Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2020 Earnings Presentation
26 slides from Aegon's earnings presentation, May 12, 2020
Slide 1: 1Q 2020 update
1Q 2020 update Matt Rider CFO May 12, 2020 Helping people achieve a lifetime of financial security
Slide 2: Our response to COVID-19 pandemic
Our response to COVID-19 pandemic Protecting our employees; fulfilling our responsibilities towards all our stakeholders Protecting health and safety of our employees Employees • Global framework introduced to sustain employee well-being, engagement and productivity • More than 95% of all employees
Slide 3: Summary 1Q 2020 update
Summary 1Q 2020 update • Earnings impact from COVID-19 largely from volatile markets and low interest rates • Underlying earnings in 1Q20 resilient in NL, UK, Asset Management, and International, but Earnings impacted by adverse mortality and lower interest rates in US • Net income driven by fair va
Slide 4: Underlying earnings of EUR 366 million, net income of EUR 1,270 million
Underlying earnings of EUR 366 million, net income of EUR 1,270 million Net income (in EUR million) Underlying earnings before tax (UEBT) Americas 142 • Americas: Netherlands 154 - EUR 62 million adverse mortality – largely unrelated to COVID-19 – and EUR 37 million unfavorable intangible adjustment
Slide 5: Group capital position and normalized capital generation
Group capital position and normalized capital generation Group Solvency II ratio Group Solvency II ratio at March 31, 2020 Normalized capital generation1 (in %) (in EUR million) • Group Solvency II ratio slightly above the target range supported by normalized 208 capital generation 201 200 Region 1Q
Slide 6: Solid capital position for all main units
Solid capital position for all main units Local solvency ratio by unit 1Q 2020 376% • Estimated RBC ratio remained above the bottom-end of the target range of 350% • The decline is mainly due to adverse market movements. Impact from lower equity markets and 2H 2019 470% interest rates in line with p
Slide 7: Protecting the economic value of the balance sheet
Protecting the economic value of the balance sheet Management actions Hedging and Underwriting Capital asset allocation and pricing preservation • Rebalanced macro equity hedge to increase • Variable annuity repricing in 2Q20 to lead to • Legal merger of core US Life entities downside protection and
Slide 8: US business has a liquid and well-diversified investment portfolio
US business has a liquid and well-diversified investment portfolio Asset allocation at March 31, 2020 Asset allocation compared to industry1 Aegon US fixed income securities2 (General account Aegon US, 100% = USD 80.6 billion2) (in USD billion, total USD 55.9 billion) 2.2% Cash 12.0% 3.7 1.4 4.5% 1.
Slide 9: Sensitivity to rating migrations
Sensitivity to rating migrations US credit rating1 and sensitivities (March 31, 2020; in USD billion, total USD 55.9 billion) • Portfolio heavily weighted towards BBB+ NAIC class 1 investment grade bonds, only 7.5% are 6.8 below investment grade A 16.0 NAIC class 2 BBB 19.4 • Downgrade of 20% of all
Slide 10: Well-diversified and investment grade rated corporate credit exposure
Well-diversified and investment grade rated corporate credit exposure Selected details to corporate bond exposure in the US General account Aegon US1 Corporate bond exposure1 by industry Corporate bond exposure1 (in USD billion, March 31, 2020) (in USD billion, March 31, 2020, amortized cost) for se
Slide 11: Focus on maintaining solid financial position despite challenging conditions
Focus on maintaining solid financial position despite challenging conditions Financial position and outlook (March 31, 2020) Group Solvency II ratio Return on Equity target Very unlikely to reach 10% 208% return on equity target in 2020 given the extraordinary circumstances Holding excess cash Other
Slide 12: Appendix
Appendix For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Helping people achieve a lifetime of financial security
Slide 13: Well-managed capital sensitivities
1H 2018 Results Well-managed capital sensitivities Solvency II sensitivities (in percentage points, 1Q 2020) Scenario Group NL UK US US RBC Equity markets +25% +6% -3% -2% +21% +21% Equity markets -25% -9% -4% -4% -22% -19% Interest rates +50 bps +4% -4% -1% +14% +20% Interest rates -50 bps -6% +3%
Slide 14: Updated US macro equity tail hedge sensitivities
Updated US macro equity tail hedge sensitivities Macro hedge target: RBC Capital RBC sensitivities to declining equity markets • Changed emphasis from tail protection to linear protection as a 0 RBC ratio change (in %pts) result of 2020 equity selloff -40 • 2Q20 quarterly fair value result has decre
Slide 15: Credit losses currently remain on low levels
Credit losses currently remain on low levels Impairments on US general account fixed income assets (in bps) 120 91 82 64 48 52 37 33 27 25 17 17 17 Average 22 9 8 8 5 1 2 4 2 1 3 1 -6 -2 -2 -3 -9 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Slide 16: Conservative asset allocation across asset classes
Conservative asset allocation across asset classes Details of three selected asset classes Corporate mortgage loans CDO / CLO by rating1 CMBS / MBS / ABS3 by rating1 (in USD billion, March 31, 2020, amortized cost) (in USD billion, March 31, 2020, amortized cost) (in USD billion, March 31, 2020, amo
Slide 17: Conversion of RBC to Solvency II
Conversion of RBC to Solvency II Next review in 2H 2020 • Conversion methodology for US operations has been agreed with DNB, to be reviewed annually • Calibration of US insurance entities followed by subsequent adjustment for US debt and Holding items - Calibration of US insurance entities is consis
Slide 18: Net income amounts to EUR 1,270 million
Net income amounts to EUR 1,270 million Underlying earnings to net income (in EUR million) Fair value items UEBT 1Q 2020 366 • COVID-19 pandemic related market impacts of declining interest rates, sharp equity market decline, credit spread Fair value items 1,372 widening and increased volatility • H
Slide 19: Favorable impact from hedges and spread widening; adverse impacts from volatility and unhedged risks
Favorable impact from hedges and spread widening; adverse impacts from volatility and unhedged risks Fair value attribution (in EUR million) Netherlands fair value items NL LAT result 1,127 • LAT with positive contribution from higher illiquidity premium, partly offset by impact from declining inter
Slide 20: LAT deficit sensitivity to credit spread movements
LAT deficit sensitivity to credit spread movements Sensitivity market movements on LAT deficit of Aegon the Netherlands (in EUR billion, 1Q 2020) As a result of the LAT deficiency, Scenario LAT deficit impact future IFRS results1 in Aegon NL Mortgage spreads +50 bps (0.6) will become more sensitive
Slide 21: Leverage ratio remains within target range of 26 – 30%
Leverage ratio remains within target range of 26 – 30% Gross financial leverage ratio (in %) 32.2% 30.7% 30% 29.2% 28.5% • Gross financial leverage ratio at Target 1Q 2020 within target zone zone • Decrease in leverage ratio in 1Q 2020 26.6% due to increase in shareholders’ equity 26% 2016 2017 2018
Slide 22: General account investments
General account investments March 31, 2020 (in EUR millions, except for the impairment data) The United Asset Holdings & Americas International Total Netherlands Kingdom Management other Cash/Treasuries/Agencies 18,949 16,585 504 817 72 19 36,947 Investment grade corporates 33,909 7,293 354 4,781 3
Slide 23: Main economic assumptions
Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.15 n.a. 0.88 Annual gross equity market return (price appreciation + dividends) 8% 6.5% 6.5% Main assumptions for financial targets US 10-year government bond yields Grade to 4.25% in 10 years time NL 10-year governm
Slide 24: Aegon Investor Relations
Aegon Investor Relations Stay in touch Upcoming events 2020 Contact Investor Relations Jan Willem Weidema +31 70 344 8028 Head of Investor Relations UBS Financial Institutions May 14 – 15 Karl-Otto Grosse-Holz Virtual Conference +31 70 344 7857 Investor Relations Officer Goldman Sachs Hielke Hielkem
Slide 25: Investing in Aegon
Investing in Aegon Aegon ordinary shares Aegon New York Registry Shares (NYRS) • Traded on Euronext Amsterdam • Traded on NYSE since 1991 and since 1969 and quoted in euros quoted in US dollars • One Aegon NYRS equals one Aegon Amsterdam-listed common share • Cost effective way to hold international
Slide 26: Disclaimer
Disclaimer Cautionary note regarding non-IFRS-EU measures This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax, income before tax, market consistent value of new business and return on equity. These non-IFRS-EU measures are calculated by con