Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2008 Earnings Presentation
35 slides from Aegon's earnings presentation, Aug 7, 2008
Slide 1: Second quarter 2008 results
Local knowledge. Global power. Second quarter 2008 results Alex Wynaendts, CEO Jos Streppel, CFO Analyst & Investor presentation London, August 7, 2008
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements Cautionary note regarding 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 ar
Slide 3: Highlights Q2 2008
Highlights Q2 2008 o Strong capital position with excess capital of over EUR 0.8 billion o Solid underlying earnings – down by 2%* o Continued growth of life sales and deposits, VNB up 2%* o Interim dividend of EUR 0.30 per share o New strategy announced o Three strategic priorities o Reallocate cap
Slide 4: Execution of strategy
Execution of strategy o Securitization of unit linked business in the UK released EUR 315 million, adding to core capital and enhancing financial flexibility o AEGON #2 pension provider in Hungary and #5 in Poland after mergers of acquired pension funds o Acquisition of Turkish life & pensions compa
Slide 5: Solid underlying earnings
Solid underlying earnings o Underlying earnings before tax down 2%* o Americas earnings increased 2%* as result of higher investment spreads o UK earnings declined due to lower fee income and investments in the business Underlying earnings before tax (€ million) 679 (63) 1 (23) (7) 9 596 2% 1% (21)%
Slide 6: Net income affected by financial markets
Net income affected by financial markets o Normal bond trading in Americas and lower gains on investments in the Netherlands lead to losses on investments o Increased impairment charges on US credit and equity investments Net income development (€ million) 655 (83) (1) (136) (94) (30) (35) 276 Q2 07
Slide 7: Continued profitable growth of new life sales
Continued profitable growth of new life sales o Total new life sales up 3%* o Positive momentum in sales of high net worth products in Americas o Sales growth across most lines of business in UK o Strong sales in the Netherlands mainly driven by group pensions Retail life sales New life sales New li
Slide 8: Strong growth in retail deposits
Strong growth in retail deposits o Total net deposits of EUR 971 million o VA deposits in the Americas increased by 5% o FA deposits in the Americas experience best sales quarter since 2003 o Deposits in Other countries triple Variable annuities Fixed annuities Total gross retail deposits Americas A
Slide 9: Shareholders' equity development
Shareholders’ equity development o Shareholders’ equity excluding revaluation reserves is 74% of total capital base – well above target o Decline in revaluation reserves driven by higher interest rates Shareholders’ equity development (EUR million) 12,597 276 (933) 118 (45) (112) (290) (2) 12 11,621
Slide 10: Capital position remains strong
Capital position remains strong o Continued financial strength o Operating units are capitalized at the higher of: – Regulatory requirements, – S&P requirements at AA level and – Economic requirements under AEGON’s economic framework (after full implementation by 2009) o Financial flexibility of EUR
Slide 11: Strong capital position
Strong capital position o Excess capital over EUR 0.8 billion o Capital released by recent securitization not included in June 30, 2008 excess capital position o US excess capital declined after payment of dividend to holding Excess capital at country units (EUR billion) United States 12.3 12.1 Neth
Slide 12: Composition of capital well within leverage tolerances
Composition of capital well within leverage tolerances o Cash at holding is netted against senior debt o Capital leverage reduced during quarter as a result of US dividend Composition of capital (EUR billion) 22.5 21.5 20.3 19.8 7% 7% 17% 7% 5% 20% 21% 21% 75% 73% 72% 74% 2006 2007 Q1 2008 Q2 2008 C
Slide 13: Improved financial flexibility
Improved financial flexibility Financial flexibility (EUR billion) 1.8 o Excess capital over 1.6 EUR 0.8 billion o Leverage capital increased o Recent ViF securitization and possibility of future securitizations are not yet included in financial flexibility at June 30, 2008 31 Mar 08 30 Jun 08 Addit
Slide 14: Interim dividend of EUR 0.30 per share
Interim dividend of EUR 0.30 per share o Dividend policy is to maintain attractive dividend, based on capital and cash flow position o Dividend paid in cash or stock at election of shareholder o Intention to neutralize dilution effect of stock dividend Dividend (EUR) 0.62 0.55 0.31 0.30 0.32 0.30 0.
Slide 15: Limited impairments
Limited impairments o Limited impairments of EUR 98 million pre tax of which: – EUR 57 million US credit impairments incl. EUR 41 million related to US subprime – EUR 26 million related to an US equity position – EUR 15 million other impairments o Almost all fixed income instruments are held as avai
Slide 16: Americas – underlying earnings up 2%
Americas – underlying earnings up 2% o Fundamentals of business remain Underlying earnings before tax (USD million) solid 691 o Higher sales in retail businesses 678 o Strong FA deposits o VA deposits up 5% o VNB up 16% driven by strong fixed Q2 07 Q2 08 annuity production, increased retail life New
Slide 17: The Netherlands – new life sales up 28%
The Netherlands – new life sales up 28% o Continued positive momentum Underlying earnings before tax (EUR million) o Sales up significantly, driven by group pensions and immediate annuities 115 116 o Lower investment performance more than offset by a release of accruals o VNB of EUR 11 million Q2 07
Slide 18: United Kingdom – continued strong sales
United Kingdom – continued strong sales o Sales growth across most lines of Underlying earnings before tax* (GBP million) businesses o Underlying earnings decline due to 48 38 lower financial markets and investments for growth Q2 07 Q2 08 o VNB up 31% on higher margins and volumes New life sales ove
Slide 19: Other countries – strong growth of deposits
Other countries – strong growth of deposits o Deposits tripled driven by retail mutual Underlying earnings before tax* (EUR million) fund and variable annuity sales in Asia 36 o Weakness in financial markets 29 resulted in decline in life sales o VNB decreased to EUR 38 million Q2 07 Q2 08 mainly as
Slide 20: Conclusions
Conclusions o Strong capital position o Solid underlying earnings o Strong momentum in sales o Value of new business on track o Interim dividend of EUR 0.30 per share Local knowledge. Global power. 20
Slide 21: Q&A
Q&A For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Local knowledge. Global power. 21
Slide 22: Upcoming events
Upcoming events 24 September 2008 Sanford Bernstein Conference, London Jos Streppel 8-9 October 2008 Merrill Lynch Conference, London Alex Wynaendts 6 November 2008 AEGON Q3 2008 Results 13 November 2008 Cheuvreux Conference, New York Jos Streppel 24 November 2008 AEGON Analyst and Investor Day, Lon
Slide 23: Appendix
Possible divider pages Appendix US investment portfolio 30 June 2008 Local knowledge. Global power. 23
Slide 24: Structured assets detail
Structured assets detail Mortgage-backed and Asset-backed Securities Amortized costs as of 30 June2008 (EUR million) Unrealized Unrealized Ratings hierarchy of S&P, Moody’s, Fitch, Internal, NAIC AAA <AAA Total gains / change from (losses) 31 Mar 2008 Total CMBS 4,362 734 5,097 (219) 12 Agency MBS 1
Slide 25: Commercial mortgage backed securities
Commercial mortgage backed securities o The CMBS portfolio has been structured defensively, with over 80% AAA-rated securities o Below-AAA exposures have been positioned conservatively, particularly for 2006 and 2007 vintage deals, when standards were most aggressive o CMBS and Commercial Real Estat
Slide 26: Prime and near-prime residential MBS
Prime and near-prime residential MBS o The Near-prime portfolio is composed of Fixed-rate Alt-A and Negative Amortization Floating-rate mortgage securitizations o All of the Negative Amortization floaters and about half of the Alt-A securities are supersenior bonds, meaning that they have many times
Slide 27: US subprime summary
US subprime summary o Negligible subprime CDOs: EUR 13 million held at fair value o Senior subprime tranches hold up well under stress tests, and are unlikely to be permanently impaired o EUR 480 million are mezzanine tranches of securitizations collateralized by subprime hybrid-ARM loans, and these
Slide 28: Subprime unrealized losses
Subprime unrealized losses Amortized costs / (unrealized loss) 30 June 2008 (EUR million) Collateral Insured Senior Subordinated Sub/residual Total Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized costs loss costs loss costs loss costs loss cos
Slide 29: Sub-prime and second lien exposure
Sub-prime and second lien exposure Amortized costs as of 30 June 2008 (EUR million) Ratings hierarchy of S&P, AAA AA A BBB Below <BBB Moody’s, Fitch, Internal, NAIC AAA wrapped AA+ AA wrapped A+ A wrapped wrapped BBB BBB wrapped Total Subprime 1st lien 648 245 18 53 71 - 1 - - - - - 1,035 mortgages
Slide 30: Sub-prime by vintage
Sub-prime by vintage Amortized costs - fixed as of 30 June 2008 (EUR million) Ratings hierarchy of S&P, AAA AA A Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A+ A BBB Total wrapped wrapped wrapped BBB 2004 & prior 304 141 13 32 55 - 1 - - - 547 2005 126 - 4 6 - - - - - - 136 2006 117 - 1 - 16 - -
Slide 31: Second lien by vintage
Second lien by vintage Amortized costs as of 30 June 2008 (EUR million) Ratings hierarchy of S&P, AAA AA A BBB Below <BBB Total Moody’s, Fitch, Internal, NAIC AAA wrapped AA+ AA wrapped A+ A wrapped wrapped BBB BBB wrapped 2004 & prior 64 8 - 6 32 - 4 - 3 23 - - 140 2005 6 - - - 3 - - - - 28 - 27 64
Slide 32: CDO summary
CDO summary o No purchases of ABS CDOs since 2001 o Therefore, negligible subprime exposure o Primarily corporate credit collateral Collateral by type EUR million Tranches by rating EUR million Leveraged bank loans 620 AAA 676 Corporate bonds 141 AA 206 Commercial real estate and CMBS 174 A 34 Asset
Slide 33: No synthetic subprime CDO's
No synthetic subprime CDO’s o No synthetic subprime or mortgage-related CDOs o Sold protection primarily on very senior tranches of the CDX (index of 125 investment grade corporate bonds) o Average duration 4.4 years o Accounting for all credit derivatives is mark to market through earnings o Market
Slide 34: US fair value items: credit derivatives
US fair value items: credit derivatives o Credit derivatives gained EUR 38 million pre-tax due to corporate credit spread tightening o Risk of permanent loss on most of our synthetic CDOs is very low due to seniority Q2 fair value notional change value o Tranched Credit Protection – Or “Synthetic CD
Slide 35: Alternative investment results AEGON USA
Alternative investment results AEGON USA o Earnings on alternative investments exceeded expectations during the quarter o Multi-year results have been far above expectations Total Actual Over / 30 June 2008 Expected earnings* earnings* (under) Asset class asset balance Q2 2008 Q2 2008 performance (E