Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2008 Earnings Presentation
33 slides from Aegon's earnings presentation, May 7, 2008
Slide 1: First quarter 2008 results, Embedded value 2007
Local knowledge. Global power. First quarter 2008 results Embedded value 2007 Alex Wynaendts, CEO Jos Streppel, CFO Eric Goodman, CIO AEGON USA Analyst & Investor conference call May 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: AEGON underlying performance remains strong
AEGON underlying performance remains strong o Strong business performance results in an increase of underlying earnings o Operating earnings and net income affected by recent turmoil in world financial markets o Strong retail sales especially in the USA o No significant impairments, reflecting high
Slide 4: AEGON delivers strong underlying growth
AEGON delivers strong underlying growth o Underlying earnings before tax up 9% - at constant currency up 22% o Americas increased 14% at constant currency Underlying earnings before tax € million 41 658 26 (21) 10 +9% 602 0 14% 30% (23)% 37% n/a 22% Underlying earnings growth at constant currency 1Q
Slide 5: Unfavorable market conditions affect operating earnings
Unfavorable market conditions affect operating earnings o Underperformance of alternative investments in both the US and NL o Widening credit spreads significantly impact credit derivatives – significant recovery since quarter-end o Lower interest rates drive TRA and Segregated funds results Impact
Slide 6: Net income declined due to lower operating earnings
Net income declined due to lower operating earnings o Lower realized gains in the Americas and The Netherlands o Despite difficult market conditions no material impairments Net income development € million 342 (39) (32) (118) 153 Operating earnings Losses on Impairment charges Tax Net income before
Slide 7: Sales and deposits
Sales and deposits o Retail sales in the Americas increased 9% despite challenging environment o Institutional deposits down due to lower sales in the Americas o Net deposits of FA, VA and Pensions & Asset management improved significantly o VNB impacted by weakening of USD and GBP and lower institu
Slide 8: Impact of market turmoil and adverse currency movements
Impact of market turmoil and adverse currency movements o Shareholders’ equity 72% of total capital base Shareholders’ equity development Shareholders’ equity mainly impacted by revaluation of assets and currency movements 15,151 153 (1,510) (1,066) (46) (73) (12) 12,597 31 Dec Net income Change in
Slide 9: USA investments: main points
USA investments: main points o Net impairments through earnings were EUR 10 million during Q1 o Fair value items: Alternatives returns were below average. Credit derivatives mark to-market losses were significant, but temporary o Available-for-sale (AFS) bond portfolio’s market value decline consis
Slide 10: USA: Q1 credit impairments were very low
USA: Q1 credit impairments were very low o Almost all fixed income instruments are held as available-for-sale securities and as such are only impaired through earnings if o we do not have the ability to hold, or o we intend to sell them, or o we expect to receive less than full principal and interes
Slide 11: US fair value items: credit derivatives
US fair value items: credit derivatives o Credit derivatives lost EUR 144 million pre-tax due to corporate credit spread widening o Significant spread recovery since quarter-end o Risk of permanent loss on our synthetic CDOs is very low due to seniority Q1 fair value notional change value o Tranched
Slide 12: US subprime summary
US subprime summary o Negligible subprime CDOs: EUR 17 million held at fair value o Senior subprime tranches hold up well under stress tests, and are unlikely to be permanently impaired o EUR 520 million are mezzanine tranches of securitizations collateralized by subprime hybrid-ARM loans, and these
Slide 13: US AFS bond market value change
US AFS bond market value change o AFS bond portfolio market value declined 3.6% due to estimated average credit spread widening of 135 basis points o Structured asset sectors, and floating rate bonds experienced largest declines o Significant credit spread recovery post-quarter end 31 Dec 31 Mar Q1
Slide 14: Americas – strong underlying growth
Americas – strong underlying growth Underlying earnings Net operating before tax earnings o Successful introduction of new VA (USD million) (USD million) rider – Retirement Income Choice o Merrill Lynch integration underway 500 716 and on schedule 627 o Continued expansion of key 111 distribution pa
Slide 15: The Netherlands – strong underlying growth
The Netherlands – strong underlying growth Underlying earnings Net operating before tax earnings o Strong immediate annuity sales (EUR million) (EUR million) o Introduction of “Bankspaarproduct” 113 74 70 87 o Changes in business mix leads to decline in VNB o IRR reached 10.7%, close to hurdle rate
Slide 16: United Kingdom – continued strong sales
United Kingdom – continued strong sales Operating earnings Net operating before tax* earnings o Progress with bank distribution (GBP million) (GBP million) partnerships o Launch of Investment Control – 44 37 onshore bond with money back 34 30 guarantee o Income for Life – VA style pension contract t
Slide 17: Other countries – strong underlying growth
Other countries – strong underlying growth Operating earnings Net operating before tax* earnings o Number of pension fund members in (EUR million) (EUR million) CEE increased to 1.4 million o Acquisition of pension fund 39 management company in Hungary 29 27 and life and pension provider in 16 Turke
Slide 18: Embedded value per share increased to EUR 13.44
Embedded value per share increased to EUR 13.44 Δ constant In EUR million, except per share data 2007 2006 Δ currency Embedded value life insurance 25,889 27,292 (5)% 2% Total embedded value (TEV) 21,694 22,418 (3)% 4% TEV per common share* 13.44 13.19 2% 10% Value of new business 927 775 20% 26% Em
Slide 19: Movement analysis Embedded Value Life Insurance
Movement analysis Embedded Value Life Insurance o Embedded value operating margin 8.8% Embedded value life insurance movement (in EUR million) EV operating return: EUR 2,322 million 1,395 (1,185) 935 (1,958) 927 477 (1,995) 27,292 25,889 2006 Value of new Inforce Long Term Change in Currency Other C
Slide 20: Conclusions
Conclusions o Continued strong underlying performance o Unfavorable market conditions impacted net income o No significant impairments reflecting high quality of investment portfolio o Continued successful international expansion in Turkey o Embedded value per share increased to EUR 13.44 o VNB 2010
Slide 21: Unlocking the global potential
Unlocking the global potential Analyst and Investor Conference, London, 2 - 3 June 2008 Local knowledge. Global power. 21
Slide 22: 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. 22
Slide 23: Appendix
Possible divider pages Appendix Local knowledge. Global power. 23
Slide 24: Prime and near-prime residential MBS
Prime and near-prime residential MBS o Almost all of AEGON’s Prime and Near-prime Residential MBS are Senior or Supersenior tranches rated AAA o The Near-prime portfolio is composed of Fixed-rate Alt-A and Negative Amortization Floating-rate mortgage securitizations o All of the Negative Amortizatio
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 Es
Slide 26: 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 4.7 years o Accounting for all credit derivatives is mark to market through earnings o Market
Slide 27: Structured assets detail
Structured assets detail Mortgage-backed and Asset-backed Securities Amortized costs (EUR million) as of 31 March 2008 Unrealized Unrealized Ratings hierarchy of S&P, Moody’s, Fitch, Internal, NAIC AAA <AAA Total gains / change from (losses) 31 Dec 2007 Total CMBS 3,960 730 4,690 (231) (207) Agency
Slide 28: Subprime unrealized losses
Subprime unrealized losses Amortized costs / (unrealized loss) (EUR million) 31 March 2008 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 co
Slide 29: 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 564 AAA 646 Corporate bonds 145 AA 183 Commercial real estate and CMBS 176 A 37 Asset
Slide 30: Sub-prime and second lien exposure
Sub-prime and second lien exposure Amortized costs (EUR million) as of 31 March 2008 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB Subprime 1st lien 664 322 21 40 - 1 - - 1,048 mortgages – fixed rate Subprime 1st lien 267 41 297 241
Slide 31: Sub-prime by vintage
Sub-prime by vintage Amortized costs - fixed (EUR million) as of 31 March 2008 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB 2004 & prior 297 203 16 34 - 1 - - 551 2005 131 - 4 6 - - - - 142 2006 120 15 1 - - - - - 136 2007 116 103 -
Slide 32: Second lien by vintage
Second lien by vintage Amortized costs (EUR million) as of 31 March 2008 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB 2004 & prior 68 39 - 6 - 4 28 - 145 2005 7 4 - - - - 28 28 67 2006 - 27 - 30 - 27 58 12 154 2007 - 216 - - - 10 -
Slide 33: Alternative investment results AEGON USA
Alternative investment results AEGON USA o Earnings on alternative programs were positive overall, but below expectations o Multi-year results have been far above expectations Total Actual Over / 31 Mar 2008 Expected earnings* earnings* (under) Asset class asset balance Q1 2008 Q1 2008 performance (