Aegon Ltd. · EURONEXT:AGN
Aegon — H1 2020 Earnings Presentation
33 slides from Aegon's earnings presentation, Aug 13, 2020
Slide 1: 1H 2020 results
1H 2020 results Lard Friese CEO Matt Rider CFO August 13, 2020 Helping people achieve a lifetime of financial security
Slide 2: First half 2020 results
First half 2020 results Underlying earnings before tax1 Net deposits New life sales (in EUR million) (in EUR billion) (in EUR million) • EUR (150) million impact from higher 1 456 • Increased 1,008 mortality in US Life, in part due to 405 379 retention and 961 COVID-19 institutional 700 deposits • L
Slide 3: Key focus areas
Key focus areas Strengthening the balance sheet Priorities Actions announced today • Increasing financial flexibility • Retaining final dividend 2019 • Reducing leverage • Rebasing dividend to level well covered by free cash flows • Repay USD 500 million senior debt • Improving the company’s risk pr
Slide 4: Capital Markets Day
Focus Execute Hosted as To be held on Contact IR Deliver virtual meeting December 10th +31 70 344 8305 ir@aegon.com Capital Markets Day 4
Slide 5: 1H 2020 Results
1H 2020 Results 5
Slide 6: Underlying earnings of EUR 700 million, net income of EUR 202 million
Underlying earnings of EUR 700 million, net income of EUR 202 million Net income Underlying earnings before tax (UEBT) (in EUR million) • Americas: Americas 264 - In Life, EUR 150 million adverse mortality, of which EUR 34 million with COVID-19 as direct cause of death, EUR 97 million unfavorable Ne
Slide 7: US assumption review
US assumption review • Long-term interest rate assumption lowered by 150 bps to 2.75%, separate Lowering long-term account bond fund returns adjusted correspondingly interest rate assumption • Updated assumption implies reinvestment yield of approximately 4% in 20301 compared with 3.21% achieved in
Slide 8: Group Solvency II ratio at 195%
Group Solvency II ratio at 195% OF and SCR development (in EUR billion) • Expected return reflects strong business performance - New business strain amounts to -6% or SII 201% +9% 0% -18% -2% +5% 195% EUR 447 million • Market variances driven by lower US 18.5 interest rates 0.7 0.0 (1.5) 17.5 (0.4)
Slide 9: Capital position of main units
Capital position of main units Local solvency ratio by unit • Adverse markets contributed negatively to RBC ratio, notably lower interest rates. • Credit and equity also had adverse impacts, with rating migration and credit defaults 1H 2020 407% having 14%-points negative impact on the RBC ratio 470
Slide 10: Manageable impact from rating migration in 1H20
Manageable impact from rating migration in 1H20 • RBC capital requirements for fixed income investments are based on their NAIC rating classes linked to credit ratings • Credit rating migrations have increased as rating agency actions on bonds increased risk-based capital requirements • Year-to-date
Slide 11: Holding excess cash at EUR 1.7 billion
Holding excess cash at EUR 1.7 billion Holding excess cash development (in EUR billion, 1H 2020) • Gross remittances of EUR 553 million in 153 1H20, mainly from the United States and the Netherlands (26) 552 • No remittances expected from the United 1,706 (167) States in the remainder of 2020 due to
Slide 12: Financial targets withdrawn and interim dividend rebased
Financial targets withdrawn and interim dividend rebased EUR 0.06 interim dividend per share for 2020 • Rebasing the dividend Dividend per share (in EUR) - No payment of the final 2019 dividend - Reducing the interim dividend to 0.15 0.29 EUR 0.06 per share 0.27 0.16 • Aegon withdraws its 2019-2021
Slide 13: Concluding remarks
Concluding remarks 13
Slide 14: Key focus areas
Key focus areas Strengthening the balance sheet Priorities Actions announced today • Increasing financial flexibility • Retaining final dividend 2019 • Reducing leverage • Rebasing dividend to level well covered by free cash flows • Repay USD 500 million senior debt • Improving the company’s risk pr
Slide 15: Appendix
Appendix For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Helping people achieve a lifetime of financial security
Slide 16: Fair value gains in NL partly offset by losses from volatility and alternative investments
Fair value gains in NL partly offset by losses from volatility and alternative investments in the US Fair value attribution Netherlands fair value items (in EUR million) • LAT with nearly neutral result as positive contribution from higher NL hedges 1,043 illiquidity premium largely offsets impact f
Slide 17: Details US assumption review
Details US assumption review IFRS earnings impact Other charges from US assumption review (in USD million, pre-tax) • Lowering of long-term interest rate assumption leads to charge as a result of increase in net IFRS liabilities Assumption IFRS impact • Non-economic assumption changes in Life, mainl
Slide 18: Long-Term Care continues to develop in line with expectations
Long-Term Care continues to develop in line with expectations LTC actual versus expected claims ratio (in %, in USD million, closed block) • IFRS results are the leading indicator – most up to date, 140% 80 best estimate assumptions 130% 60 • IFRS assumptions are reviewed in detail annually; managem
Slide 19: Long-Term Care block profile
Long-Term Care block profile As of Total Open Closed Reinsurance June 30, 2020 (net of reinsurance) IFRS Reserves USD 0.5 billion USD 6.7 billion USD 1.3 billion USD 5.9 billion ALR 0.5 4.8 0.9 4.4 Balance DLR 0.0 1.9 0.4 1.5 Sheet Statutory Reserves USD 0.5 billion USD 7.0 billion USD 1.3 billion U
Slide 20: Long-Term Care assumptions (1/2)
Long-Term Care assumptions (1/2) Base Reserves Testing IFRS STAT 2006 & 2007 & 2014 & 2015 & IFRS GPV & prior issues later issues prior issues later issues STAT PDR1 STAT AAT2 company 2020 company company 2020 company 2014 company experience 2020 company experience with 2% Morbidity experience at ex
Slide 21: Long-Term Care assumptions (2/2)
Long-Term Care assumptions (2/2) Base Reserves Testing IFRS STAT 2006 & 2007 & 2014 & 2015 & IFRS GPV & prior issues later issues prior issues later issues STAT PDR1 STAT AAT2 7.67% 3.5% 7.67% grading down grading down grading down NY7 and remove certain Prescribed Discount rates Equivalent Equivale
Slide 22: Long-Term Care sensitivities
Long-Term Care sensitivities IFRS GPV Margin Sensitivity Estimated impact decrease / increase Current assumption Change in assumption (in USD millions, pre-tax) Best estimate company experience Increase 5% Incidence (300) / 300 reviewed annually Decrease 5% 0.75% annual reduction in incidence Morbid
Slide 23: Well-managed capital sensitivities
Well-managed capital sensitivities Solvency II sensitivities (in percentage points, 1H 2020) Scenario Group NL UK US US RBC Equity markets +25% +6% -3% +1% +23% +22% Equity markets -25% -12% -4% -5% -30% -36% Interest rates +50 bps +4% -1% +2% +8% +9% Interest rates -50 bps -5% -0% -4% -8% -11% Gove
Slide 24: Updated US macro equity hedge sensitivities
Updated US macro equity hedge sensitivities Macro hedge target: RBC Capital RBC sensitivities to declining equity markets • Macro Hedge continues to target the statutory capital position of 0% RBC ratio change (in %pts) the company and protect the RBC ratio against adverse equity movements -50% • Pr
Slide 25: Annualized credit losses in 1H20 slightly above long-term average
Annualized credit losses in 1H20 slightly above long-term average Impairments on US general account fixed income assets (in bps) 120 91 82 64 48 52 37 33 36 27 25 17 17 17 Average 24 9 8 8 1 2 4 2 1 3 1 -6 -2 -2 -3 -9 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20
Slide 26: Conversion of RBC to Solvency II
Conversion of RBC to Solvency II Next review in 2H 2020 • Conversion methodology for US operations has been agreed with DNB, to be reviewed annually • Calibration of US insurance entities followed by subsequent adjustment for US debt and holding items - Calibration of US insurance entities is consis
Slide 27: Capital generation and remittances
Capital generation and remittances Capital generation and gross remittances (in EUR million) Normalized capital generation1 Gross remittances Region 1H 2019 2H 2019 1H 2020 1H 2019 2H 2019 1H 2020 Americas 519 591 230 402 406 423 Netherlands 202 268 182 - - 100 United Kingdom 42 40 77 179 72 - Inter
Slide 28: Slight decrease in leverage ratio in 1H20
Slight decrease in leverage ratio in 1H20 Total financial leverage Gross financial leverage ratio (in EUR billion) (in %) 7.4 32.2% 7.0 6.7 6.7 6.6 30.7% Senior 2.4 2.3 1.8 1.7 1.7 29.2% 28.6% 28.4% Hybrid 5.0 4.7 4.9 4.9 4.9 2016 2017 2018 2019 1H 2020 2016 2017 2018 2019 1H 2020 Note: To align clo
Slide 29: General account investments
General account investments June 30, 2020 (in EUR millions, except for the impairment data) The United Asset Holdings & Americas Netherlands Kingdom International Management other Total Cash/Treasuries/Agencies 17,610 16,849 499 939 91 19 36,007 Investment grade corporates 37,510 9,157 369 5,026 - -
Slide 30: Main economic assumptions
Main economic assumptions Exchange rate assumptions going forward US UK Exchange rate against euro 1.15 0.88 Main assumptions for US DAC recoverability Annual gross equity market return (price appreciation + dividends) 8% 10-year government bond yields Grade to 2.75% in 10 years time Credit spreads,
Slide 31: Aegon Investor Relations
Aegon Investor Relations Stay in touch Upcoming events 2020 Contact Investor Relations Jan Willem Weidema +31 70 344 8028 Head of Investor Relations Barclays Virtual Global Financial Sept. 15 Karl-Otto Grosse-Holz Services Conference +31 70 344 7857 Investor Relations Officer Bank of America Hielke
Slide 32: Investing in Aegon
Investing in Aegon Aegon ordinary shares Aegon New York Registry Shares (NYRS) • Traded on Euronext Amsterdam • Traded on NYSE since 1991 and since 1969 and quoted in euros quoted in US dollars • One Aegon NYRS equals one Aegon Amsterdam-listed common share • Cost effective way to hold international
Slide 33: 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