Aegon Ltd. · EURONEXT:AGN
Aegon — Q3 2010 Earnings Presentation
38 slides from Aegon's earnings presentation, Nov 11, 2010
Slide 1: Third quarter 2010 results
Third quarter 2010 results Jan Nooitgedagt CFO Analyst & Investor presentation November 11, 2010
Slide 2: Key messages
Key messages � Increase in underlying earnings � Strong net income � Strong sales and deposits � Excess capital increased to EUR 3.3 billion, after repayment of EUR 0.5 billion � Limited impact from improved Dutch longevity 2
Slide 3: Continued focus on execution of strategy in Q3
Continued focus on execution of strategy in Q3 Reallocate capital � Institutional spread-based balances declined USD 1 billion � Increased fee business, reduced spread business in the US � Capital preservations of EUR 0.3 billion � Exploring strategic options for Transamerica Reinsurance Increase re
Slide 4: Restructuring in the UK on track
Restructuring in the UK on track Targets � 25% cost reduction by end 2011 � Increase RoC to 8-10% by 2014 � New business RoC of >12% � Cumulative operating cash flows of GBP 600-650 million from 2010 to 2014 Execution in Q3 � Restructuring of sales division � Closure of employee benefits software bu
Slide 5: Macro equity hedge increased
Macro equity hedge increased � Macro equity hedge on US variable annuity GMIB back-book increased to USD 2.3 billion in October � Macro hedge program consists of total return swaps on multiple indices � VA GMIB back-book equity exposure of USD 2.9 billion now ~80% hedged � Aim to fully equity hedge
Slide 6: Execution of strategy demonstrated by strong results
Execution of strategy demonstrated by strong results Underlying earnings before tax New life sales (EUR million) (EUR million) 590 522 557 478 488 473 538 527 390 492 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Revenue-generating investments Gross deposits* (EUR billion) (EUR billion
Slide 7: Underlying earnings increased 21% compared with Q3 2009
Underlying earnings increased 21% compared with Q3 2009 � Americas’ earnings up 8% due to higher fee and investment income partly offset by changes in policyholder behaviour assumptions � Continued strong earnings in the Netherlands � Results in the UK increased as last year included an exceptional
Slide 8: Impact low interest rates manageable
Impact low interest rates manageable � Low interest-rate environment poses longer-term challenges to industry � Active management to protect in-force book from decline in interest rates � Continued low interest rates will put pressure on new business margins � Effect of prolonged low interest rates
Slide 9: Operating expenses declined 1% at constant currencies
Operating expenses declined 1% at constant currencies � Total operating expenses at constant currencies declined 1%; cost reductions offset by investments in new capabilities and new markets � Operating expenses: – Americas decreased on a comparable basis as result of expense savings – Netherlands d
Slide 10: Strong net income primarily driven by earnings and fair value items
Strong net income primarily driven by earnings and fair value items � Fair value items reflect increase in the fair value of guarantees and related hedges in the Netherlands and in the US � Investment gains due to sales of high yield and emerging markets debt in the Netherlands and trading in invest
Slide 11: Impairments mostly linked to US housing related securities
Impairments mostly linked to US housing related securities � Gross impairments remained at Q2 2010 level, while recoveries declined � Impairments expected to remain at somewhat elevated levels, particularly in US real estate related securities Impairments (EUR million) 416 501 385 394 286 212 150 77
Slide 12: Strong sales and deposits
Strong sales and deposits � New life sales increased 7% primarily driven by US retail life sales and pension sales in the UK � Gross deposits* 38% up on strong third-party asset management deposits � Fixed annuities de-emphasized � VNB declined due to a change in business mix New life sales Gross de
Slide 13: Excess capital up despite EUR 500 million repayment
Excess capital up despite EUR 500 million repayment � Excess capital up on earnings and capital preservations � Excess capital of EUR 3.3 billion above S&P’s AA capital adequacy requirements – EUR 2.0 billion in operating units (Q2: EUR 1.9 billion) – EUR 1.3 billion at the holding company (Q2: EUR
Slide 14: Continued strong capital position
Continued strong capital position � Core capital* at 74% of total capital base – above threshold of 70%; managing to at least 75% by the end of 2012 � Repayment of EUR 0.5 billion to the Dutch State in August 2010 � IGD solvency ratio of 205% (Q2: ~ 200%) Shareholders’ equity (EUR billion) Total cap
Slide 15: Shareholders' equity continues to improve
Shareholders’ equity continues to improve � Shareholders' equity rose sequentially as a result of net income and improved revaluation reserves offset by the weaker US dollar � Positive revaluation reserves of EUR 2.3 billion Shareholders’ equity development Q3 2010 (EUR billion) 17.2 0.7 1.7 (1.5) (
Slide 16: Impact improved longevity in the Netherlands manageable
Impact improved longevity in the Netherlands manageable � New mortality tables show a strong increase in life expectancy Dutch population � No impact on earnings in Q4 2010 � Expected one-off negative impact on excess capital of less than EUR 250 million in Q4 2010 Dutch life expectancy in 2050 Male
Slide 17: Conclusion
Conclusion � Increase in underlying earnings � Strong net income � Strong sales and deposits � Excess capital increased to EUR 3.3 billion, after repayment of EUR 0.5 billion � Limited impact from improved Dutch longevity 17
Slide 18: Analyst & Investor Conference
Analyst&& Investor Analyst Investor Day Conference New York, December 2, 2009 New York City, December 7- 8, 2010 Please register via ir@aegon.com 18
Slide 19: Q&A
Q&A LIFE INSURANCE PENSIONS INVESTMENTS WEGON
Slide 20: Upcoming AEGON events
Upcoming AEGON events December January February Analyst and Investor Conference, Q4 2010 results (CEO) New York City February 24, 2011 December 7-8, 2010 Citigroup Speed dating, London ((CFO) CFO) December 16, 2010 20
Slide 21: Appendix
Appendix at WEGON
Slide 22: Increased new life sales demonstrate continued strong franchise
Increased new life sales demonstrate continued strong franchise � New life sales increased 7% to EUR 527 million compared with Q3 2009 – Americas’ sales improved 6% as retail life increased – The Netherlands decreased mainly due to lower group pension sales – UK production increased 3% as a result o
Slide 23: Continued strong deposits
Continued strong deposits � Gross deposits of EUR 9.4 billion, an increase compared with Q3 2009 of 38% – Strong third-party asset management and US pensions deposits – Growth of variable annuities and mutual funds were partly offset by lower inflows of fixed annuities as the product is de-emphasize
Slide 24: Value of new business
Value of new business � Value of new business of EUR 120 million, lower due to: – lower sales and reduced margins in the Netherlands – decrease of sales and margins of immediate annuities in the UK – lower margins in life insurance and lower sales of fixed annuities in the US � New Markets represent
Slide 25: Americas
Americas � Underlying earnings increased 8% to USD 484 million, mainly due to growth in the pension business, improved financial markets and expense savings � New life sales increased 6% due to life single premium � Net deposits* of USD 687 million as pensions, variable annuities and retail mutual f
Slide 26: The Netherlands
The Netherlands � Strong underlying earnings of EUR 97 million � New life sales down due to group pensions – low interest environment had major impact on group pension market � Net outflows of EUR 83 million due to lower saving deposits � Operating expenses declined 13% following continued cost savi
Slide 27: United Kingdom
United Kingdom � Underlying earnings increased to GBP 24 million, mainly due to growth of the annuity book and lower expenses; Q3 09 included an exceptional charge of GBP 38 million � New life sales improved 3% as higher pension sales offset lower immediate annuity sales following earlier repricing
Slide 28: New Markets
New Markets � Underlying earnings increased as a result of growth in Spain, France and VA Europe and the transfer of asset management activities partly offset by claims related to storms and floods in Hungary and investments in Asia � New life sales improved in Central & Eastern Europe, Asia and Spa
Slide 29: Spread-based balances run off as expected
Spread-based balances run off as expected � Institutional spread-based balances are running off as foreseen, USD 1 billion in Q3 Run-off balances (USD billion) 45 40 35 Decline of USD 17.0bn 17.0bn 30 25 20 15 10 5 0 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Institutional spread Payout annuiti
Slide 30: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets Opening balance June 30, 2010 103.0 35.2 9.6 2.9 Net in- and outflow 0.2 1.6 0.0 (0.1) Unrealized / realized results 2.5 0.7 0.5 0.1 Foreign exchange (10.5
Slide 31: Investments general account
Investments general account AEGON N.V. UNAUDITED INVESTMENTS GENERAL ACCOUNT September 30, 2010 The United New Holdings amounts in EUR millions, except for the impairment data Americas Netherlands Kingdom Markets and other TOTAL Cash / Treasuries / Agencies 15,760 11,414 1,393 1,137 471 30,175 Inves
Slide 32: Limited exposure to peripheral European sovereigns
Limited exposure to peripheral European sovereigns EUR million * June 30, 2010 Sept. 30, 2010 Portugal 47 48 Greece 70 72 Ireland 89 90 Italy 106 107 Spain 1,231 1,218 * At fair value 32
Slide 33: Net impairments by asset class
Net impairments by asset class AEGON general account investments Q3 2010 impairments / recoveries by country unit - IFRS basis (pre-DAC, pre-tax) EUR millions Americas NL UK New Markets Total ABS – Housing 12 - 12 - - ABS – Non-housing - - - - - CMBS 6 - 6 - - RMBS 61 - 61 - - Subtotal structured as
Slide 34: Commercial mortgage loans
Commercial mortgage loans � USD 13.2 billion commercial mortgage loan portfolio* � Sound debt service coverage ratio of 1.8 � Average LTV of 65% � Own origination CML net impairments - IFRS (USD million) million)** ** Weighted average loan-to-value by property type *** (%) 80 70 60 50 40 30 32 22 16
Slide 35: Credit losses in the US stabilized
Credit losses in the US stabilized � In Q3 2010 US credit losses in bps of fixed income assets amounted to 12 bps, level with 10 bps in Q2 2010 � Annualized YTD 2010 credit impairments amount to 55 bps US credit losses in bps of fixed income assets 120 91 82 64 48 55 44 44 average of 33 bps 37 27 25
Slide 36: Life reinsurance
Life reinsurance � Underlying earnings decreased to USD 4 million, mainly due to an exceptional charge relating to changes in variable annuities policyholder behavior assumptions � New life sales decline as a result of an industry wide slow down � 86% of premium income US domestic � 18% new business
Slide 37: For questions please contact Investor Relations
For questions please contact Investor Relations T: +31 70 344 8305 E: ir@aegon.com www.aegon.com P.O. Box 85 2501 CB The Hague The Netherlands
Slide 38: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This presentation includes certain non-GAAP financial measures: underlying earnings before tax and value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment inf