Aegon Ltd. · EURONEXT:AGN
Aegon — Morgan Stanley European Financials Conference 2013
55 slides from Aegon's conference presentation, Mar 21, 2013
Slide 1: Transform Tomorrow
Transform Tomorrow London, 21 March 2013 Darryl Button Executive Vice President
Slide 2: Aegon at a glance
Aegon at a glance Over 24,000 Life PENSIONS ASSET MANAGEMENT EMPLOYEES1 insurance +20 markets THROUGHOUT THE AMERICAS, EUROPE AND ASIA Underlying earnings before Net income in 2012 Revenue-generating tax in 2012 investments1 EUR EUR EUR 1.8 billion 1.6 458 billion billion 1) As per December 31, 2012
Slide 3: Execute on strategic transformation
Execute on strategic transformation 2009 2010 2011 2012 2013 2014 2015 Improving risk-return profile Strategic transformation Run-off spread-based businesses Set ambition to become leader in Cost restructurings in US, UK and NL our chosen markets Capture business Renewed purpose and values o
Slide 4: Providing products and services across the customer's life cycle
Providing products and services across the customer’s life cycle Assets Protection Accumulation At & After Retirement Working life Purchase of house Retirement Age Protection Accumulation At & After Retirement Customer Protect property, wealth, family Financial confidence, long term ROI Money,
Slide 5: Our products and services have never been more needed
Our products and services have never been more needed Demographic and economic uncertainties Reduced safety net Increasing Financial market from government, longevity and aging volatility employers and populations family People need to take Opportunity to help fulfill their own responsibility = fina
Slide 6: Building on leading market positions
Building on leading market positions United States #6 Individual life #8 Variable annuities #12 DC pensions (participants) Canada #5 Universal life #6 Term life The Netherlands #1 Group pensions #6 Individual life #6 Accident & health #10 Property & casualty United Kingdom #3 Individual pensions #6
Slide 7: Responding to the realities of a changing environment
Responding to the realities of a changing environment AEGON’s actions Lower interest rates Active (re)pricing strategy ► Focus on creating value ► Make products less sensitive to interest rates Changing distribution landscape ► Introduce more fee-based components Getting closer to our custom
Slide 8: Successfully growing our fee-based businesses in the US
Successfully growing our fee-based businesses in the US Continuing shift from spread to fee-based products Growth via diversified distribution, differentiated service and product innovation Diverse business model designed for sustainable growth supported by demographics Scalability driven by
Slide 9: Focus on writing profitable new business
Focus on writing profitable new business Increase in value of new business despite considerable decline in interest rates ► Pricing discipline maintained – value over volume Management actions have significantly improved profitability of new sales ► Discontinued sales of universal life secondary
Slide 10: Using technology to get closer to customers and support intermediaries
Using technology to get closer to customers and support intermediaries Demand for transparent and simple-to-understand products and services ► Customers research online to be able to make informed purchasing decisions New web-technology enables direct-to-customer connectivity ► Create customer-c
Slide 11: Capture growth in Accumulation and At & After Retirement in established markets
Capture growth in Accumulation and At & After Retirement in established markets AEGON’s propositions in Accumulation and At & After Retirement North Leverage scalability of retirement offering, grow strongly in At Retirement and America build out Worksite, Retirement and Long Term Care proposition
Slide 12: Capture growth in Protection and Accumulation segment in developing countries
Capture growth in Protection and Accumulation segment in developing countries AEGON’s propositions in Protection and Accumulation Grow by servicing the needs of under-penetrated life insurance market through increased CEE number of tied-agents and rider sales Roll-out household offering througho
Slide 13: Earning customers' trust by putting them first in everything we do
Earning customers’ trust by putting them first in everything we do… Improve Net Promoter Score & Customer Leadership Score Customer ► Rolling out local measurements: >70% of businesses covered by year-end 2012 strategy ► Increasing benchmark opportunities: use market panels to measure customer loy
Slide 14: Realizing ambition to become a leader in all our chosen markets
Realizing ambition to become a leader in all our chosen markets Most recommended Highest customer loyalty score among relevant peers through: ► Excellent products and services ► Good market conduct ► Enabled & engaged employees with customer centric mindset Strong positions Leader in our chosen
Slide 15: Aegon to cancel all preferred shares
For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Aegon to cancel all preferred shares
Slide 16: Aegon to cancel all preferred shares
Aegon to cancel all preferred shares Agreement with Vereniging Aegon to cancel all preferred shares ► Simplified capital structure and improved quality of capital ► High-quality capital base under new European regulatory solvency requirements ► Vereniging Aegon to substantially reduce its debt A
Slide 17: Balanced outcome for all stakeholders
Balanced outcome for all stakeholders Exchange of preferred shares leads to simplified and improved capital structure Common Improved interest cover for Aegon as payment of preferred dividend will end shareholders Limited dilutive effect for common shareholders & No economic preferential sta
Slide 18: All preferred shares exchanged for cash and common shares
All preferred shares exchanged for cash and common shares Preferred shares with book value of EUR 2.1 billion to be exchanged at fair value of EUR 1.1 billion ► After deduction of cash payment from Aegon of EUR 400 million and preferred dividend of EUR 83 million (over 2012 and 1H2013), the remain
Slide 19: High-quality regulatory capital under new regulatory solvency requirements
High-quality regulatory capital under new regulatory solvency requirements New structure allows junior perpetual capital securities to be classified as Tier 1 capital, instead of Tier 2 Solvency II capital structure Before exchange After exchange 16% 5% Tier 1 capital Tier 1 capital 76% 80% Comm
Slide 20: Impact on Aegon's financial metrics
Impact on Aegon’s financial metrics 2012 key metrics Before exchange After exchange Driver pro forma 2012 Holding excess capital EUR 2.0 billion EUR 1.6 billion Capital base ratio 76.7% 75.1% EUR 400 million cash payment IGD solvency ratio 230% 224% Higher interest cover driven by ending payment Int
Slide 21: Substantial debt reduction for Vereniging Aegon
Substantial debt reduction for Vereniging Aegon Debt reduction of ~EUR 500 million leads to improved financial position ► EUR 400 million cash payment from Aegon ► EUR 83 million preferred dividend over 2012 and 1H2013 and EUR 19 million final 2012 common share dividend, partly offset by financing
Slide 22: Vereniging Aegon agreed to give up its economic preferential status
Vereniging Aegon agreed to give up its economic preferential status Voting rights in ordinary course reduced from 22.1% to ~14.9%, aligned with economic interest Vereniging Aegon will maintain its voting rights of 32.6% in special cause Vereniging Aegon voting rights Current situation # of share
Slide 23: Aegon grows earnings and sales in Q4 2012
For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Aegon grows earnings and sales in Q4 2012
Slide 24: Continued delivery of strong results
Continued delivery of strong results Underlying earnings before tax Fee-based earnings Sales (EUR million) (% of UEBT) (EUR billion) 1,808 1,787 30 33 6.7 1,522 6.0 5.7 16 2010* 2011 2012 2010 2011 2012 2010 2011 2012 Return on equity Operational free cash flows Operating expenses (%) (EUR billion)
Slide 25: Earnings up 29% on growth, cost reductions and favorable markets
Earnings up 29% on growth, cost reductions and favorable markets Americas’ earnings up on business growth and a stronger dollar UK earnings up on the cost reduction program and the non-recurrence of exceptional charges New markets earnings lower, strong results from Aegon Asset Management were
Slide 26: Net income benefits from investment gains and divestments
Net income benefits from investment gains and divestments Fair value items loss mainly due to impact of lower credit spreads on Aegon bonds and impact of unfavorable interest rates movements on the fair value of swaps Gains on investments are the result of normal trading and asset liability mana
Slide 27: Operating expenses reduced by 6% while investing in new propositions
Operating expenses reduced by 6% while investing in new propositions Cost savings in established markets reflect cost reductions in the Americas and successful restructuring programs in the UK and the Netherlands Enacted cost savings in Dutch business of EUR 89 million, on track to meet target o
Slide 28: Sales increase demonstrates strength of franchise
Sales increase demonstrates strength of franchise New life sales increase 36% to EUR 677 million Sales* (EUR million) ► Higher US new life sales driven by indexed UL and anticipation of UL secondary guarantee product withdrawal ► Dutch pension sales increased strongly on new contract wins ► UK pen
Slide 29: Focus on adding distribution – driver of sales
Focus on adding distribution – driver of sales Expansion of Indexed Universal Life products into the brokerage channel Americas Expansion into alternative channels adds scale and diversity to variable annuity distribution Enhanced distribution strategy contributes to pension production NL No
Slide 30: Successful repositioning of Spanish business
Successful repositioning of Spanish business Strategic partnership with Banco Santander, Spain’s largest financial group, offering life and non-life products through Santander’s extensive branch network ► Access to over 4,600 branches ► Potential client base of over 12 million customers Aegon ac
Slide 31: Further improved capital position
Further improved capital position Capital base ratio of 76.7%, well above year-end 2012 target of at least 75% Strong IGD ratio of 230% NAIC RBC ratio of ~495%; NL IGD ratio of ~250%; UK Pillar 1 ratio of ~140% ► RBC benefited from strong net income offset by dividends to the holding Holding
Slide 32: Strong operational free cash flows
Strong operational free cash flows Operational free cash flows of EUR 619 million excluding market impact Market impacts of EUR (89) million due to interest rates movements Earnings on the in-force and release of required surplus particularly strong due to reserve releases and proceeds from di
Slide 33: 2012 a strong basis for the future
2012 a strong basis for the future Strong growth in earnings and profitable sales Maintained strong capital position Operating expenses reduced while investing in new propositions Distribution expanded – new partners, platforms and on-line propositions Well positioned for the future 33
Slide 34: Upcoming events
Upcoming events March May June August Annual Report 2012 Q1 2013 results Analyst & Investor Day, Q2 2013 results March 22, 2013 May 8, 2013 London August 8, 2013 June 19, 2013 Annual General Meeting DB Financials Conference, May 15, 2013 New York June 5, 2013 CS West Coast Financials Conference, San
Slide 35: Appendix
For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Appendix
Slide 36: Focus on delivering on targets
Focus on delivering on targets Achieve return on equity of Grow underlying earnings Double fee-based earnings to Increase annual normalized before tax by operational free cash flow to 10-12% 7-10% 30-35% € 1.3-1.6 by 2015 on average per annum billion between 2010 and 2015 of underlying earnings by 2
Slide 37: Main economic assumptions
Main economic assumptions Main US economic assumptions* 10-year US Treasury assumption of 4.75% by 2017 ► Grading to 4.75% in five years Credit spreads are assumed to grade over two years to 110 bps Bond funds are assumed to return 4% for 5 years and 6% thereafter Money market rates are assu
Slide 38: Limited exposure in general account to peripheral European countries
Limited exposure in general account to peripheral European countries Total exposure to peripheral European sovereigns only 0.6% of general account Corporate debt mainly related to defensive sectors, for example utilities Exit of Unnim and CAM will reduce peripheral exposure by EUR 920 million,
Slide 39: New life sales of EUR 677 million
New life sales of EUR 677 million US sales up on increased indexed universal life sales and higher sales in anticipation of UL secondary guarantee product withdrawal Individual life sales declined in the Netherlands but were more than offset by a strong increase in pension sales as a result of n
Slide 40: Gross deposits increases in asset management and variable annuities
Gross deposits increases in asset management and variable annuities Higher retirement plan deposits were driven mainly by successful efforts to increase inflows from the existing client base through higher contributions and larger participant count Asset management inflows as a result of strong
Slide 41: Market consistent value of new business of EUR 204 million
Market consistent value of new business of EUR 204 million MCVNB for the Americas remains strong as underperforming products are actively re-priced or withdrawn from the market MCVNB in the Netherlands up on higher contribution from mortgages as funding costs declined and due to a strong increas
Slide 42: Higher underlying earnings
Higher underlying earnings Americas’ earnings supported by strong business growth, partly offset by higher performance related expenses Higher Life and Savings earnings in the Netherlands more than offset lower earnings in Pensions and Non-life Earnings in the UK increase as pension earnings i
Slide 43: Americas
Americas Underlying earnings before tax increased on strong business performance, partly offset by higher performance related expenses Operating expenses increased 4% as cost savings were more than offset by higher performance related expenses and costs to support growth New life sales increas
Slide 44: The Netherlands
The Netherlands Underlying earnings increased as higher earnings from Life & Savings more than offset lower earnings in Pensions and Non-Life Operating expenses increased as realized cost savings were more than offset by higher employee benefit expenses and investments in new distribution capabi
Slide 45: United Kingdom
United Kingdom Underlying earnings before tax remained stable with Q3 but improved strongly compared with last year driven by the non-recurrence of exceptional charges recorded last year Operating expenses continued to decline following the successful implementation of cost reduction programs in
Slide 46: New Markets
New Markets Underlying earnings before tax decline mainly driven by divestments in Spain Operating expenses increased 1% as the result of higher costs in Asia and VA Europe driven by investments to support future growth, recurring charges for corporate center expenses were partly offset by the d
Slide 47: Capital base ratio of 76.7%
Capital base ratio of 76.7% Capital base ratio increases to 76.7%, above target of at least 75% by year-end 2012 Improvement of capital base ratio up on retained earnings, dividends from operating units and divestitures Holding and other reflects mainly operating and interest expenses Common
Slide 48: Capital allocated to run-off businesses
Capital allocated to run-off businesses Current capital allocated to run-off businesses of EUR 2.1 billion ► Return on capital of run-off businesses of 2.5% year to date Capital intensive run-off businesses negatively impact return on equity ► Capital allocated to run-off businesses is included
Slide 49: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets Opening balance October 1, 2012 90.0 40.9 11.2 5.1 Net in- and outflow (1.4) 1.6 0.2 (0.3) Unrealized / realized results 0.1 0.4 0.1 0.1 Foreign exchange (
Slide 50: Investments general account
Investments general account Aegon UNAUDITED December 31, 2012 INVESTMENTS GENERAL ACCOUNT The United New Holdings amounts in EUR millions, except for the impairment data Americas Netherlands Kingdom Markets and other TOTAL Cash / Treasuries / Agencies 17,069 11,861 3,122 1,484 759 34,295 Investment
Slide 51: Impairments by asset class
Impairments by asset class Aegon general account investments Q4 12 impairments / (recoveries) by country unit - IFRS basis (pre-DAC, pre-tax) EUR millions Americas NL UK New Markets Total ABS – Housing - - - - - ABS – Non-housing (1) - - - (1) CMBS 5 - - - 5 RMBS 1 - - (0) 1 Subtotal structured asse
Slide 52: Credit losses in the US trending down
Credit losses in the US trending down Q4 2012 US credit impairments amount to 4 bps US credit losses in bps of fixed income assets 120 91 82 average of 32 bps 64 48 52 44 44 since 1990 37 33 27 25 17 17 17 9 8 1 2 4 2 -2 -6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 53: Reconciliation of effective tax rate Q4 2012
Reconciliation of effective tax rate Q4 2012 Reconciliation of effective tax rate Q4 12 EUR million Americas The Netherlands United Kingdom New Markets/ Holdings Total Income before tax 299 142 50 60 551 Nominal tax rate 35.0% (105) 25.0% (36) 24.5% (12) NM (23) (176) Actual income tax (60) (26) (13
Slide 54: For questions please contact Investor Relations
For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands
Slide 55: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This document includes certain non-GAAP financial measures: underlying earnings before tax and market consistent value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note
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