Aegon Ltd. · EURONEXT:AGN
Aegon — Morgan Stanley European Financials Conference 2015
51 slides from Aegon's conference presentation, March 2015
Slide 1: Strong foundations for growth
Strong foundations for growth Morgan Stanley European Financials Conference – London, March 2015 Darryl Button CFO aegon.com
Slide 2: Strategic overview
Strategic overview Well positioned to capture growth opportunities in all our markets Managing back book and new business profitability in a challenging environment Continued progress on execution of strategy 2
Slide 3: Well positioned to benefit from global trends
Well positioned to benefit from global trends Changing demographics Economic Reduced social benefits Helping people take responsibility for their environment Volatile financial markets financial future Limited economic growth Disintermediation, shift to do-it-yourself (UK, NL) Customer R
Slide 4: Attractive propositions across the customer life cycle
Attractive propositions across the customer life cycle Assets Protection Workplace for insurance Need: protect family, property, Product: life, non-life and savings wealth and health Accumulation Reduced social benefits Need: financial confidence, Product: pensions, long-term ROI savings, investment
Slide 5: Focusing on pension participants to drive growth in established markets
Focusing on pension participants to drive growth in established markets Enabling Customers in need of Comparable customer Growth opportunities employees to save retirement solutions needs Pension plan Pension plan balances* participants* Guaranteed retirement US income USD Increase retention rate fr
Slide 6: Serving US customers through a single investment & retirement division
Serving US customers through a single investment & retirement division National footprint Actively served 3,300 I&R employees with a 25,000+ plan sponsors national footprint Sales & distribution Investment solutions Alignment & technology • Leveraging strength of collective • A single product team f
Slide 7: Integrated solution to and through retirement in UK
Integrated solution to and through retirement in UK regardless of advice preference Accumulation Advised Non-advised Workplace Single investment & trading platform Generic Government Guidance Individual Guidance Customer selects approach Guidance solutions depending on needs Advice solutions Digital
Slide 8: Leadership positions in the Netherlands offer strong foundations for growth
Leadership positions in the Netherlands offer strong foundations for growth #1 #1 #1 Pensions Insurance-linked PPI provider insurer administrator Largest pension insurer* Second largest pension PPI leader with EUR 0.6bn AuM** administrator (in millions)** 4.4 Aegon Peer 1 2.5 2.8 1.9 2.3 Aegon PPI P
Slide 9: Creating space to grow and invest in our business
Creating space to grow and invest in our business Cost savings allow us to invest in connecting better with our customers Investments enable us to accelerate the execution of our strategy Connecting better with our customers… …while improving efficiency OpEx / (OpEx + UEBT) US >1 million partici
Slide 10: Actively managed pricing policy is yielding results
Actively managed pricing policy is yielding results Market consistent value of new business (EUR million, % of PVNBP) 1.9% 1.8% 1.6% 1.6% 1.6% 1.5% 1.4% 1.3% 1.3% 1.0% 1.0% 1.0% 285 268 232 223 221 204 202 192 196 173 125 117 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 MCVNB Negative
Slide 11: US protection distribution deals to offset impact of economic decisions on sales
US protection distribution deals to offset impact of economic decisions on sales Expanding distribution Life, health and specialty sales (USD million) Continued expansion of World Financial Group (WFG) distribution through recruiting agents 2,000 1,808 Addition of USD 196 million of Health busin
Slide 12: Managing variable annuities for profitability
Managing variable annuities for profitability As per Q1 2015, reporting will be aligned with the way we manage our VA business Both core variable annuities and the closed block are managed for profitability Fair value guarantees fully hedged to rates, equities and equity volatility Closed bl
Slide 13: Strong free cash flow growth
Strong free cash flow growth Free cash flow up strongly as a result of higher operational free cash flow (OFCF) from business growth and lower holding expenses ► OFCF growth from fee-based businesses more than offsets lower spread-related cash flows ► Holding expenses halved as a result of cost sa
Slide 14: Capital position remains solid as focus turns fully towards Solvency II
Capital position remains solid as focus turns fully towards Solvency II Group IGD solvency ratio of 208% and solid local capital positions Group Holding excess capital of EUR 1.2 billion following EUR 500 million IGD ratio of 208% senior debt redemption European operations fully focused on Sol
Slide 15: Summary: continued successful execution of our strategy
Summary: continued successful execution of our strategy Optimize Operational Customer portfolio excellence loyalty Divestment of Canada, La Improved customer retention in Successfully rolling-out new ways Mondiale stake and Badajoz JV the US following creation of I&R to connect to our customer
Slide 16: Appendix
Appendix 16
Slide 17: Deleveraging further enhances stability
Deleveraging further enhances stability Leverage reduction in 2015 driven by the redemption of the USD 500 million 4.625% senior bond, due December, funded from the proceeds of the divestment of Canada No further deleveraging required as Aegon meets its leverage targets ► Gross financial leverag
Slide 18: Ample access to money markets and capital markets
Ample access to money markets and capital markets Aegon has a number of programs and facilities at its disposal to secure its liquidity position and to source both capital and operating funding Debt programs Aegon N.V. and Aegon Funding Corp ► USD 4.5 billion French, Euro and US commercial paper
Slide 19: Ratings reflective of strong capitalization and prudent risk management
Ratings reflective of strong capitalization and prudent risk management Aegon NV Issuer Credit ratings Ratings Long-term Short-term Standard & Poor’s A-, Stable A-2 Moody’s A3, Stable P-2 Fitch A, Stable F1 Aegon Insurance Financial Strength ratings Ratings Aegon USA Aegon NL Aegon UK S&P AA-, Stabl
Slide 20: Dutch pension system gradually transitioning from DB to DC
Dutch pension system gradually transitioning from DB to DC Historically, the Dutch pension system has been biased to defined benefit pensions ► Pension funds held EUR 1 trillion in assets per end-2013 related to defined benefit (DB) schemes ► The Dutch insurance industry had EUR 137 billion pensio
Slide 21: Covering the entire retirement value chain in the Netherlands
Covering the entire retirement value chain in the Netherlands Asset Product Administration Distribution management manufacturing ■ Retail pensions ■ Small enterprise market ■ Medium enterprise market ■ Corporate Market ■ Industry 21
Slide 22: Background on the usage of the ultimate forward rate
Background on the usage of the ultimate forward rate An ultimate forward rate is applied to value liabilities in the Netherlands for solvency purposes ► The ultimate forward rate is 4.2% at the 60 year point which leads to a benefit from the last liquid point (20 year) onwards ► A zero coupon curv
Slide 23: Q4 2014 results
Q4 2014 results
Slide 24: Higher earnings and sales driven by strong operational performance
Higher earnings and sales driven by strong operational performance Higher underlying earnings supported by continued solid business performance Sales growth across the group; new business profitability strong despite low interest rates Strong operational free cash flows and solid capital posit
Slide 25: 22% sales growth driven by continued strong deposits
22% sales growth driven by continued strong deposits Strong gross deposits of EUR 13.7 billion driven by US variable annuities and pensions, and third-party asset management flows; net deposits* of EUR 2.6 billion Higher life sales mainly due to stronger universal life production in US and Asia;
Slide 26: Growth of fee-based businesses continues
Growth of fee-based businesses continues Americas gross deposits of USD 9.7 billion result of continued growth of fee business ► Variable annuity deposits up 23% to USD 2.8 billion; net deposits of USD 1.7 billion ► Retirement plan deposits of USD 5.3 billion; net deposits of USD 0.6 billion ► Rec
Slide 27: Leverage and fixed charge coverage targets achieved in 2014
Leverage and fixed charge coverage targets achieved in 2014 Gross financial leverage of 28.7% Gross leverage within 26-30% target range (EUR billion, %) 34.0% 33.3% ► Leverage cut by ~25% since 2011 32.0% 28.7% ► No equity credit taken for perpetual capital securities 9.2 8.7 7.7 7.1 2011 2012 201
Slide 28: Sustainable dividend growth
Sustainable dividend growth Proposed final 2014 dividend of EUR 0.12 per share, total 2014 dividend of EUR 0.23 per share Continue to neutralize stock dividends to avoid dilution Future dividend growth dependent on strong capital position and cash flows Free cash flows Increasing dividends** (
Slide 29: Key messages
Key messages Higher earnings and profitable sales despite continued low interest rates Q4 results Continued sales momentum throughout group reflects strong fundamentals Strong normalized operational free cash flows Dividend increased to EUR 0.23 per share supported by cash flows Capital and
Slide 30: Continued delivery of strong results
Continued delivery of strong results Underlying earnings before tax Net income (EUR million) (EUR million) 1,672 1,982 1,968 1,865 1,775 1,186 936 857 2011 2012 2013 2014 2011 2012 2013 2014 Return on equity Fee-based earnings (%) (% of UEBT) 39% 8.6 8.6 30% 33% 33% 7.8 6.7 2011 2012 2013 2014 2011
Slide 31: Underlying earnings of EUR 562 million
Underlying earnings of EUR 562 million Americas earnings higher driven mostly by Underlying earnings before tax growth in variable annuities and pensions due to markets and net inflows Americas The Netherlands (USD million) (EUR million) Higher earnings in the Netherlands due to a EUR 45 million
Slide 32: Net income of EUR 399 million
Net income of EUR 399 million Fair value items mainly reflect hedging programs without an accounting match in the US and NL; alternative asset returns impacted by under performance of energy sector exposure Gains on investments primarily related to the rebalancing of the fixed income portfolio i
Slide 33: Fair value items impacted by hedge programs and model updates
Fair value items impacted by hedge programs and model updates Total fair value items of EUR (132) million FV hedging with FV hedging without accounting match* accounting match FV investments FV other EUR 24 million EUR (66) million EUR (57) million EUR (33) million Derivatives ∆: EUR 2,094m Derivati
Slide 34: Gross deposits of EUR 13.7 billion
Gross deposits of EUR 13.7 billion Strong variable annuity and mutual fund Gross deposits deposits in the Americas more than offset lower deposits from pensions due to fewer Americas The Netherlands (USD billion) (EUR million) take-overs Higher gross deposits in the Netherlands driven by strong
Slide 35: New life sales of EUR 523 million
New life sales of EUR 523 million Higher new life sales in the Americas mainly New life sales driven by strong universal life sales Americas The Netherlands Lower new life sales in the Netherlands the (USD million) (EUR million) result of signing fewer, but more profitable, pension contracts D
Slide 36: MCVNB of EUR 196 million
MCVNB of EUR 196 million Lower MCVNB in the Americas as the Market consistent value of new business impact of lower interest rates more than offset the benefit of higher sales Americas The Netherlands (USD million) (EUR million) MCVNB decline in the Netherlands driven by lower contribution from
Slide 37: Operational free cash flows and holding excess capital
Operational free cash flows and holding excess capital Operational free cash flows of EUR 338 million excluding market impacts and one-time items ► Market impacts and one-time items totalling EUR (12) million ► Positive market impacts in the Americas largely offset by negative impacts in the Nethe
Slide 38: Operational free cash flows by unit
Operational free cash flows by unit Americas cash flows expected to remain stable on local currency basis Dutch cash flows in 2014 impacted by single large pension buy-out UK on a trajectory towards its cash flow target of GBP 150 million in 2015 Cash generating units support growth of the b
Slide 39: Group and local capitalization levels
Group and local capitalization levels Group IGD solvency ratio of 208%; Holding excess capital of EUR 1.2 billion Excess capital in the United States of USD ~1.1 billion over S&P AA level IGD ratio in the Netherlands of ~215% impacted by declining interest rates Pillar 1 ratio in the UK down
Slide 40: Capital allocated to run-off businesses
Capital allocated to run-off businesses Current capital allocated to run-off businesses of USD 2.0 billion ► Return on capital of run-off businesses of 0.5% year to date Capital intensive run-off businesses negatively impact return on equity ► Capital allocated to run-off businesses included in
Slide 41: Americas
Americas Earnings growth driven by higher variable Underlying earnings Operating expenses annuity and pension balances due to before tax (USD million) (USD million) positive markets and net inflows Operating expenses at similar level while growing the business 408 467 480 464 483 Higher life a
Slide 42: The Netherlands
The Netherlands Higher earnings driven by a EUR 45 million Underlying earnings Operating expenses release resulting from a new employee before tax (EUR million) (EUR million) pension arrangement Lower operating expenses mainly driven by a new employee pension arrangement 172 190 195 124 127 Ne
Slide 43: United Kingdom
United Kingdom Underlying earnings up 37% to GBP 22 Underlying earnings Operating expenses million due to improved persistency before tax (GBP million) (GBP million) Higher operating expenses mainly due to GBP 26 million cost for the implementation of the pension fee cap 22 22 117 16 84 83 Low
Slide 44: New Markets
New Markets Lower earnings as growth in Asset Underlying earnings Operating expenses Management more than offset by higher before tax (EUR million) (EUR million) surrenders in Poland, the recurring effect of assumption changes and model updates in Asia and the derecognition of France 46 198 40 176
Slide 45: Reconciliation of effective tax rate Q4 2014
Reconciliation of effective tax rate Q4 2014 Reconciliation of effective tax rate Q4 2014 New Markets/ EUR million Americas The Netherlands United Kingdom Total Holdings Income before tax 167 377 34 (67) 511 Nominal tax rate 35.0% (59) 25.0% (94) 21.5% (7) N/A 14 (146) Actual income tax (17) (105) 1
Slide 46: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets & Other Opening balance September 30, 2014 84.1 50.2 12.7 4.5 Net in- and outflow (4.8) 0.5 (0.2) 0.3 Unrealized / realized results 0.9 1.2 0.6 0.1 Foreign
Slide 47: Energy & oil services exposure
Energy & oil services exposure US general account energy & oil services exposure USD million AAA AA A BBB <BBB/NR Total Independent - 97 475 934 107 1,613 Oil field services - 39 165 320 72 595 Midstream - - 277 1,324 66 1,667 Integrated 175 686 483 191 - 1,535 Refining - - - 141 9 150 Total corpora
Slide 48: Main economic assumptions
Main economic assumptions Main US economic assumptions 10-year US Treasury assumed to grade to 4.25% by 2024 3-month US Treasury assumed to grade to 2.5% by 2024 Credit spreads are assumed to grade to 110 bps by 2016 Bond funds are assumed to return 4% until 2024 and 6% thereafter Annual g
Slide 49: Earnings sensitivities to equity markets and reinvestment yields
Earnings sensitivities to equity markets and reinvestment yields Protection of capital position main purpose of macro Macro hedge equity sensitivity estimates hedging program Total equity return in Fair value items impact quarter IFRS accounting mismatch between hedges and liabilities -8% ~USD (
Slide 50: Upcoming events
Upcoming events April May Kepler Cheuvreux Q1 2015 results, Conference, Dublin The Hague April 8, 2015 May 13, 2015 Annual General Meeting, The Hague May 20, 2015 50
Slide 51: Disclaimers
Disclaimers Cautionary note regarding non-IFRS measures This document includes the following non-IFRS financial measures: underlying earnings before tax, income tax, income before tax and market consistent value of new business. These non-IFRS measures are calculated by consolidating on a proportion
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