Aegon Ltd. · EURONEXT:AGN
Aegon — H2 2018 Earnings Presentation
41 slides from Aegon's earnings presentation, Feb 14, 2019
Slide 1: Financial results second half 2018
Financial results second half 2018 Alex Wynaendts CEO Matt Rider CFO The Hague, February 14, 2019 Helping people achieve a lifetime of financial security
Slide 2: Important milestones achieved
Important milestones achieved Operational Maintained strong Growing, fungible excellence capital position capital generation • Achieved EUR 350 million expense • Continued strong Group Solvency II • Normalized capital generation after savings target ratio of 211% despite unfavorable holding expenses
Slide 3: Underlying earnings before tax
Underlying earnings before tax US Retirement Plans and claims experience drive 8% decline in UEBT • Continued expense savings, especially in the Netherlands, contribute to earnings growth • Business growth and higher investment, and underwriting margins in Spain & Portugal, NL and UK • US Retirement
Slide 4: Expense savings
Expense savings Delivered EUR 350 million expense savings target Cumulative run-rate savings since year-end 2015 • Annualized run-rate savings achieved of approximately EUR 355 million over 2016-2018 period • US short of target as a result of investments in operations and technology to improve the U
Slide 5: US Retirement Plans underlying earnings
US Retirement Plans underlying earnings Decline in UEBT mainly driven by lower investment income and fee revenue • Retirement Plans earnings impacted by investments in the business, declining balances and one-time items • Decline in investment margin and net fee revenue mainly due to declining balan
Slide 6: Net income amounts to EUR 253 million
Net income amounts to EUR 253 million Underlying earnings to net income development in 2H18 (EUR million) UEBT 2H18 1,010 Fair value items • Fair value gains in Europe mainly from hedging benefits in Fair value items (257) addition to real estate revaluations in NL • Losses in the US were largely fr
Slide 7: Other charges of EUR 581 million
Other charges of EUR 581 million Previously announced • Provision of EUR 147 million related to settlement of litigation • Book loss of EUR 94 million on the sale of life reinsurance business US • Transition and conversion charges of EUR 27 million related to TCS • Provision of EUR 26 million
Slide 8: Macro hedge results
Macro hedge results Fair value result impacted by lower than anticipated change in implied volatility • Macro hedge designed to limit impact on RBC ratio to • 4Q18 fair value result primarily driven by GMIB/DB reserve 25 points in a 25% equity market decline and 40 points in a movements 40% equity m
Slide 9: Cofunds integration
Cofunds integration Successful measures to solve operational and customer services issues in the UK • Following measures established to address service issues that occurred following the retail migration, core trading and service levels returned to target levels • Focus going forward will be on the
Slide 10: Group Solvency ratio II of 211%
Group Solvency ratio II of 211% OF and SCR development (EUR billion) • Expected return (+11%) reflects strong business performance SII 215% +11% -4% -15% +6% -1% 211% • Capital return (-4%) primarily driven by external dividends to shareholders • Market variances (-15%) driven by unfavorable equity
Slide 11: Manageable sensitivity to US credit risk
Manageable sensitivity to US credit risk • General Account has significantly decreased due to increased focus on fee-based businesses resulting in divestments and product re-designing • US RBC ratio is well positioned to absorb credit losses − The US RBC ratio remains well within the target range of
Slide 12: Holding excess cash
Holding excess cash Remains within target range • Holding excess cash remained within target range of EUR 1.0 - 1.5 billion − Decline was mainly driven by the previously announced EUR 700 million of debt redemptions in 2H18 • The Holding received EUR 786 million in gross remittances from subsidiarie
Slide 13: Leverage ratio within target range of 26 – 30%
Leverage ratio within target range of 26 – 30% Focus on further deleveraging the group as target range is maintained on more conservative definition Gross financial leverage (in %, restated using more conservative definition) • 2018 gross financial leverage ratio well within target zone • More conse
Slide 14: Group targets
Group targets The Hague, February 14, 2019 Helping people achieve a lifetime of financial security
Slide 15: Simplification and growth to create value
Simplification and growth to create value Pivoting to sustainable growth after simplifying the business and optimizing the portfolio 2011 - 2015 2016 - 2018 2019 > • Doubling of free cash flow • Improving operational • Profitable sales growth • Changing business profile performance • Sustainably gro
Slide 16: Delivery on targets 2016 – 2018
Delivery on targets 2016 – 2018 Delivered on expense savings and capital return; strong progress on RoE Run-rate expense savings Capital return to shareholders Return on equity (EUR million) (EUR billion, cumulative) (%) Target 10.2% Target 2.1 355 Target EUR 2.1 bn 10% RoE 9.3% 9.3% 280 EUR 350m
Slide 17: Focus on growth in 2019 – 2021
Focus on growth in 2019 – 2021 Engaging our large customer base and growing in core markets Customers Goals Focus • Broader and longer • Offer bundled products and advisory customer relationship • Provide customers with relevant guidance • Improved customer • Evolve operating model engagement • Use
Slide 18: Targets 2019 – 2021
Targets 2019 – 2021 Growth strategy will deliver sustainable and attractive returns to all stakeholders Normalized capital generation Strong focus on customer centricity EUR 4.1 billion cumulative for 2019 – 20211 Dividend pay-out ratio Building on strong market positions 45 – 55 % of normalized cap
Slide 19: Strategic categories
Active portfolio management Grouping our businesses in three distinct categories Implementing the growth strategy • At scale business • Manage portfolio actively • Single product relationship Manage for Value • Mostly spread-based • Group businesses in three distinct • Capital generative Strategic c
Slide 20: Attractive portfolio structure
Attractive portfolio structure Strong portfolio with businesses at different development stages • Drive for Growth and Manage for Value each generate about half of the capital • Vast majority of new business strain in Drive for Growth category − Scale-up for Future with limited strain due to focus o
Slide 21: Targeting EUR 4.1 bn normalized capital generation
Targeting EUR 4.1 bn normalized capital generation Sustainably growing capital generation mainly driven by Drive for Growth category1 Normalized capital generation1 (in EUR billion, cumulative for 3 years) 2019 – 2021 cumulatively: 4.1 Over EUR 8 billion normalized capital Scale-up for the Future ge
Slide 22: Manage for Value businesses
Manage for Value businesses Focussing on efficiency and capital generation Manage for Value Normalized capital generation1 Underlying earnings before tax businesses (in EUR billion) (in EUR million) 0.7 749 • Continue expense savings, Americas e.g., in Netherlands Life and 175 Fixed Annuities 0.3 UK
Slide 23: Drive for Growth businesses
Drive for Growth businesses Capturing market share and growing customer base with well established businesses Drive for Growth Normalized capital generation1 Underlying earnings before tax businesses (in EUR billion) (in EUR million) 0.9 1,309 • Reinvest in new business Americas while growing capita
Slide 24: Scale-up for the Future businesses
Scale-up for the Future businesses Investing in a diversified portfolio of opportunities as building blocks for the future Scale-up for the Normalized capital generation1 Underlying earnings before tax Future businesses (in EUR billion) (in EUR million) 0.1 199 • Develop profitable new Americas busi
Slide 25: Increasing returns to shareholders
Increasing returns to shareholders 45 – 55% of normalized capital generation will be returned to shareholders EUR 0.29 DPS EUR 1.5 billion 45 – 55% Dividend pay-out ratio Full-year 2018 Gross remittances of normalized capital generation +7% year-on-year 2019 in 2019 – 20211 1 Capital generation excl
Slide 26: Focus 2019 – 2021
Focus 2019 – 2021 Attractive returns to shareholder based on a strong global franchise Large Strong Solid Active customer market capital portfolio base positions position management Focus on profitable growth and sustainable capital generation 26
Slide 27: Thank You!
Thank You! Aegonplein 50, 2591 TV The Hague Telephone: +31 (0)70 344 8305 P.O. Box 85 2501 CE The Hague The Netherlands Helping people achieve a lifetime of financial security
Slide 28: Aegon at a glance
1H 2018 Results Aegon at a glance What we do Life insurance, pensions & Asia asset management for approximately 3% 29 million customers (YE17) Deposits Europe Net deposits €(8.5) billion Americas 36% (2H18) History 52% Our roots date back to the first half of the 19th century 6% Employees AAM Over 2
Slide 29: Growth in deposits
Growth in deposits Return to positive net deposits driven by Drive for Growth businesses Gross and net deposits Net deposits by category (APE, in EUR billion and %) (in EUR billion) Second half year • Gross deposits decreased by 13% to EUR 57.8 billion in 2H 2018 vs. 2H 2017 70 6 1.6 • Main contribu
Slide 30: Growth in Life sales
Growth in Life sales Return to positive net deposits driven by Drive for Growth businesses New life sales and Life MCVNB margin New life sales1 by category (APE, in EUR million and %) (in EUR million) Second half year • New life sales declined by 7% to EUR 480 8% 595 398 million on a constant curren
Slide 31: Growth in Accident & Health sales
Growth in Accident & Health sales Strong sales in Drive for Growth category underlines successes in the strategy A&H and Property & Casualty sales Non-Life sales by category (in EUR million) (in EUR million) Second half year • New premium production for accident & 600 health decreased by 69% to EUR
Slide 32: Returned EUR 2.1 billion capital over 2016 – 2018
Returned EUR 2.1 billion capital over 2016 – 2018 Free cash flows significantly increased • Full year dividend for 2018 increased 2 cents to EUR 0.29 per common share • Achieved EUR 2.1 billion capital return to shareholders over 2016 - 2018 • Dividend well covered by strong free cash flows • Lower
Slide 33: Capital framework
Capital framework EUR 1.5bn remittance guidance underscores fungibility and ensure financial flexibility • Gross remittances well covered by normalized capital generation before holding funding and operating expense • EUR 1.5 billion guidance for gross remittance in 2019, includes proceeds of EUR 15
Slide 34: Main units solvency ratios remain within or above target zones
Main units solvency ratios remain within or above target zones Local solvency ratio by unit Market impacts & one-time items in 2H18 (%) 2H18 465% • Unfavorable market movements driven declining equity markets and lack of implied volatility gains, which had been anticipated 1H18 490% US • One-time it
Slide 35: Updated Solvency II sensitivities
1H 2018 Results Updated Solvency II sensitivities Solvency II sensitivities (in percentage points) Scenario Group US NL UK Equity markets +25% +15% +34% +2% -7% Equity markets -25% -11% -23% -5% -2% Interest rates +50 bps +3% -0% +3% +2% Interest rates -50 bps -6% -14% -1% -4% Credit spreads* +50 bp
Slide 36: General account investments
General account investments December 31, 2018 amounts in EUR millions, except for the impairment data Americas Europe Asia Holdings & other Total Cash/Treasuries/Agencies 14,875 16,555 538 148 32,116 Investment grade corporates 31,148 3,861 3,819 - 38,828 High yield (and other ) corporates 2,061 16
Slide 37: Flexibility in replacing grandfathered securities
Flexibility in replacing grandfathered securities • Grandfathered securities to be replaced before the end of the grandfathering period in 2025* - Securities would be treated as liabilities in 2026 if not replaced • Significant flexibility in replacing securities due to limited short-term maturities
Slide 38: Gross financial leverage ratio and RoE
Gross financial leverage ratio and RoE Moving towards a more conservative gross financial leverage ratio definition and aligning RoE correspondingly Old definition New definition 2H2017 2H2018 2H2017 2H2018 Shareholders’ equity 20.57 19.54 Shareholders’ equity 20.57 19.54 Revaluation reserve - 4.92
Slide 39: Main economic assumptions
Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.15 n.a. 0.88 Annual gross equity market return (price appreciation + dividends) 8% 7% 7% Main assumptions for financial targets US 10-year government bond yields Grade to 4.25% in 10 years time NL 10-year government
Slide 40: Investing in Aegon
Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA ISIN NL0000303709 SEDOL 5927375NL • Aegon ordinary shares Trading Platform Euronext Amsterdam - Traded on Euronext Amsterdam since 1969 Country Netherlands and quoted in euros Aegon’s New York Registry Shares • Aegon New York Registry S
Slide 41: Disclaimer
Disclaimer Cautionary note regarding non-IFRS-EU measures This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax, income before tax, market consistent value of new business and return on equity. These non-IFRS-EU measures are calculated by con