Aegon Ltd. · EURONEXT:AGN
Aegon — BoA-ML Financials Conference 2013
38 slides from Aegon's conference presentation, September 2013
Slide 1: Executing our strategy
Executing our strategy BoA-ML Financials Conference – London, September 2013 Darryl Button CFO aegon.com
Slide 2: Key messages
Key messages Focus on executing our strategy is delivering clear results ► Strategic transformation to become a truly customer centric company is well underway ► Solid business growth is driving increase in profitability ► Risk profile significantly improved Implementing a balanced capital deplo
Slide 3: Focus on executing on strategic objectives
Focus on executing on strategic objectives Continue to optimize portfolio Deliver operational excellence Invest in core growth business Focus on profitable growth Exit or de-emphasize non-core Increase efficiency and reduce businesses expenses ► Reviewing low return businesses Improve tech
Slide 4: Measuring and enhancing customer loyalty
Measuring and enhancing customer loyalty Focus on improving Net Promoter Scores ► Rolling out local measurements: 74% of businesses covered in 2012, 90% coverage expected by year-end 2013 ► Increasing benchmark opportunities: use market panels to measure customer loyalty scores ► Implementing impr
Slide 5: Leveraging strength in At-Retirement market to grow fee business
Leveraging strength in At-Retirement market to grow fee business Aegon is building a leading presence in the At-Retirement segment of key markets ► Providing effective product solutions to meet needs throughout the retirement life cycle ► Supporting our strategy to shift to fee based business St
Slide 6: Financial framework supports execution of strategy
Financial framework supports execution of strategy Financial framework Strong operating unit balance sheets Disciplined capital management policy Fungibility of cash flows Development and use of excess capital Progress towards 2015 deliverables 6
Slide 7: Strong operating unit balance sheets
Strong operating unit balance sheets Significant balance sheet de-risking since 2009 US RBC ratio (%) NL IGD ratio (%)1 UK Pillar 1 ratio (%)2 465 245 200 350 160 170 2008 Q2 2013 2008 Q2 2013 2008 Q2 2013 Strong local solvency ratio Strong local solvency ratio Aiming to strengthen and Bindi
Slide 8: Disciplined capital management policy
Disciplined capital management policy Local capital policy Management action Use of operational free cash flows Local excess capital Fungibility analysis Buffers assessed at least annually Dividends to the holding increased above plan Buffer level Dividends Buffer to ensure stable dividends
Slide 9: Capital management policy in practice
Capital management policy in practice United States The Netherlands United Kingdom* New Markets Buffer „AA‟ + USD 700m 250% 200% Varies Target S&P „AA‟ IGD 200% Pillar 1 175% by country Q2 2013 „AA‟ + ~USD 800m ~245% ~170% Operational free cash flows (OFCF) defined – ‘The capital generated in a loca
Slide 10: OFCF fund dividends to the holding and/or strengthen local capital positions
OFCF fund dividends to the holding and/or strengthen local capital positions 2012 normalized operational free cash flows in target range of EUR 1.3 – 1.6 billion Americas stable as run-off of capital-intensive spread business is replaced by growth of fee business Netherlands stable as new busi
Slide 11: New business – improved capital efficiency and higher returns
New business – improved capital efficiency and higher returns Capital investments in new business and as a percentage of sales (EUR billion) Successful strategic shift in business mix towards less capital-intensive products 2007 2.0 23% 2010 1.3 21% Strict pricing discipline has led to increased
Slide 12: Buffer at the holding to stabilize dividends and create flexibility
Buffer at the holding to stabilize dividends and create flexibility Disciplined capital management policy applies to holding as well Strong excess capital position remains necessary in the current market environment Excess capital buffers allow management flexibility and ability to act counter
Slide 13: Balanced capital deployment strategy 2013 – 2015
Balanced capital deployment strategy 2013 – 2015 Base case plan – excluding management action to release additional capital EUR million Dividends to the holding after investments in new business ~4,000 Additional cash held for 2013 senior debt maturity ~600 Proceeds from divestments in Spain ~800 Ca
Slide 14: New leverage targets to further enhance stability
New leverage targets to further enhance stability Reduce leverage to improve financial flexibility – supporting AA financial strength rating Shift from net to gross leverage ratio to increase transparency and simplicity ► Both hybrid capital and senior debt are part of gross leverage ► Multiple
Slide 15: Returning cash to shareholders through sustainable dividends
Returning cash to shareholders through sustainable dividends Sustainable dividend to allow investors to share in the performance of the company Offer an attractive dividend based on strong capital position and cash flows Intention to neutralize stock dividends going forward to prevent dilution
Slide 16: Strategic initiatives including returning additional capital to shareholders
Strategic initiatives including returning additional capital to shareholders Strategic initiatives to enhance growth ► New distribution agreements ► Investments to accelerate business transformation Execution of strategic priorities Returning additional capital to shareholders ► Further neutrali
Slide 17: Progress towards 2015 deliverables
Progress towards 2015 deliverables Double fee-based earnings to Increase annual normalized Grow underlying earnings Trajectory towards operational free cash flow to before tax by 30-35% € 1.3-1.6 7-10% 8-10% billion on average per annum return on equity by 2015 of underlying earnings by 2015 by 2015
Slide 18: Underlying earnings growth driven by execution of strategy
Underlying earnings growth driven by execution of strategy Earnings growth rate impacted by persistent low interest rates ► Annual review of assumptions in Q3 2012 – a good year to benchmark underlying earnings ► Limited number of exceptional items Organic growth in underlying earnings driven
Slide 19: Clear path for RoE growth – 2015 target remains ambition
Clear path for RoE growth – 2015 target remains ambition TARGETS TRAJECTORY AMBITION Achieve return on equity of Achieve return on equity of Achieve return on equity of 10-12% 8-10% 10-12% by 2015 Current trajectory for 2015 by 2015 Targets impacted by Management actions to achieve ambition Persis
Slide 20: Key messages
Key messages Focus on executing our strategy is delivering clear results ► Strategic transformation to become a truly customer centric company is well underway ► Solid business growth is driving increase in profitability ► Risk profile significantly improved Implementing a balanced capital deplo
Slide 21: Appendix
Appendix 21
Slide 22: Transparent leverage metrics
Transparent leverage metrics EUR million Q2 2013 EUR million 2012 Shareholders’ equity 21,104 Underlying earnings before tax 1,851 Non-controlling interests & share options 85 Interest on senior leverage 138 Adj. for revaluation reserves (3,724) Adjusted underlying earnings before tax 1,989 Adj. for
Slide 23: Main economic assumptions
Main economic assumptions Main US economic assumptions 10-year US Treasury assumption of 4.75% Credit spreads are assumed to grade down over two years to 110 bps Bond funds are assumed to return 4% for 5 years and 6% thereafter Money market rates are assumed to remain flat at 0.1% for two ye
Slide 24: Q2 2013 results
Q2 2013 results 24
Slide 25: Positive sales trend continues – reflecting our strategic focus
Positive sales trend continues – reflecting our strategic focus New life sales increased 21% to EUR 520 million ► New life sales in NL more than doubled due to strong competitive position and increasing market demand for pensions ► UK sales 38% higher, benefiting from auto enrollment, strong group
Slide 26: Growth underpinned by distribution, innovation and leveraging technology
Growth underpinned by distribution, innovation and leveraging technology ► New US VA partnership with Edward Jones and earlier announced agreement with Voya (ING U.S.) New distribution ► Selected by Mercer as one of three partners in the large DC market and sole partner for SME in the UK agreements
Slide 27: Successful transition from spread to fee-based business
Successful transition from spread to fee-based business Higher earnings of US variable annuities and retail mutual funds more Underlying earnings than compensating decrease in fixed annuities (USD million) 175 170 172 154 ► Successful delivery on strategy to shift from spread to fee-based business
Slide 28: Growing value of new businesses
Growing value of new businesses Market consistent value of new business in the Americas doubled ► VA benefited from continued sales momentum and higher interest rates ► Life up on repricing and redesign of products Market consistent VNB (EUR million) In the Netherlands value of new business incr
Slide 29: UK transformation to low-cost platform player
UK transformation to low-cost platform player At-Retirement Workplace Savings Non-Advised Accumulation and decumulation “Gated” solutions for employee Self-service availability for the D.I.Y. capability for the adviser market segments market Launched November 2011 Launched June 2012 To be launched t
Slide 30: Underlying earnings up on business growth and favorable equity markets
Underlying earnings up on business growth and favorable equity markets Americas up on both pension and variable annuities partly offset by higher sales related expenses resulting from strong sales Netherlands stable, higher earnings in Life & Savings were offset by lower earnings in Pensions U
Slide 31: Net income impacted by fair value items
Net income impacted by fair value items Fair value items impacted by hedging losses in US and swaps on perpetuals and the higher valuation of medium term notes due to credit spread movements at the holding Gains on investments are the result of normal trading and asset-liability management Low
Slide 32: Fair value items impacted by rising equity market and interest rates
Fair value items impacted by rising equity market and interest rates Total fair value items of EUR (270) million FV hedging with FV hedging without FV investments FV other accounting match accounting match EUR (75) million EUR 20 million EUR (152) million EUR (63) million Derivatives ∆: EUR (757)m D
Slide 33: Operating expenses up on sales related expenses and investments
Operating expenses up on sales related expenses and investments Total operating expenses excluding UK business transformation costs were 3% higher Expenses in the Americas up on higher sales related expenses following strong growth Operating expenses in the Netherlands declined driven by reali
Slide 34: Continued strong operational free cash flows
Continued strong operational free cash flows Operational free cash flows of EUR 674 million ► Market impacts of EUR 324 million driven by rising interest rates ► One-time items of EUR (16) million Operational free cash flow development (EUR million) EUR million Q2 12 Q1 13 Q2 13 Earnings on in-for
Slide 35: Solid group and local capital positions
Solid group and local capital positions Group IGD ratio of 220%, reflecting strong operating unit regulatory capital positions ► US RBC ratio of ~465%; NL IGD ratio of ~270% (incl. UFR and bank); UK Pillar 1 ratio of ~170% Cash flow generation in US and positive impact of higher interest rates o
Slide 36: Holding excess capital remains strong
Holding excess capital remains strong Holding excess capital increased to EUR 1.9 billion ► Cash used for the preferred share transaction, external dividends and investment in partnership with Santander offset by dividends from business units and proceeds from Unnim divestment Gross financial le
Slide 37: Dividend growth supported by strong capital and cash flows
Dividend growth supported by strong capital and cash flows Interim 2013 dividend increased to EUR 0.11 per share Dividends paid in cash or stock at the election of the shareholder Repurchase of interim 2013 stock dividend; eliminating dilutive impact and increasing cash commitment Aim to pay
Slide 38: Disclaimer
Disclaimer Cautionary note regarding non-IFRS measures This document includes the 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 proportionate basis A