Aegon Ltd. · EURONEXT:AGN
Aegon — Investor Day (December 2009)
32 slides from Aegon's investor day presentation, Dec 2, 2009
Slide 1: Americas financial review
Americas financial review Darryl Button CFO Americas Analyst and Investor Day, New York City, December 2, 2009 1
Slide 2: Key messages
Key messages o Reporting structure aligned with management changes o Earnings impacted by financial crisis – franchises intact and producing strong underlying earnings growth going forward o Institutional spread lending in run off – reduced exposure to credit risk over time o Adjusted operating expe
Slide 3: Agenda
Agenda o Financial review o Business review Local knowledge. Global power. 3
Slide 4: Reporting structure - today
Reporting structure - today Individual Pension Life and Institutional Life Savings and and Asset Underlying Protection Products Reinsurance earnings Retirement Management Accident Retail Institutional Fixed Variable BOLI / Over / Life and mutual guaranteed annuities annuities COLI health funds produ
Slide 5: Reporting structure – aligned with management changes
Reporting structure – aligned with management changes Work US Mon AFP site SVS EU Canada Life Japan LTC TCM DIA BOLI Argos Mexico ADMS TAM TRS /COLI Korea WFG TRM Clark Mong eral Brazil nderlying rnings earnings Individual Employer Life and Alternative Life Savings and Solutions and Protection Marke
Slide 6: Development of underlying earnings before tax per quarter
Development of 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 cas
Slide 7: 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 8: Impact of run-off institutional spread-based business
Impact of run-off institutional spread-based business Spread balances (USD billion) 33 24 13 8 3 2 2008 Q3 2009 2010E 2012E 2014E 2016E o Institutional cash shortfall due to shortening of liabilities – 12 month notice putable funding agreements (USD 6 billion) – Municipal GICs (USD 5 billion) – Exte
Slide 9: 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 10: Mean reversion – equity return assumptions
Mean reversion – equity return assumptions Negative DAC unlocking above cap � Corridor cap 15.00% 15.00% 15.00% 11.00% 10.00% 9.00% 8.25% 8.25% 8.00% 7.50% 7.50% 7.25% 7.25% 6.25% 6.25% 6.25% 6.00% 5.00% 5.75% 6.00% 4.75% 4.75% 4.75% 4.75% Corridor floor Positive DAC unlocking below floor � Q4 Q1 Q2
Slide 11: Proven ability to execute on cost reduction initiatives
Proven ability to execute on cost reduction initiatives Adjusted operating expenses down 10% year to date Category 9M 2009 9M 2008 Change Total operating expenses 1,678 1,640 38 Less: employee pension plan costs (90) 76 (166) Less: restructuring charges (40) n/a (40) Adjusted operating expenses 1,54
Slide 12: 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 13: 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) 550 516 491 Other 430 370 131 61 40 36 Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 Recoveries (USD million) 49 38 24 20 18 5 3 4 3 Q3 '07
Slide 14: Reduced unrealized bond losses
Reduced unrealized bond losses Revaluation account (USD billion) Q3 '07 Q4 '07 Q1 '08 Q2 '08 Q3 '08 Q4 '08 Q1 '09 Q2 '09 Q3 '09 (5) (10) (15) (20) Gross Bond Unrealized Gain (Loss) Net Revaluation Reserve o Significant improvement in recent quarters o Not a proxy for actual impairments Local knowled
Slide 15: Agenda
Agenda o Financial review o Business review Local knowledge. Global power. 15
Slide 16: Diversified mix of business
Diversified mix of business Americas embedded value (full year 2008) 14% Life Accident and health 4% 30% Fixed annuities Variable annuities 9% Retail mutual funds Pensions and asset management 7% Institutional guaranteed products >1% 14% BOLI / COLI 6% Life reinsurance 16% Local knowledge. Global po
Slide 17: 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 18: 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 19: Life and Protection
Life and Protection Canada Work Mon site Life LTC AFP ADMS WFG Sources of o Investment spreads (30%) earnings o Insurance fee margins (70%) 400 300 Financial 200 model* 100 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Underlying Earnings 2007 Sample Model 10% of Premium 1% of
Slide 20: Individual Savings and Retirement
Individual Savings and Retirement Canada TCM TAM TRM o Fixed annuities - investment spreads (100%) o Variable annuities Sources of - fees net of hedging (70%) earnings - investment spreads (30%) o Mutual funds - fees (100%) 150 100 Variable Annuities Fixed Annuities 100 50 Financial 50 0 model* 0 -5
Slide 21: Employer Solutions and Pensions
Employer Solutions and Pensions Clark SVS TIM Work site DIA TRS o Separate account and off balance sheet � fees Sources of o Purchased annuities and general account � spread earnings o Worksite voluntary � insurance margins 60 50 40 Financial 30 model* 20 10 0 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3
Slide 22: Life Reinsurance
Life Reinsurance EU Korea Brazil US Japan Mexico o Insurance fee margins (55%)* Sources of o Investment spreads (45%) earnings 60 40 Financial 20 model* 0 -20 -40 Q1 07 Q2 07 Q3 07 Q4 07 Q1 08 Q2 08 Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Underlying Earnings Sample Model 7% Premium 1% of Reserves o Actuarial
Slide 23: Reduced capital markets risk
Reduced capital markets risk Equity Interest Rate Credit Risk Risk Risk • VA hedging • Effective ALM • Run-off institutional spread lending • Common equity • Cash and forward divestment starting swaps • Asset de-risking to mitigate migration • Reduced hedge fund • Floating rate assets investment exp
Slide 24: Conclusion
Conclusion o Organizational changes to simplify the business and extract synergies o Strong franchises positioned to win o Focused on costs to drive competitive advantage o Reduced exposure to capital markets risk will result in higher quality, consistent earnings going forward Local knowledge. Glob
Slide 25: Q&A
Q&A Local knowledge. Global power. 25
Slide 26: Appendix
Appendix Local knowledge. Global power. 26
Slide 27: Divisional restructuring
Divisional restructuring Previous Reporting Structure New Reporting Structure Life and Protection AEGON Direct Marketing Services No change Life and Protection Long Term Care No change Life and Protection Monumental Life No change Life and Protection World Financial Group No change Life and Protecti
Slide 28: Life & Protection – Earnings Drivers
Life & Protection – Earnings Drivers (A&I Conference – November 2007) Sources of Earnings: Pricing: � Technical margins (70%) � Products priced on a holistic basis � Investment spreads (30%) (Total Revenue – Total Expenses) � 11%* Total Capital* *unlevered, after-tax • Spread on reserves • Return on
Slide 29: Individual Savings & Retirement – Earnings Drivers
Individual Savings & Retirement – Earnings Drivers (A&I Conference – November 2007) (in USD mln) 150 Fixed Annuities Sources of Earnings: 100 � Investment spread (100%) • Spread on account balance 50 • Return on surplus 0 Sample Model: Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 05 05 05 05 06 06 06 06 07 07 0
Slide 30: Pension & Asset Management – Earnings Drivers
Pension & Asset Management – Earnings Drivers (A&I Conference – November 2007) Sources of Earnings: Margins vary � Fees (40%) significantly by � Investment spread (60%) product based on • Spread on account balance capital allocation – range from 10 to 100 • Return on surplus bps 10 bps => large case
Slide 31: Life Reinsurance – Earnings Drivers
Life Reinsurance – Earnings Drivers (A&I Conference – November 2007) Sources of Earnings: Pricing: � Technical Margins (45%) � Products priced on a holistic basis to return minimum return on capital � Investment Spreads (45%) (Total Revenue – Total Expenses) • Spread on reserves � 11%* Total Capital
Slide 32: 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,