Aegon Ltd. · EURONEXT:AGN
Aegon — Investor Presentation (September 2015)
51 slides from Aegon's investor presentation, September 2015
Slide 1: Investor Presentation
Investor Presentation September 2015 Clare Bousfield CFO Aegon UK
Slide 2: Strategic overview
Strategic overview Well positioned to capture growth opportunities in all our markets Managing back book and new business profitability in a challenging environment Continued progress on execution of strategy 2
Slide 3: Aegon at a glance
Aegon at a glance Focus History Employees Life insurance, pensions & Our roots date back to first half of Around 28,000 employees asset management 19th century As per June 30, 2015 Underlying earnings before tax Revenue-generating investments Paid out in claims and benefits 2015 YTD As per June 30,
Slide 4: Well positioned to benefit from global trends
Well positioned to benefit from global trends Changing demographics Economic Reduced social benefits Helping people take responsibility for their environment Volatile financial markets financial future Limited economic growth Disintermediation, shift to do-it-yourself (UK, NL) Customer R
Slide 5: Attractive propositions across the customer life cycle
Attractive propositions across the customer life cycle Assets Protection Workplace for insurance Need: protect family, property, Product: life, non-life and savings wealth and health Accumulation Reduced social benefits Need: financial confidence, Product: pensions, long-term ROI savings, investment
Slide 6: Focus on pension participants driving business growth
Focus on pension participants driving business growth 3.9 million 3.7 million 1.9 million Participants +9% +19% +7% USD 146 billion EUR 72 billion GBP 50 billion total +19% +11% GBP 5 billion platform Balances Unique proposition One strategy Helping people take responsibility for their financial fut
Slide 7: Serving US customers through a single investment & retirement division
Serving US customers through a single investment & retirement division 3,300 I&R employees with Actively serving a national footprint 25,000+ plan sponsors Enhancing Introducing new Better connecting distribution investment solutions with our customers New deposits of USD 42 billion 5.4 million cust
Slide 8: Aegon UK at a glance
Aegon UK at a glance… 6 locations EDINBURGH (2063) LYTHAM (55) MANCHESTER DUBLIN (28) (200) MAIDENHEAD LONDON (70) (73) Plus Homeworkers (125) 185 years Strong experience regulatory PENSIONS, INVESTMENT & SAVINGS relationships Award winning platform £63bn +2.5 million +2,500 FUNDS UNDER PLATFORM CUS
Slide 9: The UK is one of the most advanced financial services markets in the world
The UK is one of the most advanced financial services markets in the world, with strong growth potential Regulatory change is an …but has created the need to …in one of the biggest markets opportunity to create a new long rethink traditional business in the world… term savings market… models Project
Slide 10: Maximise the opportunity to provide customers with a broader offering
We will seek to maximise the opportunity to provide customers with a broader offering and protect our margins Asset Investment Risk products Product Customer Advice & Management Services administration Interface (UX) Guidance Licensed Entity Licensed Entity Hedging To & thru retirement Customer Faci
Slide 11: Consistent customer-centric strategy uses platform to acquire, retain and consolidate
Consistent customer-centric strategy uses platform to acquire, retain and consolidate in a very large market At Retirement Non-Advised Workplace Savings Access to Regulation creating under- Access to Government requiring Ageing population with valuable served population of existing valuable employee
Slide 12: Unchanged strategy - leading the UK market in transforming the customer journey
Unchanged strategy - leading the UK market in transforming the customer journey ‘to & thru’ retirement with our multi-channel, digital platform Drive customers to lower cost Through 3 channels on a single Creating a low cost platform with digital platform & Retiready… digital platform, ‘to & thru’ s
Slide 13: Our platform strategy is becoming a reality
Our platform strategy is becoming a reality with strong performance despite the high levels of regulatory change Unprecedented regulatory Countered by a strong momentum & Platform delivering the best change…. delivery in platform in 2015 outcomes for all stakeholders Platform - Assets under Administ
Slide 14: We make money by enabling customers to consolidate other assets
We make money by enabling customers to consolidate other assets in a single account & to access other solutions The Platform attracts and retains valuable …and enables customers to consolidate & stay customers… through to decumulation driving profitability Example Customer Member Attraction 72% of p
Slide 15: 2014 results show strong growth vs 2013
2014 results show strong growth vs 2013 - MCVNB impacted by regulatory change Underlying earnings £m Operating expenses £m MCVNB £m Customers millions £75m £93m 120 Transformation £51m £(9)m Pensions Flexibility 100 DWP 13 18 17 SII de- Core expenses 2.4 risking 80 No. customers 28 26 14 20 13 9 6 9
Slide 16: Secure Retirement Income – leveraging Aegon group's expertise
Secure Retirement Income – leveraging Aegon group’s expertise to extend revenue opportunities Available to advised customers through ARC and One Retirement and to non-advised customers through the Retiready proposition. Advised pension Non- Advised Market leading proposition guarantees pension guara
Slide 17: Leadership positions in the Netherlands offer strong foundations for growth
Leadership positions in the Netherlands offer strong foundations for growth #1 #1 #1 Insurance-linked Pensions insurer PPI provider administrator Largest pension insurer* Second largest pension PPI leader with EUR 0.6bn AuM** administrator (in millions)** 4.4 Aegon Peer 1 2.5 2.8 Aegon PPI Peer 2 Pe
Slide 18: Creating space to grow and invest in our business
Creating space to grow and invest in our business Cost savings allow us to invest in connecting better with our customers Investments enable us to accelerate the execution of our strategy Connecting better with our customers… …while improving efficiency OpEx / (OpEx + UEBT) US >1 million partici
Slide 19: Actively managed pricing policy is yielding results
Actively managed pricing policy is yielding results Market consistent value of new business (EUR million, % of PVNBP) 1.9% 1.8% 1.6% 1.6% 1.6% 1.5% 1.4% 1.3% 1.3% 1.0% 1.0% 1.0% 1.0% 0.9% 285 268 232 223 221 204 202 192 196 183 173 125 117 140 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4
Slide 20: Solid progress on inforce management
Solid progress on inforce management Actions Customer benefits Results Optimizing our portfolio Closed sale of Canadian business Found good home for our customers Enhance return on equity by 40bps Announced sale of Clark Consulting High service levels maintained EUR 0.6 billion aggregate
Slide 21: Managing variable annuities for profitability
Managing variable annuities for profitability Both core variable annuities and the closed block managed for profitability Fair value guarantees on core block fully hedged to rates, equities and equity volatility Closed block equity market risk coverage provided by macro hedging Core variable a
Slide 22: Strong free cash flow growth
Strong free cash flow growth Free cash flow up strongly as a result of higher operational free cash flow (OFCF) from business growth and lower holding expenses ► OFCF growth from fee-based businesses more than offsets lower spread-related cash flows ► Holding expenses halved as a result of cost sa
Slide 23: Update on Solvency II position
Update on Solvency II position: tightened range of 140% – 170% Greater clarity obtained on various items ► Calibration of US equivalence at 250% RBC including transferability ► Volatility adjuster modelling and higher investment risk capital in the Netherlands ► Fundamental spreads and matching ad
Slide 24: Q2 2015 Results
Q2 2015 Results Increase in earnings, sales and cash flows The Hague – August 13, 2015 Alex Wynaendts Darryl Button CEO CFO
Slide 25: Increase in earnings, sales and cash flows
Increase in earnings, sales and cash flows Increase in underlying earnings; fee-based business growth and stronger US dollar partly offset by lower Life & Protection results in the Americas Sales mainly driven by US retirement plans and asset management Strong operational free cash flows and s
Slide 26: Underlying earnings up as a result of business growth and currencies
Underlying earnings up as a result of business growth and currencies Higher underlying earnings mainly driven by growth in variable annuities, pensions and asset management, in addition to favorable currency movements Earnings impacted by lower fixed annuity and Life & Protection results (includ
Slide 27: Fair value items impacted by hedge programs and guarantees
Fair value items impacted by hedge programs and guarantees Total of EUR (293) million FV hedging with FV hedging without accounting match accounting match FV investments FV other EUR (186) million EUR (73) million EUR (35) million EUR 1 million Derivatives ∆: EUR (3,811)m Derivatives ∆: EUR (73)m Li
Slide 28: 18% sales growth to EUR 2.4 billion
18% sales growth to EUR 2.4 billion Gross deposits increased 29% driven by asset management, bank deposits in NL and favorable currency movements New life sales stable as higher IUL sales in the US and favorable currency movements offset lower sales in NL and UK Accident & health and general i
Slide 29: Sustainable dividend growth
Sustainable dividend growth Proposed increase of interim dividend to EUR 0.12 per share Continue to neutralize stock dividends to avoid dilution Holding excess capital increases to EUR 1.5 billion Future dividend growth dependent on capital position and cash flows Free cash flows Increasing
Slide 30: Key messages
Key messages Earnings up due to growth in fee-based businesses and currencies Q2 results High level of profitable sales maintained Capital and risk Capital position and operational free cash flows remain strong management Interim dividend increases to EUR 0.12 Execution of Optimizing our p
Slide 31: Appendix continued: Q2 2015 results
Appendix continued Q2 2015 results For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands
Slide 32: Index
Index 2Q15 2Q15 2Q15 2Q15 Strategy Financials Country Reconciliation support specific tables, assumptions & sensitivities Slide 25 Slide 26-33 Slide 34-37 Slide 38-41 32
Slide 33: Sustainability embedded in our strategy
Sustainability embedded in our strategy Products and services A responsible approach Supporting local communities customers can trust to investments Clear and easy to understand Decisions guided by Aegon’s Long history of working with and products Responsible Investment Policy investing in loc
Slide 34: Underlying earnings up to EUR 549 million
Underlying earnings up to EUR 549 million Lower earnings in Americas driven by the Underlying earnings before tax recurring effect from assumption changes and model updates implemented Q3 2014, Americas The Netherlands (USD million) (EUR million) adverse mortality claims and divestment of Canada
Slide 35: Net income of EUR 350 million
Net income of EUR 350 million Fair value items loss mainly driven by hedging programs in the US and NL, and lower than expected alternative investment returns, which more than offset gain on interest rate swaps on perpetuals at the Holding Gains on investments amounted to EUR 134 million, primar
Slide 36: Gross deposits increased to EUR 16.8 billion
Gross deposits increased to EUR 16.8 billion Lower gross deposits in the Americas Gross deposits driven by lower variable annuities and less takeover deposits in retirement plans, while Americas The Netherlands (USD billion) (EUR billion) recurring deposits grew by 8% Gross deposits in the Nethe
Slide 37: New life sales were up 1% to EUR 518 million
New life sales were up 1% to EUR 518 million New life sales in the Americas increased, New life sales driven by higher indexed UL sales, which were partly offset by divestment of Canada Americas The Netherlands (USD million) (EUR million) and withdrawal of UL second guarantee product Lower new l
Slide 38: MCVNB of EUR 183 million
MCVNB of EUR 183 million, despite persistent low interest rates Lower MCVNB in the Americas mainly due Market consistent value of new business to impact of lower interest rates Americas The Netherlands (USD million) (EUR million) MCVNB in the Netherlands increased, driven by profitable mortgage
Slide 39: Operational free cash flows and holding excess capital
Operational free cash flows and holding excess capital Operational free cash flows* of EUR 388 million ► One-time items of EUR 256 million mostly due to tax benefits arising from re-domestication of variable annuities to the US ► Market impacts of EUR (677) million driven by VA hedging losses in t
Slide 40: Group and local capitalization levels
Group and local capitalization levels Group IGD solvency ratio 206% Excess capital in the United States declined to USD ~1 billion over S&P AA level as a result of capital generation more than offset by dividend payment to the holding IGD ratio in the Netherlands of ~225%; Pillar 1 ratio in th
Slide 41: Capital allocated to run-off businesses
Capital allocated to run-off businesses Current capital allocated to run-off businesses of USD 1.9 billion ► Return on capital of run-off businesses of 2.3% year to date Capital intensive run-off businesses negatively impact return on equity ► Capital allocated to run-off businesses included in
Slide 42: Americas
Americas Lower earnings as growth in VA and Underlying earnings Operating expenses pensions more than offset by adverse before tax (USD million) (USD million) mortality experience and recurring impact of assumption changes and model updates implemented in Q3 2014 454 471 Operating expenses decre
Slide 43: The Netherlands
The Netherlands Higher earnings primarily due to favorable Underlying earnings Operating expenses mortality and an employee benefit release, before tax (EUR million) (EUR million) which more than offset higher non-life claims Increase in operating expenses driven by 136 210 131 131 200 investmen
Slide 44: United Kingdom
United Kingdom Underlying earnings declined to GBP 25 Underlying earnings Operating expenses million due to lower earnings in life business before tax (GBP million) (GBP million) Decrease in operating expenses driven by reduction of business transformation costs and cost reduction programs 26 28
Slide 45: New Markets
New Markets Earnings growth in Asset Management Underlying earnings Operating expenses offset by lower earnings in other markets before tax (EUR million) (EUR million) and divestment Operating expenses up 28% to EUR 209 million due to unfavorable currency 62 62 192 209 51 movements and project r
Slide 46: Energy & oil services exposure
Energy & oil services exposure US general account energy & oil services exposure USD million AAA AA A BBB <BBB/NR Total Independent - 3 324 963 160 1,450 Oil field services - 37 161 252 52 503 Midstream - - 266 1,198 78 1,542 Integrated 166 670 439 169 - 1,445 Refining - - - 133 8 141 Total corporat
Slide 47: Main economic assumptions
Main economic assumptions 10-year US Treasury assumed to grade to 4.25% by 2025 3-month US Treasury assumed to grade to 2.5% by 2025 Credit spreads are assumed to grade to 110 bps by 2017 Bond funds are assumed to return 4% until 2025 and 6% thereafter Annual gross equity market returns of
Slide 48: Earnings sensitivities to equity markets and reinvestment yields
Earnings sensitivities to equity markets and reinvestment yields Protection of capital position main purpose of macro Macro hedge equity sensitivity estimates hedging program Total equity return in Fair value items impact quarter IFRS accounting mismatch between hedges and liabilities -8% ~USD (
Slide 49: Investing in Aegon
Investing in Aegon Aegon ordinary shares Aegon’s ordinary shares ► Traded on Euronext Amsterdam since 1969 Ticker symbol AGN NA and quoted in euros Underlying ISIN NL0000303709 SEDOL 5927375NL Aegon New York Registry Shares (NYRS) Trading Platform Euronext Amsterdam ► Traded on NYSE since 1991 a
Slide 50: Upcoming events
Upcoming events September Morgan Stanley conference Bank of America Merrill Dublin Lynch conference September 3, 2015 London September 30, 2015 ING Benelux conference London September 10, 2015 KBW insurance conference London September 16, 2015 Kepler Cheuvreux Autumn conference Paris September 18, 2
Slide 51: Disclaimers
Disclaimers Cautionary note regarding non-IFRS measures This document includes the following non-IFRS financial measures: underlying earnings before tax, income tax, income before tax and market consistent value of new business. These non-IFRS measures are calculated by consolidating on a proportion