Aegon Ltd. · EURONEXT:AGN
Aegon — BoA-ML Banking & Insurance CEO Conference 2016
59 slides from Aegon's conference presentation, September 2016
Slide 1: Accelerate, connect, deliver
Accelerate, connect, deliver Alex Wynaendts BoA-ML Banking & Insurance CEO Conference London – September 2016 CEO Helping people achieve a lifetime of financial security
Slide 2: Overview
Accelerate, connect, deliver 2 Overview • Transformed the profile of the company by focusing on fee business • Financial market risk reduced, as a result of proactive management actions Aegon • Solid capital position, completed EUR 400 million share buyback in H1 2016 today • Continued execution of
Slide 3: Transformed company profile
Achievements 3 Transformed company profile As a result of executing on our strategy While growing our fee business Optimized value Generated average annual of backbook sales growth of 12% from Addressed Realized material cost 2010 to 2015 legacy issues savings in established Invested in digita
Slide 4: Clear transformation
Shift to fee-based businesses 4 Clear transformation Successful shift from spread- to fee-based businesses Development of fee-based balances and earnings • Strong growth in fee-based (balances in EUR billion and earnings as % of total earnings) earnings; percentage nearly tripled since 2010 750 60%
Slide 5: Clear leader in fast-growing market
Creating the leading UK platform 5 Clear leader in fast-growing market Accelerating strategic transformation in the UK • Number 1 retail platform and number 3 in workplace savings market • Leveraging state-of-the-art technology to become a pure play digital provider • Targeting cost savings of GBP ~
Slide 6: Living up to our purpose
Purpose 6 Living up to our purpose To help people achieve a lifetime of financial security …to trusted provider of …through guidance retail solutions and advice… From worksite relationship… At & after retirement Situation Retirees looking for income and wealth transfer Wealth accumulation Situation
Slide 7: Aegon’s strategic priorities
Priorities 7 Aegon’s strategic priorities • Offer solutions throughout the lifecycle • EUR 200 million expense reduction program in US, NL and holding • Provide omni-channel distribution • Simplifying our business by digitizing • Expand guidance and advice processes and increasing capabilities self-
Slide 8: Addressing investor concerns
Accelerate, connect, deliver 8 Addressing investor concerns 1 2 3 Low Capital Capital interest rates position generation & deployment 4 5 6 Regulatory Underperformance Expense levels environment in the US
Slide 9: Challenging interest rate environment
Low interest rates 9 Challenging interest rate environment Active management to limit impact of ‘lower for longer’ • Adjusting products throughout the business • Changing the business mix Sales • Focusing on new business profitability, not on volumes • Strategic shift from spread- to fee-based busin
Slide 10: Solid capital position
Capital position 10 Solid capital position Well positioned to withstand headwinds Group Solvency II ratio & sensitivity ranges Q2 2016 • Group Solvency II ratio well within target zone of capital management policy Capital Management Policy Target • Immaterial sensitivity to equity markets Q2 2016 So
Slide 11: Growing capital generation
Capital generation 11 Growing capital generation Supported by increasing contributions from growth markets Solvency II capital generation* Capital generation developments (EUR million) 2016 Direction • Lower earnings in the Americas (-) Americas ~900 Stable Impact • Higher UFR amortization in NL (-)
Slide 12: Capital deployment strategy
Capital deployment 12 Capital deployment strategy On track to return EUR 2.1 billion capital to shareholders in 2016-2018 Dividends Share buyback EUR 1.7 billion EUR 0.4 billion 2016 interim dividend Completed increased 8% EUR 950 million of capital return to shareholders in 2016
Slide 13: Navigating the regulatory environment
Regulatory environment 13 Navigating the regulatory environment Limited impact on strong US capital position Regulation Change Impact Principal Based Reserve requirements will become more economic, Reserves (Life) resulting in the disappearance of the majority of Not material January 1, 2017 redunda
Slide 14: Addressing underperformance in the US
Underperformance in the US 14 Addressing underperformance in the US 5 part plan to enhance earnings and improve returns 1 2 3 4 5 Rationalized location Focused and Address deterioration of Strategic overhaul of Disposition of non-core strategy following disciplined expense profitability in Life & bu
Slide 15: Expense savings on track
Expense savings program 15 Expense savings on track Americas ahead of planned expense savings 2018 target Americas Expense savings vs target • Reducing complexity by transforming to ONE Transamerica • Completed voluntary separation incentive plan USD (in EUR million) EUR 74 • Reducing consulting rel
Slide 16: Progress on financial targets
Targets 16 Progress on financial targets Capital return, excess capital and expense savings on track Year-end Half-year Commitment 2018 target 2016 results Strong sales growth CAGR of 10% >10% Reduce operating expenses EUR 200 million EUR 74 million Increase RoE 10% 7.1% Excess capital at Holding EU
Slide 17: Priorities moving forward
Priorities 17 Priorities moving forward Continue successful execution of strategy Maintain solid capital position while returning capital to shareholders Management actions to mitigate low interest rates Improve returns in the Americas through execution of 5 part plan Execute expense savings program
Slide 18: Regulatory environment
Appendix 18 Regulatory environment Helping people achieve a lifetime of financial security
Slide 19: Life captives grandfathered
Regulatory environment 19 Life captives grandfathered Principle Based Reserves to be introduced in 2017 • Life captives finance redundant reserves Example build up of US statutory reserves • US state regulators recognize the non- (Statutory reserves in USD millions and years) economic nature of thes
Slide 20: NAIC VA reserve & capital reform
Regulatory environment 20 NAIC VA reserve & capital reform Proposal supported by Aegon • NAIC commissioned Oliver Wyman to review reserve and capital framework for variable Positives Negatives annuities • Better alignment • Standardized capital • Captives for variable annuities are used to between h
Slide 21: Cofunds acquisition
Appendix 21 Cofunds acquisition Helping people achieve a lifetime of financial security
Slide 22: Building on complementary strengths
Creating the leading UK platform 22 Building on complementary strengths Leveraging strong existing skillset • Assets: GBP 77bn (GBP 28bn retail) • Assets: GBP 12bn • Assets: GBP 8bn Platform, GBP 46bn Traditional (GBP 21bn to be upgraded) Profile • Customers: 750,000 (retail) • Customers: 350,000 •
Slide 23: Profile of the Cofunds business
Creating the leading UK platform 23 Profile of the Cofunds business Cofunds provides platform services to advisors charging fees over assets Offering Asset development • Cofunds, founded in 2001 as a first mover in the (in GBP billion) UK Platform Market and currently the market leader CAGR with GBP
Slide 24: Modest investment drives cash flow growth
Creating the leading UK platform 24 Modest investment drives cash flow growth • Capital benefit from cost savings limits net investment for Cofunds acquisition • Aegon will recognize GBP ~150 million Solvency II benefit as a result of cost savings1 - Cost synergies will be equally split between Aego
Slide 25: Appealing financial rationale
Creating the leading UK platform 25 Appealing financial rationale Cofunds acquisition to deliver substantial value Capital benefit of GBP ~150 million resulting from cost savings Modest investment Net capital investment for acquisition and restructuring of GBP ~50 million1 Attractive Payback per
Slide 26: Advisor and customer benefits
Creating the leading UK platform 26 Advisor and customer benefits Substantially enhancing adviser proposition and distribution capability Superior Minimal Enhanced Major new proposition disruption distribution business relationship • Continuous platform • No requirement for an • Cofunds and Aegon •
Slide 27: Capital update
Appendix 27 Capital update Helping people achieve a lifetime of financial security
Slide 28: Capital management policy
Capital update 28 Capital management policy 140-170% target Solvency II range at Group level Group EEA country units Opportunity SII ratio Target: 130% – 150% SII Ratio 1 170% SCR Aegon Target Group 140% SCR Americas Target* 350 – 450% life RBC US holding** -70% 2 Caution SII equivalence @250% 120 –
Slide 29: Increased Solvency II ratio
Capital update 29 Increased Solvency II ratio Management actions drive Solvency II ratio up Group Local solvency ~155% +2% +2% +5% (2%) (4%) 158% SII ratio ratio by unit US NL UK OF OF ~450% 154% 145% 17.7 17.8 RBC SII SII Management actions SCR SCR 11.4 11.3 Q1 Capital UK annuity Improvements Marke
Slide 30: Netherlands Solvency II refinements
Capital update 30 Netherlands Solvency II refinements Management actions improve Solvency II ratio What changed? Why change? Impact on ratio? • Additional interest rate hedges have • Reduce the sensitivity of the ratio for been implemented pre-Brexit changes in market conditions and volatility in st
Slide 31: Solvency II sensitivities updated
Capital update 31 Solvency II sensitivities updated Group sensitivities updated for NL hedging changes and UK divestment Solvency II sensitivities • Group Solvency II ratio well within target zone of (in percentage points) capital management policy Scenario Group US NL UK • Immaterial sensitivity to
Slide 32: Leverage and fixed charge coverage
Capital update 32 Leverage and fixed charge coverage Remain within target ranges • Gross financial leverage of 29.6% as of Q2 2016 - Leverage cut by ~25% since 2011 • Fixed charge coverage of 6.7x full year 2015 - Fixed charges reduced by more than 40% - Preferred dividend eliminated Gross leverage
Slide 33: Maturity schedule and treatment of debt instruments
Capital update 33 Maturity schedule and treatment of debt instruments • Solvency II treatment of outstanding debt instruments ► Perpetual securities are grandfathered as Tier 1 capital* ► Dated subordinated notes are grandfathered as Tier 2 capital • Trust pass-through securities and senior debt ins
Slide 34: Ample access to money and capital markets
Capital update 34 Ample access to money and capital markets Aegon NV & Aegon Funding Corp (debt) Asset backed financing USD 4.5 billion French, Euro and US commercial EUR 5.0 billion Covered Bond Program paper programs ‒ Aegon Bank USD 6.0 billion Euro MTN program SAECURE European registra
Slide 35: Q2 2016 Results
Appendix 35 Q2 2016 Results Helping people achieve a lifetime of financial security
Slide 36: Solid capital ratio despite volatile markets
Q2 2016 results 36 Solid capital ratio despite volatile markets Net loss of EUR 385 million mainly due to divestment of UK annuity book • Solvency II ratio increased to an estimated 158% as capital generation and management actions more than offset adverse market impacts • Underlying earnings before
Slide 37: Underlying earnings before tax
Q2 2016 results 37 Underlying earnings before tax Results impacted by adverse claims experience in the US • Lower Americas earnings mainly due to adverse claims experience, low interest rates and lower earnings from Variable Annuities • Higher earnings from Europe as a result of lower DPAC amortizat
Slide 38: Net loss mainly due to Other charges
Q2 2016 results 38 Net loss mainly due to Other charges UK annuity divestments and fair value items offset realized gains Underlying earnings to net income development in Q2 2016 (in EUR million) UEBT Q2 16 435 Fair value items Americas: Netherlands: Fair value items (378) • Alternative investments
Slide 39: Continued strong gross deposits
Q2 2016 results 39 Continued strong gross deposits Life sales reflects focus on profitability • Higher gross deposits driven by US retirement plans, asset management, savings deposits in NL and external growth of the platform business in the UK - Net deposits amounted to EUR 1.2 billion • New life s
Slide 40: Holding excess capital at EUR 1.1 billion
Q2 2016 results 40 Holding excess capital at EUR 1.1 billion Net dividends from the units offset capital return and holding expenses • Regular dividends supported by capital generated at the units • Dividends received from the Americas, CEE, Spain and Aegon Asset Management • Expected total 2016 cap
Slide 41: Q2 2016 Results - appendix
Appendix 41 Q2 2016 Results - appendix Helping people achieve a lifetime of financial security
Slide 42: Analyst & Investor conference
Q2 2016 results 42 Analyst & Investor conference Hosted in New York on Thursday December 8, 2016 • Please mark in your calendar • Invitation to follow soon
Slide 43: Aegon at a glance
Q2 2016 results 43 Aegon at a glance Focus History Employees Life insurance, pensions & Our roots date back to the Over 29,000 employees asset management for first half of the 19th century (June 30, 2016) 30 million customers 34% 9% Europe AAM Asia <1% Earnings Investments Paid out 57% Americas Unde
Slide 44: Responsible business
Q2 2016 results 44 Responsible business Embedded in our operations Our commitment: “To act responsibly and to create positive impact for all our stakeholders” Putting our customers at Having a responsible Empowering our Promoting retirement the center of what we do investments approach employees rea
Slide 45: Raising awareness
Q2 2016 results 45 Raising awareness Second quarter retirement research highlights Research publication Published the 5th Aegon Retirement Readiness survey covering 16,000 people in 15 countries. Global presence Launched new longevity institute in Brazil collaborating with the Aegon Center for Longe
Slide 46: General account investments
Q2 2016 results 46 General account investments By geography June 30, 2016 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 20,731 18,415 280 221 39,647 Investment grade corporates 42,015 5,808 3,401 - 51,223 High yield (and o
Slide 47: Structured assets and corporate bonds
Q2 2016 results 47 Structured assets and corporate bonds By rating June 30, 2016 amounts in EUR millions AAA AA A BBB <BBB NR Total Structured assets by rating Commercial MBS 4,322 946 254 88 132 - 5,741 Residential MBS 2,208 329 197 214 2,010 - 4,957 Non-housing related ABS 3,215 902 1,154 317 250
Slide 48: US energy & commodity exposure
Q2 2016 results 48 US energy & commodity exposure Direct and indirect by rating June 30, 2016 amounts in EUR millions Unrealized gain AAA AA A BBB <BBB/NR Total / (loss) Independent - 3 364 721 151 1,238 69 Oil field services - - 195 41 145 382 (19) Midstream - - 251 1,107 98 1,457 82 Integrated 2 5
Slide 49: Fair value items
Q2 2016 results 49 Fair value items Impacted by alternative investments and hedge programs Total of EUR (378) million FV hedging with FV hedging without accounting match accounting match FV investments FV other EUR (283) million EUR (74) million EUR (14) million EUR (7) million Derivatives ∆: EUR 1,
Slide 50: Underlying earnings
Q2 2016 results 50 Underlying earnings Declined to EUR 435 million Underlying earnings before tax • Lower earnings in Americas as a result of adverse Americas Europe claims experience, lower earnings from VA due to (in USD million) (in EUR million) reduction of closed block and lower margins and the
Slide 51: Gross deposits
Q2 2016 results 51 Gross deposits Increased to EUR 23.0 billion Gross deposits • Higher gross deposits in the Americas as a result Americas Europe of the acquisition of Mercer’s DC business, (in USD billion) (in EUR billion) partially offset by lower deposits in Variable Annuities 14.9 3.4 3.1 • Gro
Slide 52: New life sales
Q2 2016 results 52 New life sales Amounted to EUR 244 million • New life sales in the Americas decreased, driven by all product categories • New life sales in Europe were stable as higher sales in Turkey, Hungary and Spain were offset by lower sales in Poland and pensions in the Netherlands • New li
Slide 53: MCVNB of EUR 100 million
Q2 2016 results 53 MCVNB of EUR 100 million Impacted by margin pressure, low interest rates and methodology change • Lower MCVNB in the Americas as a higher contribution from life insurance was more than offset by a lower contribution from Variable Annuities • MCVNB in Europe down due to the exclusi
Slide 54: Operating expenses
Q2 2016 results 54 Operating expenses Stable at EUR 926 million Operating expenses • Operating expenses in the Americas decreased, Americas Europe as the benefit of cost savings programs was partly (in USD million) (in EUR million) offset by the Mercer acquisition and restructuring expenses • Operat
Slide 55: Capital generation and capital buffer
Q2 2016 results 55 Capital generation and capital buffer Impacted by adverse financial markets • Capital generation of EUR 0.3 billion, excluding market impacts of EUR (0.2) billion and one- time items of EUR 0.8 billion • Capital buffer in the holding increased to EUR 1.1 billion driven by net divi
Slide 56: Capital allocated to run-off businesses
Q2 2016 results 56 Capital allocated to run-off businesses Further reduced in 2016 • Current capital allocated to run-off businesses of USD 1.3 billion • Capital intensive run-off businesses negatively impact return on equity - Capital allocated to run-off businesses included in RoE calculations, bu
Slide 57: Main economic assumptions
Q2 2016 results 57 Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.10 n.a. 0.71 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 forward
Slide 58: Investing in Aegon
Q2 2016 results 58 Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA • Aegon ordinary shares ISIN NL0000303709 - Traded on Euronext Amsterdam since 1969 SEDOL 5927375NL Trading Platform Euronext Amsterdam and quoted in euros Country Netherlands • Aegon New York Registry Shares (NYRS) A
Slide 59: Disclaimer
59 Disclaimer 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 proporti
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