Aegon Ltd. · EURONEXT:AGN
Aegon — Q4 2017 Earnings Presentation
30 slides from Aegon's earnings presentation, Feb 15, 2018
Slide 1: Aegon concludes 2017 with solid fourth quarter results
Aegon concludes 2017 with solid fourth quarter results Alex Wynaendts Matt Rider The Hague – February 15, 2018 CEO CFO Helping people achieve a lifetime of financial security
Slide 2: Successful execution on strategy
Strategy 2 Successful execution on strategy Significant improvement in Solvency II ratio and strong capital generation Administration of US life & annuity businesses outsourced Exceeded target to reduce capital allocated to run-off businesses Transformation continues with increased focus on digitiza
Slide 3: Significant improvement in Solvency II ratio
Strategy 3 Significant improvement in Solvency II ratio Group Solvency II improvement • Strong capital generation of EUR 2.1 billion in 2017 200% • Successfully recapitalized Dutch unit back to dividend paying Target status; EUR 100 million expected in 1H18* zone • Divested EUR ~1.1 billion of non-c
Slide 4: Administration of US life & annuity businesses outsourced
Strategy 4 Administration of US life & annuity businesses outsourced • Retirement plans • Life • IRAs Service & • Annuity • >10 million policies to be serviced & • Advice center administration • Supplemental health administered by TCS and new business • Mutual funds going forward • Voluntary benefit
Slide 5: Exceeded target to reduce capital allocated to run-off businesses
Strategy 5 Exceeded target to reduce capital allocated to run-off businesses • Reduced IFRS capital allocated to run-off businesses by nearly USD 5 billion since 2009 • Exceeded USD 1 billion 2018 target to reduce IFRS capital allocated to run-off a year early • Effectively eliminates run-off busine
Slide 6: Transformation continues with increased focus on digitization
Strategy 6 Transformation continues with increased focus on digitization • Established Center of Excellence to accelerate digitization Accelerate innovation • Roll-out of digital training programs to targeted groups of employees • Organized internal Hackathons resulting in potential new concept deve
Slide 7: Strong gross deposits of EUR 35 billion
Sales 7 Strong gross deposits of EUR 35 billion • Gross deposits increased 54% to EUR 35 billion, primarily driven by Aegon Asset Management and UK platform sales - AAM recorded external third-party net inflows for the sixth consecutive year • Net outflows of EUR 13 billion primarily the result of c
Slide 8: Sales of insurance products impacted by strategic choices
Sales 8 Sales of insurance products impacted by strategic choices • New life sales declined by 6% to EUR 225 million, driven by weakening of USD, and lower term and indexed universal life sales in the US • New premium production for accident & health and general insurance decreased by 22% to EUR 175
Slide 9: On track to deliver on 2018 financial targets
Strategy 9 On track to deliver on 2018 financial targets Run-rate annualized expense savings Strong sales momentum (EUR million) (EUR billion) 20 CAGR 300 +23% EUR 10 CAGR 200 350m* of 100 >10% 0 0 2015 2016 2017 2018 2016 2017 2018 Target TCS agreement Target Cumulative capital return to shareholde
Slide 10: 4Q 2017 Results
10 4Q 2017 Results
Slide 11: Underlying earnings benefit from expense savings & favorable markets
Earnings 11 Underlying earnings benefit from expense savings & favorable markets • Underlying earnings stable at constant currencies • Improved claims experience in US mainly driven by better mortality experience • Continued progress on expense savings program in 2017, offset by one-time expenses in
Slide 12: Strong net income
Earnings 12 Strong net income Underlying earnings to net income development in 4Q 2017 (EUR million) Gain from fair value items UEBT 4Q 2017 525 Mainly from positive revaluations on investments and hedging gains in NL and the US Fair value items 85 Realized gains 91 Realized gains Net impairments (3
Slide 13: Six consecutive quarters of positive below the line items
Earnings 13 Six consecutive quarters of positive below the line items • Net income averages to 111% of net underlying earnings over previous six quarters • Net impairments remain well below long term average of 25 bps • Fair value items have on balance been positive, partly driven by hedging gains r
Slide 14: US tax reform is a net positive
US tax reform 14 US tax reform is a net positive • Significant increase in recurring earnings and capital generation - Group return on equity to increase by 55 bps, as recurring earnings benefit outweighs one-time increase in equity from DTL reduction • US operations expected to remain above mid-poi
Slide 15: Group solvency ratio increases to 201%
Capital 15 Group solvency ratio increases to 201% OF and SCR development (EUR billion) • Expected return (+4%) reflects strong business performance SII 195% 4% -4% -3% +8% 201% • Market variances (-4%) driven by the unfavorable impact from equity market movements in the UK and adverse interest rate
Slide 16: Excess capital increases to EUR 1.4 billion
Capital 16 Excess capital increases to EUR 1.4 billion • Excess capital well within target range of EUR 1.0 – 1.5 billion • Net remittances from units in 4Q 2017 totalled EUR 0.8 billion - EUR 625 million of remittances received from the US, driven by the sale of the majority of the run-off business
Slide 17: On track to return EUR 2.1 billion to shareholders over 2016-2018
Cash and capital deployment 17 On track to return EUR 2.1 billion to shareholders over 2016-2018 • Final dividend for 2017 increased to EUR 0.14 per common share; full year dividend up 4% • Paid a growing dividend for six consecutive years • Strong full year 2017 capital generation supports sustaina
Slide 18: Continue to deliver on our commitments in 2018
Strategy 18 Continue to deliver on our commitments in 2018 Improve our performance by growing Transform the company by focusing our business and reducing expenses on fee and protection businesses Maintain solid capital position while Broaden relationships with our returning capital to shareholders c
Slide 19: Appendix
19 Appendix For questions please contact Investor relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands
Slide 20: Aegon at a glance
Overview 20 Aegon at a glance Focus Sales Asia Life insurance, pensions & Total sales of asset management for over € 16bn 2% 26 million customers (FY 2017) Europe Americas 31% 61% History Employees Our roots date back to the Over 28,000 employees 6% first half of the 19th century (December 31, 2017)
Slide 21: Americas: Delivering on expense savings program
Financials 21 Americas: Delivering on expense savings program • Underlying earnings decreased to USD 414 million, as a higher contribution from fee-based businesses and favorable claims experience were offset by one-time items and business transformation expenses • Operating expenses decreased by 1%
Slide 22: Europe: Strong sales and deposit growth
Financials 22 Europe: Strong sales and deposit growth • Underlying earnings decreased to EUR 167 million driven by one-time expenses in Spain & Portugal • Operating expenses increased by 11% due primarily to the acquisition of Cofunds in the UK and was partly offset by the divestment of UMG in NL •
Slide 23: Asia: Strong new life sales
Financials 23 Asia: Strong new life sales • Underlying earnings declined to USD 14 million, as higher earnings from Aegon Insights, China and Japan were more than offset by lower earnings from the HNW business • New life sales were supported by higher sales from the HNW business and strong sales in
Slide 24: Asset management: Sixth consecutive year of net inflows
Financials 24 Asset management: Sixth consecutive year of net inflows • Underlying earnings up by 5% as a result of higher performance and origination fees • Higher operating expenses driven by restructuring charges, higher personnel expenses in China as a result of strong performance, and higher on
Slide 25: Expense savings of EUR 350 million on track for 2018
Financials 25 Expense savings of EUR 350 million on track for 2018 Declining core operating expenses (EUR million – rolling 4 quarters ) • Continued execution of expense savings program drives 3,800 reduction in core operating expenses 3,650 • Annualized run-rate savings of approximately EUR 280 mil
Slide 26: General account investments
Financials 26 General account investments December 31, 2017 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 17,044 16,739 445 164 34,393 Investment grade corporates 31,277 4,133 3,560 - 38,971 High yield (and other ) corpora
Slide 27: Updated Solvency II sensitivities
Capital and assumptions 27 Updated Solvency II sensitivities Solvency II sensitivities (in percentage points) Scenario Group US NL UK Equity markets +20% +10% +17% +5% -10% • Group Solvency II ratio of 201% exceed Equity markets -20% -5% -10% -5% +12% target zone of capital management policy Interes
Slide 28: Main economic assumptions
Capital and assumptions 28 Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.10 n.a. 0.85 Annual gross equity market return (price appreciation + dividends) 8% 7% 7% Main assumptions for financial targets US NL UK 10-year government bond yields Develop in line with
Slide 29: Investing in Aegon
29 Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA • Aegon ordinary shares ISIN NL0000303709 - Traded on Euronext Amsterdam since 1969 SEDOL 5927375NL and quoted in euros Trading Platform Euronext Amsterdam Country Netherlands • Aegon New York Registry Shares (NYRS) - Traded on NYSE
Slide 30: Disclaimer
30 Disclaimer Cautionary note regarding non-IFRS 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