid franchise o New life sales of EUR 549 million – Americas’ new life sales improved 3% sequentially – The Netherlands benefits from new pension contracts – UK sales were up as a result of increased pensions – Other countries: single premium production rise in C
Slide 25: Continued strong deposits
Continued strong deposits o Gross deposits of EUR 5.9 billion* – Pensions, saving and variable annuities deposits were all strong – Fixed annuities were managed lower o Net deposits of EUR 1.5 billion* Gross deposits* Q4 2009 (EUR millions) 387 699 1,017 855 2,973 5,932 Fixed annuities Variable annu
Slide 26: Value of new business
Value of new business o Value of new business of EUR 216 million – Strong improvement in VNB across almost all countries – Main contributors to sequential rise in VNB are the Americas, the Netherlands and Spain o Internal rate of return of 17.6% Americas The Netherlands United Kingdom Other countrie
Slide 27: Americas
Americas o Underlying earnings continued to improve as financial markets recovered o New life sales were up 3% from the previous quarter o Net deposits* of USD 1.4 billion mainly driven by pensions, evidence of strong franchise o Restructuring efforts reflected in 5% annual decrease of operating exp
Slide 28: The Netherlands
The Netherlands o Underlying earnings were strong due to higher technical results o Restructuring efforts reflected in 8% annual decline of operating expenses** o New life sales were up, driven by pensions, evidence of customer satisfaction o Net deposits continued to be strong o Intermediary channe
Slide 29: United Kingdom
United Kingdom o Underlying earnings increased as a result of a recovery in financial markets o Operating expenses decreased 1% annually due to cost savings o New life sales were up sequentially, driven by pensions o Net deposits were lower compared with a very strong Q3 2009 o Improved brand recogn
Slide 30: Other Countries
Other Countries o CEE reported the highest profit in its history in 2009 o Strong results in Other Countries mainly driven by CEE and Spain o New life sales benefitted from new products and successful sales’ campaigns in Spain whereas China showed strong recurring premiums production in Q4 2009 o Ne
Slide 31: Successful capital release program
Successful capital release program Capital released (EUR billion) o Capital efficiency 4.9 – Ca. 60% of capital preservation initiatives 0.3 – Generally no material earnings impact 0.5 0.3 1.9 – High RoC benefit 0.6 0.3 – More efficient use of capital without 0.4 meaningfully changing risk profile 0
Slide 32: General account assets mainly in Americas
General account assets mainly in Americas Total investments General account EUR 361 billion* EUR 134 billion* 2% 1% 28% 27% 37% 64% 6% 35% General account Americas Policyholder account United Kingdom Off- balance sheet The Netherlands Other Countries Holding * As of December 31, 2009 on a carrying v
Slide 33: Total general account portfolio composition
Total general account portfolio composition December 31, 2009 EUR billions United Total Americas Netherlands Kingdom Other Cash / Treasuries / Agencies 28.4 13.8 11.6 0.6 2.4 Investment Grade (IG) corporates 47.2 35.2 5.8 5.5 0.7 High yield corporate 3.9 3.2 0.4 0.3 0.0 Corporate other 0.7 - - - 0.7
Slide 34: Limited exposure to peripheral European sovereigns
Limited exposure to peripheral European sovereigns EUR million Portugal 58 Greece 92 Ireland 138 Italy 143 Spain 1,784 Local knowledge. Global power. 34
Slide 35: Net impairments by asset class
Net impairments by asset class AEGON general account investments (consolidated in EUR millions) Q4 2009 impairments / recoveries by country unit - IFRS basis (pre-DAC, pre-tax) US NL UK Others * Total ABS – Housing 59 - - - 59 ABS – Non-housing 1 - - - 1 CMBS 4 - - - 4 RMBS 33 - - - 33 Subtotal stru
Slide 36: Impairments have declined from peak levels
Impairments have declined from peak levels Total net credit impairments, pre-tax, pre-DAC (EUR million) 450 300 150 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 ■ AFS other ■ Mortgages ■ AFS bonds - corporate ■ AFS bonds – ABS/MBS Local knowledge. Global power. 36
Slide 37: Reallocation of capital towards higher growth and return
Reallocation of capital towards higher growth and return Geographic mix (in %) Capital allocation* 5-10 10 10 5 15-25 30 30 25-35 60 60 55 40-50 2007 2009 Target allocation 2012 Global businesses (Life reinsurance, Asset Management, European Variable Annuities) Central & Eastern Europe, Asia and Lat
Slide 38: Management actions
Underlying earnings run-rate sensitive to USD Post-crisis run-rate > 2010 Quarterly EUR/USD UEBT (EUR million) Market impact 1.30 450 - 500 1.45 425 - 475 1.60 400 - 450 Management actions Primary drivers of underlying earnings growth o Growth of business o Cost savings o Redeployment of cash Local
Slide 39: Summary of term sheet of deal with Dutch State
Summary of term sheet of deal with Dutch State Instrument Securities qualifying as core capital o No voting rights o Non-transferable o Minimize any future dilution Maturity Perpetual Issue Price EUR 4 per security Repurchase option AEGON can repurchase securities at any time o 250 million within fi
Slide 40: Disclaimer
Disclaimer Forward-looking statements The statements contained in this presentation that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: aim, believe,
Slide 41: For questions please contact Investor Relations
For questions please contact Investor Relations T: +31 70 344 8305 E: ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Local knowledge. Global power. 41
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