Aegon Ltd. · EURONEXT:AGN
Aegon — Goldman Sachs US Financial Services Conference 2009
45 slides from Aegon's conference presentation, December 2009
Slide 1: Well-positioned in the Americas
Well-positioned Well-positioned in the Americas Mark Mullin CEO Americas New York City – December 2009
Slide 2: Key messages
Key messages o The US market is the largest market in the world and AEGON is a top player o We have transformed the organization to simplify the business – Capture synergies – Economies of scale – Share best practices o We are focused in key attractive markets of life and retirement o We have a stro
Slide 3: Our ambition
Our ambition “To be a leader in helping customers secure their financial futures” o Rebalance capital allocation o Improve growth and returns o Reduce financial markets risks o Manage AEGON as an international company …resulting in sustainable profitable growth Local knowledge. Global power. 3
Slide 4: Our action plan
Our action plan Create a more balanced mix of business through disciplined portfolio management 1 – balance growth and earnings quality – balance product offering – balance risk/reward profile Restructure organization 2 and aggressively pursue organizational synergies Capitalize on competitive advan
Slide 5: Transformed organization by aligning complementary businesses
Transformed organization by aligning complementary businesses Mon LTC Work SVS Life site AFP TCM DIA ADMS TAM TRS WFG TRM Clark Individual Employer Life and Savings and Solutions and Alternative Life Protection Retirement Pensions Markets Reinsurance Serving Serving Serving Brazil A retail life savi
Slide 6: Leading in the US life and retirement market
Leading in the US life and retirement market o Largest life insurance and pension market in the world o Industry fundamentals and demographic attractiveness have both improved o Our competitive advantages and distribution capabilities position us as a leader in each business unit #5 in both term #7
Slide 7: Capitalizing on competitive advantages and opportunities
Capitalizing on competitive advantages and opportunities Employer Life and Individual Savings Solutions and Protection and Retirement Pensions o Market is underserved o Growing reliance on o Greater awareness of and under-protected worksite distributed retirement needs o Low cost provider with produ
Slide 8: 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. 8
Slide 9: Appendix – Fulfilling our ambition
Appendix – Fulfilling our ambition Local knowledge. Global power. 9
Slide 10: First things first
First things first o First priority: full repayment of capital support o EUR 1 billion repaid on November 30 – first step towards full repayment Geographic mix Capital allocation* Global businesses (Life reinsurance, Asset Management, European Variable Annuities) Central & Eastern Europe, Asia and L
Slide 11: Key achievements
Key achievements Full repayment to the Dutch State o Repaid EUR 1 billion as first step towards full repayment Reallocate capital towards businesses with higher growth and return prospects o Freed-up EUR 4.2 billion since June 2008 – 60% capital efficiency and 40% de-risking o Excess capital of EUR
Slide 12: Americas – grow in Pensions and At-Retirement
Americas – grow in Pensions and At-Retirement Achievements Opportunities Execution o New distribution added o Largest and most sophisticated o Create common product portfolio o Offering high quality service life market, but still underserved across diverse distribution Retail life o Top-5 player o M
Slide 13: The Netherlands – improve position in SME pensions
The Netherlands – improve position in SME pensions Achievements Opportunities Execution o Stable market share o Retreating government o Multi distribution channels o Well positioned in broker channel and employers increases o New generation products Retail life need for savings for later o Develop o
Slide 14: UK – leverage strong pension position for At-Retirement market
UK – leverage strong pension position for At-Retirement market Achievements Opportunities Execution o High proportion of non-mortgage o Significant protection gap o Ongoing investment in brand individual protection sales o Attractive product for o Development of simple bank Retail life o Exited Grou
Slide 15: Central & Eastern Europe – profitable growth
Central & Eastern Europe – profitable growth Achievements Opportunities Execution o Top 3 in Poland and Hungary o Market ready for new type of life o Launching new products, o Introduced innovative products in products developed with US expertise Retail Czech Republic and Slovakia o Roll-out of hous
Slide 16: Additional opportunities for growth
Additional opportunities for growth Achievements Opportunities Execution o Rank #6 in China* o Serving largest Asian markets: o Leverage best practices o Accelerated growth in India China, India, Japan o Benefit from strength of local o Growth driven by improving partners Asia o Obtained license in
Slide 17: Development of underlying earnings before tax per quarter
Development of underlying earnings before tax per quarter Pre-crisis Current < 2008 Q3 2009 EUR 650 Million Earnings impacted by EUR o Run-off institutional spread-based 417 million* business ~EUR 80 million o Equity markets ~EUR 100 million o De-risking ~EUR 40 million * Excluding exceptional items
Slide 18: Underlying earnings run-rate sensitive to USD
Underlying earnings run-rate sensitive to USD Post-crisis run-rate > 2010 Quarterly EUR/USD UEBT (EUR million) rket impact 1.30 450 - 500 Market 1.45 425 - 475 1.60 400 - 450 o Equity markets medium term growth rate 8-9% p.a. Management actions Primary drivers of underlying earnings growth o Growth
Slide 19: Reduced financial markets risks
Reduced financial markets risks Americas o Risk transfer through reinsurance o Macro-hedge related to retail variable annuity portfolio o Run-off of Institutional spread-based business o Product redesign (Variable Annuities) The Netherlands o Sale Sale o off equ equity ity positions positions comple
Slide 20: Manage AEGON as an international company
Manage AEGON as an international company o Global asset management operational o Variable Annuities: – Use product competencies from US and UK to growth markets – Hedging centralized in the US – European platform in Dublin – Launched VA in UK UK,, NL NL,, France France,, Ja Japan pan o European data
Slide 21: Appendix - Americas
Appendix - Americas Local knowledge. Global power. 21
Slide 22: Life and Protection
Life and Protection o Largest America’s segment from both an earnings and EV perspective Current o Business is primarily mortality and morbidity risk based products of life Portfolio insurance, supplemental health, specialty insurance and long term care o Diverse distribution network focused on targ
Slide 23: Individual Savings and Retirement
Individual Savings and Retirement o Delivers investment products and solutions to individuals Current o Manufacturer and distributor of fixed and variable annuities and mutual funds Portfolio o Provider of personalized retirement planning o USD 78 billion of assets under management o Serving the at-
Slide 24: Employer Solutions and Pensions
Employer Solutions and Pensions o Top provider of employee benefit products and services, including retirement Current plans, worksite marketed life and health products, synthetic GICs, and Portfolio executive compensation consulting o USD 116 billion of assets under management o Serving the accumul
Slide 25: Alternative Markets
Alternative Markets o Brazil: 2009 life premiums of USD 145 million Current o Mexico: ranked 9th in worksite life insurance sales Portfolio o Canada: CND 10 billion in assets, with a life insurance market share of 5.4% and a segregated fund market share of 2.7% o Provides a quality entry point and l
Slide 26: Life Reinsurance
Life Reinsurance o Business consists primarily of mortality risk with smaller segments consisting Current of supplemental health and equity guarantee-related risks Portfolio o TARe ranks 2nd in US and 7th globally in life reinsurance new business o Primary markets are the US, Korea, Japan, Mexico, B
Slide 27: Americas' underlying earnings before tax per quarter
Americas’ underlying earnings before tax per quarter Pre-crisis Current Post-crisis <2008 Q3 2009 >2010 USD 700 million Earnings impacted by Earnings drivers o Run-off institutional USD o Growth of business spread-based business 430* o Cost savings million o Equity markets o Redeployment of cash o D
Slide 28: Quarterly run-rate underlying earnings before tax
Quarterly run-rate underlying earnings before tax Pre-Crisis Current (<2008) Change (Q3 09) (USD million) (USD million) (USD million) Americas 630 (160) 470 (excluding IGP spread) IGP spread 70 (110) (40) Total Americas 700 (270) 430 Excluding IGP spread (160) o (70) lower equity based fees and high
Slide 29: Impact of run-off institutional spread-based business
Impact of run-off institutional spread-based business Spread balances (USD billion) o Institutional cash shortfall due to shortening of liabilities – 12 month notice putable funding agreements (USD 6 billion) – Municipal GICs (USD 5 billion) – Extendable MTNs (USD 1 billion) o Remainder of US busine
Slide 30: Impact of run-off institutional spread-based business
Impact of run-off institutional spread-based business Pre-Crisis Current (<2008) Change (Q3 09) (USD million) (USD million) (USD million) IGP spread per quarter 70 (110) (40) o USD 10 billion internal asset transfer from institutional to other US portfolios in exchange for cash exchange – Transfer p
Slide 31: Mean reversion – equity return assumptions
Mean reversion – equity return assumptions Negative DAC unlocking above cap � Corridor cap Corridor floor Positive DAC unlocking below floor � Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 '03 '04 '04 '04 '04 '05 '05 '05 '05 '06 '06 '06 '06 '07 '07 '07 '07 '08 '08 '08 '08 '
Slide 32: Fair value items
Fair value items o GMWB (USD 14 billion) - delta / rho hedged Liabilities o Segregated funds (USD 3.4 billion) – 92% delta hedged o Total return annuities (USD 1.4 billion) – closed blocks o Hedge funds (USD 0.7 billion) – reduced by 1.7 billion Assets o Private equity (USD 0.7 billion) and REAP (US
Slide 33: Improved US impairment losses
Improved US impairment losses Gross impairments (USD million) US housing (ABS and RMBS) Corporate Bonds US commercial mortgages (CMBS and CML) Other Recoveries (USD million) Local knowledge. Global power. 33
Slide 34: Diversified product offering
Diversified product offering Individual Employer Life and Alternative Life Savings Solutions Protection Markets Reinsurance and Retirement and Pensions o Traditional life o Fixed annuities o 401(k) plans o Canadian life and o Term coinsurance segregated funds o Term life o Variable annuities o 403(b
Slide 35: Diversified distribution
Diversified distribution Individual Employer Life and Alternative Life Savings Solutions Protection Markets Reinsurance and Retirement and Pensions o General agents o Banks o Consulting firms o General agents o Company representatives o Registered o Wirehouses o Broker/dealers o Company (business to
Slide 36: Appendix – Q3 2009 results
Appendix – Q3 2009 results Local knowledge. Global power. 36
Slide 37: Highlights
Highlights o Return to profit o Repayment of EUR 1 billion core capital to Dutch State (November 30, 2009) o Further strengthened capital position o Revaluation reserves improve by EUR 3.3 billion o Profitable sales and net deposits, evidence of strong franchise o Continued execution of strategy Loc
Slide 38: Return to profit
Return to profit o Net income improved as a result of – improved result on fair value items, due to rising financial markets, partly offset by equity hedging – substantially lower impairments on US housing market related assets – reversal of prior year tax charges Underlying earnings to net income d
Slide 39: UEBT impacted by exceptionals and de-risking
UEBT impacted by exceptionals and de-risking o Exceptional items: – Provisions related to improvement of consistency of customer records in UK: EUR 43 million – Accelerated amortization of DPAC related to run off IMD: EUR 23 million o De-risking impact of EUR 40 million Underlying earnings before ta
Slide 40: Continued profitable sales, evidence of a strong franchise
Continued profitable sales, evidence of a strong franchise o US retail life sales up 11% o NL new life sales rose 63% o UK sales were stable o Net deposits* of EUR 2 billion more than double compared with Q2 09 o VNB of EUR 169 million impacted by lower contribution from the UK and Spain o IRR subst
Slide 41: Further reduced earnings sensitivity to equity markets
Further reduced earnings sensitivity to equity markets Estimated impact on net income* (EUR million) Q3 2009 Equity market Q2 2009 Q1 2009 -250 -20% +20% 225 -525 275 -900 400 -125 125 -225 -10% +10% 150 -400 200 Estimated impact on capital* (EUR million) Equity market -475 450 -475 -20% +20% 425 -7
Slide 42: Excess capital supported by active capital management
Excess capital supported by active capital management Excess capital development Q3 2009 (EUR billion) 3.5 (0.2) (0.2) 0.2 0.6 0.3 0.4 1.0 (0.6) 4.8 Capital preservation of EUR 0.9 billion Q2 Q2 09 Excess capital Credit Rating impairments migration US Interest rates & equity Capital effeciency De-ri
Slide 43: Successful capital release program
Successful capital release program Capital released (EUR billion) 4.2 o Capital efficiency – Ca. 60% of capital preservation initiatives 0.3 – Generally no material earnings impact 0.6 1.6 – High RoC benefit 0.3 0.4 – More efficient use of capital without meaningfully changing risk profile 0.6 0.3 0
Slide 44: Strong improvement in revaluation reserves
Strong improvement in revaluation reserves o Shareholders’ equity increased significantly as a result of improved revaluation reserves and the issuance of common shares o Improvement in revaluation reserves driven by narrowing credit spreads and lower risk-free interest rates Core capital* developme
Slide 45: Disclaimer
Disclaimer 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 are words that identify such forward-looking statements: aim, believe,
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