Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2009 Earnings Presentation
45 slides from Aegon's earnings presentation, May 14, 2009
Slide 1: First quarter 2009 results, Embedded Value 2008
First quarter 2009 results Embedded Value 2008 Alex Wynaendts, CEO May 14, 2009
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: Key messages
Key messages o Executing on long term strategy and short term priorities o Earnings improved significantly in Q1 o Resilient profitable sales and deposits o Strong capital position o Embedded value per share of EUR 11.35 Local knowledge. Global power. 3
Slide 4: Execution of strategic priorities
Execution of strategic priorities o Capital release of EUR 0.9 billion in Q1 2009 Capital o Target capital release of EUR 1.5 billion in 2009 o EUR 150 million cost measures in 2009 Costs o Approximately 1/3 realized in Q1 Contingency o Majority of additional EUR 3 billion core capital not used o Do
Slide 5: Net loss due to capital market effects and impairments
Net loss due to capital market effects and impairments o Net income mainly impacted by financial markets – Underlying earnings affected by lower capital markets – Impairments on bonds (EUR 320 million) and shares (EUR 66 million) – Under US GAAP, impairments would have been ~EUR 160 million lower –
Slide 6: Equity market decline in Q1 has been reversed quarter-to-date
Equity market decline in Q1 has been reversed quarter-to-date o Accelerated amortization of DPAC and reserve strengthening take quarter- end equity market levels into account – S&P index down 12% from 903 at year-end 2008 to 798 at March 31, 2009 – Fully reserved for S&P index level of 798 – Index r
Slide 7: Sensitivity to equity markets
Sensitivity to equity markets Estimated impact on net income* Estimated impact capital* (12 month period, EUR million) (EUR million) � Direct exposure � Direct exposure 600 � DPAC and guarantees � Guarantees � Fees 400 � Fees 300 200 -20% -10% +10% +20% -20% -10% +10% +20% -400 -400 -700 -900 o Impa
Slide 8: Relatively stable new life sales
Relatively stable new life sales o New life sales of EUR 543 million – Americas sales lower due to retail life and BOLI/COLI – Group pension sales in the Netherlands held up well, decline in retail life – Increased annuities sales in the UK, more than offset by drop in pensions – Strong new life sal
Slide 9: Strong net deposits
Strong net deposits o Net deposits of EUR 1.1 billion* – Growth driven by fixed and variable annuities o Gross deposits of EUR 6.4 billion* – Continued strong fixed annuities sales – Other countries higher due to inclusion of asset management JV in China and European variable annuities Fixed (FA) an
Slide 10: Resilient value of new business
Resilient value of new business o Value of new business of EUR 201 million, up 8% – VNB in Americas flat* – VNB in the Netherlands driven by margin improvement in mortgage business – Higher VNB in the UK driven by higher annuity sales and higher margins – Lower VNB in Other countries mainly driven b
Slide 11: Solid progress on cost reduction
Solid progress on cost reduction Americas Netherlands United Kingdom o No wage increases o Reductions of contract o Restructuring IT, o Staff reductions services marketing, customer o Deferred hiring o Process re-engineering services o Reorganization o General cost savings o Cost containment o Agenc
Slide 12: Capital position remains strong
Capital position remains strong December 31, 2008 March 31, 2009 Insurance Group Directive EUR 5.6 billion ~EUR 4.6 billion (IGD) surplus capital (183%) (~170%) S&P risk-based insurance capital model excess capital EUR 2.9 billion EUR 2.7 billion above AA level o Decline in IGD surplus capital mainl
Slide 13: Core capital primarily impacted by unrealized losses
Core capital primarily impacted by unrealized losses o Decline in core capital primarily driven by unrealized losses (revaluation reserves) o Increase in risk free interest rates is the main driver of the unrealized losses o Unrealized bond losses are not a good proxy for future credit losses o Mark
Slide 14: Excess capital supported by pro-active capital management
Excess capital supported by pro-active capital management Excess capital development Q1 2009 (EUR billion) 2.9 (0.2) (0.6) 0.3 2.7 0.6 (0.6) 0.3 Impact from capital markets : EUR 1.4 billion Q4 08 Excess Credit Rating Interest rates Capital De-risking Other Q4 Q1 09 Excess capital impairments migrat
Slide 15: US impairments Q1 2009
US impairments Q1 2009 EUR million IFRS US GAAP ABS 133 CMBS - RMBS 72 Subtotal structured assets 205 Corporate – private 2 Corporate – public 91 Subtotal corporate 93 Commercial mortgage loans 27 Subtotal net credit impairments 325 Common equity impairments 5 Total recoveries -2 Total net impairmen
Slide 16: Rating migration not expected to be repeated to same extent as in Q1
Rating migration not expected to be repeated to same extent as in Q1 Rating distribution of US fixed o Rating migration primarily due to income securities* (EUR 67 billion) downgrades of RMBS by Moody’s o Majority of downgrades in structured investment portfolio were from A or 60.1% 57.2% above to b
Slide 17: Active portfolio management
Active portfolio management o Increased allocation to cash, treasuries and short term paper in US portfolio o Prudent to invest in low risk investments in periods of widening credit spreads o Run-off of institutional spread-based balances accelerates in 2H09 o Begin reinvestment in credit risk in se
Slide 18: Embedded value EUR 11.35 per share
Embedded value EUR 11.35 per share Δ constant EUR billion, except per share data 2008 2007 Δ currency Embedded value life insurance 22.9 25.9 (11)% (10)% Total embedded value (TEV) 18.5 21.7 (15)% (13)% TEV per common share* 11.35 13.44 (16)% (14)% Value of new business 0.8 0.9 (10)% (2)% Embedded V
Slide 19: Capital markets impact Embedded Value Life Insurance
Capital markets impact Embedded Value Life Insurance Embedded value life insurance movement (EUR billion) Capital markets impact 0.9 (3.2) 0.8 25.9 (2.0) EV operating return 0.5 22.9 EUR 1.7 billion (0.3) 0.4 2007 Value of new Inforce Long term Change in Currency Other Capital 2008 business performa
Slide 20: Key messages
Key messages o Executing on long term strategy and short term priorities o Earnings improved significantly in Q1 o Resilient profitable sales and deposits o Strong capital position o Total embedded value of EUR 18.5 billion o Fundamentals of our business remain strong Local knowledge. Global power.
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 AEGON events 2009
Upcoming AEGON events 2009 June 9 and 10 Analyst and Investor Conference, London August 13 Q2 2009 results November 12 Q3 2009 results December 2 Investor day, New York Local knowledge. Global power. 22
Slide 23: Appendix
Appendix Slide I Q1 2009 country units overview 24 II Americas investment portfolio detail 29 III Other information 44 Starting Q1 2009, a break down of general account investments will be published in the Financial Supplement on a quarterly basis Local knowledge. Global power. 23
Slide 24: Appendix I: Q1 2009 country unit overview
Appendix I Q1 2009 country unit overview Local knowledge. Global power. 24
Slide 25: Americas – net deposits of USD 1.6 billion
Americas – net deposits of USD 1.6 billion* o Decline in equity markets had a significant Underlying earnings before tax (USD million) impact on underlying earnings 716 o Reduced exposure to hedge funds, increasing asset allocation to cash, treasury and agency bonds (88) (412) o Continued strong FA
Slide 26: The Netherlands – increased VNB
The Netherlands – increased VNB o Underlying earnings declined to Underlying earnings before tax (EUR million) EUR 72 million, mainly due to lower investment income across most businesses 113 75 72 o Pension sales in line with last year, renewal rates continue to improve o Life sales in line with pr
Slide 27: United Kingdom – strong new life sales
United Kingdom – strong new life sales o Underlying earnings before tax declined Underlying earnings before tax (GBP million) primarily due to lower fund related charges as a result of falls in equity and bonds markets 34 13 o Strong sales of annuities, more than offset 7 by decreased sales in life
Slide 28: Other countries – strong growth of deposits
Other countries – strong growth of deposits o Strong sales in Spain, China and India, Underlying earnings before tax (EUR million) decline in Taiwan 39 30 o Revenue generating investments slightly decreased to EUR 13.4 billion mainly as a result of lower equity markets (17) o VNB decreased to EUR 33
Slide 29: Appendix II: Americas
Appendix II Americas investment portfolio detail March 31, 2009 Local knowledge. Global power. 29
Slide 30: US portfolio composition
US portfolio composition US investment portfolio detail Dec 31, Dec 31, Mar 31, Change 2007 2008 2009 since ’07 Cash/Treasuries/Agency 8.6% 12.6% 16.5% � IG Corporate & Preferred 43.8% 41.6% 38.3% � High yield Corporate 3.6% 3.8% 4.5% � Emerging Markets Debt 2.1% 1.9% 1.6% � ABS 10.8% 10.1% 9.6% � M
Slide 31: 91% of US bond portfolio is investment grade
91% of US bond portfolio is investment grade US investment portfolio detail US bond portfolio quality profile EUR 68 billion* - March 31, 2009 B Below B BB 2.0% 1.7% 5.1% A & above 60.8% BBB 30.4% * Based on amortized cost of bonds – IFRS Basis; includes AFS and FVTPL assets. Ratings based on a hier
Slide 32: US fair value items: alternative investments
US fair value items: alternative investments US investment portfolio detail o Alternative investment returns were disappointing, as real estate and private equity incurred losses. o Hedge fund allocation was capped in early 2007, and more is being withdrawn as part of our risk reduction initiative.
Slide 33: Credit spreads improved, treasury rates higher
Credit spreads improved, treasury rates higher US investment portfolio detail Option-adjusted spreads for generic market indices (in basis points) Barcap Index 12/31/07 12/31/08 03/31/09 Δ Q1 04/30/09 Δ April U.S. Corp IG 198 555 543 (12) 439 (104) U.S. Corp High Yield 569 1,669 1,514 (155) 1,219 (2
Slide 34: Average bond prices within generic bond indices
Average bond prices within generic bond indices US investment portfolio detail Index prices Price 120 110 100 US IG Corp 90 US High Yield US CMBS 80 US MBS ABS Housing 70 ABS Non-Housing 60 50 40 Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec- Dec 94 95 96 97 98 99 00 01 02 03
Slide 35: US corporate bonds by sector
US corporate bonds by sector US investment portfolio detail US corporate bond portfolio March 31, 2009 Gross unrealized Net % Market value Market Amortized Gain Loss unrealized to amortized Corporate bond sector (EUR million) value cost gain (loss) cost Financial Banking 4,514 6,513 10 (2,009) (1,99
Slide 36: US structured assets detail
US structured assets detail US investment portfolio detail Mortgage-backed and Asset-backed Securities Amortized costs March 31, 2009 % Market Net Market Amortized value to (EUR million) unrealized value costs amortized gain/loss costs CMBS 4,544 6,309 (1,765) 72.0% RMBS - GSE Guaranteed 1,407 1,387
Slide 37: Prime and near-prime residential MBS
Prime and near-prime residential MBS US investment portfolio detail o Almost all of AEGON’s Prime and Near-prime Residential MBS were rated AAA at the time of purchase o The Near-prime portfolio is composed of primarily Fixed-rate Alt-A and Negative Amortization Floating-rate mortgage securitization
Slide 38: Subprime and near prime second lien collateral
Subprime and near prime second lien collateral US investment portfolio detail o Ratings migration has been experienced in the mezzanine tranches of securitizations collateralized by Hybrid / ARM 1st Lien collateral o Securitizations collateralized by near prime 2nd Lien collateral that are insured b
Slide 39: Subprime and second lien exposure
Subprime and second lien exposure US investment portfolio detail Amortized costs Fair value Sub-prime first lien Sub-prime first mortgages lien mortgages Second Second lien lien Total Unrealized Fixed Floating Fixed Floating Total fair (EUR million) amortized gain / rate rate rate rate value cost (l
Slide 40: Sub-prime and second lien by vintage
Sub-prime and second lien by vintage US investment portfolio detail Subprime mortgages fixed rate - March 31, 2009 (EUR million) 2008 2007 2006 2005 Pre-2005 Amortized cost Fair value Unrealized loss AAA - 69 78 157 337 641 420 (221) AA - 17 1 10 45 72 35 (38) A - - - - 0 0 0 (0) BBB - 27 - - - 27 9
Slide 41: CMBS portfolio snapshot
CMBS portfolio snapshot US investment portfolio detail o The CMBS portfolio has been structured defensively, with over 86% AAA-rated securities o A large majority of our AAA holdings are over-enhanced (i.e. they have more enhancement than needed to retain the AAA rating) o Below-AAA exposures have b
Slide 42: CMBS portfolio roll-up
CMBS portfolio roll-up US investment portfolio detail CMBS Total exposure by vintage March 31, 2009 Amortized cost Ratings hierarchy of S&P, Pre Amortized Unrealized Moody’s, Fitch, Internal 2008 2007 2006 2005 Fair value (EUR million) 2005 cost loss AAA 299 1,461 1,433 645 1,713 5,552 4,157 (1,395
Slide 43: Non-housing asset-backed securities
Non-housing asset-backed securities US investment portfolio detail o Credit Card issuers in our portfolio are major financial institutions who have historically managed their Master Trusts successfully through several recessions o Auto exposure is a mixture of consumer and commercial loans. Some cor
Slide 44: Appendix III: Other information
Appendix III Other information March 31, 2009 Local knowledge. Global power. 44
Slide 45: US variable annuity guarantees
US variable annuity guarantees Other information Per March 31, 2009 Total % of Hedged Net amount Statutory Δ Statutory fund fund value (USD billion) fund value at risk reserve reserve Q1 value hedged Direct - GMIB 6.8 1.2* 18% 3.9 1.3 0.2 Direct - GMWB 5.2 5.2 100% 1.7 0.1 - Reinsurance 5.4 5.1 94%