Aegon Ltd. · EURONEXT:AGN
Aegon — Q4 2007 Earnings Presentation
34 slides from Aegon's earnings presentation, Mar 6, 2008
Slide 1: Fourth Quarter 2007 Results
Fourth Quarter 2007 Results Don Shepard, CEO Eric Goodman, Investment Officer AEGON USA Analyst & Investor conference call March 6, 2008
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements Cautionary note regarding 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 ar
Slide 3: Strategic initiatives in 2007
Strategic initiatives in 2007 Distribution � US - Merrill Lynch � Taiwan - JV with Taishin � UK - Barclays � China - IFMC � Spain - Caja Cantabria Pensions & Retirement � Hungary – add-on acquisition of mandatory and voluntary pension fund International expansion � Romania – start of mandatory pensi
Slide 4: Solid quarter masked by one-offs in comparable period
Solid quarter masked by one-offs in comparable period � No material impairments reflecting high quality of investment portfolio � Net operating earnings declined due to currency and significant one-time tax benefits in 2006 � Solid business progress reflected in underlying earnings before tax, up 9%
Slide 5: Sales increases drive VNB growth in 2007
Sales increases drive VNB growth in 2007 � New life sales declined 8% due to lower sales in the UK and Spain and a weaker USD and GBP – at constant currency sales remained stable � Decline in deposits due to lower sales of institutional guaranteed products as deposits in 2006 were extraordinarily hi
Slide 6: Continued growth of revenue generating investments
Continued growth of revenue generating investments Revenue generating investments (EUR million) CAGR 10% at constant currency 8% 400,000 in EUR 350,000 300,000 250,000 YE04 YE05 YE06 YE07 � In EUR � Constant currency (EUR/USD conversion rate YE04: 1.3621; YE07: 1.4721) 6
Slide 7: Full year dividend increased by 13%
Full year dividend increased by 13% � Full year dividend increased by 13% to EUR 0.62 � Increased dividend reflects strong cash flow and capital position � Final dividend increased by 3% reflecting a more moderate growth rate after rebasing dividend over the past year Dividend (EUR cents) 0.62 0.55
Slide 8: Shareholders' equity development in 2007
Shareholders’ equity development in 2007 � Shareholders’ equity 72% of overall capital base comfortably above target of 70% Shareholders’ equity impacted by return of capital, revaluation of assets and currency movements EUR 1.9 billion returned 2,551 (2,164) to common shareholders (1,445) 18,605 (1
Slide 9: Investments
Investments Eric Goodman, Investment Officer AEGON USA
Slide 10: AEGON USA investment overview
AEGON USA investment overview Key investment themes from Q4 AEGON USA bond portfolio � Minimal credit impairments quality profile 31 December 2007 USD 95 billion � No impairments on subprime and other mortgage backed securities, BB B Below B although market values declined 3.6% 2.1% 0.4% as the real
Slide 11: Credit impairments were very low
Credit impairments were very low � Almost all fixed income instruments are held as Available For Sale securities and as such are only impaired through earnings if 1. we do not have the ability to hold, or 2. we intend to sell them, or 3. we expect to receive less than full principal and interest � D
Slide 12: No impairments on subprime portfolio
No impairments on subprime portfolio � Total Subprime and Second Lien portfolio of EUR 2.9 billion � Negligible subprime CDOs: EUR 21 million held at fair value � EUR 560 million are subordinated tranches of securitizations collateralized by floating rates subprime, and these represent AEGONs riskie
Slide 13: Prime and near-prime residential MBS
Prime and near-prime residential MBS � Almost all of AEGONs Prime and Near-prime Residential MBS are rated AAA � The Near-prime portfolio is composed of Fixed-rate Alt-A and Negative Amortization Floating-rate mortgage securitizations � A majority of the “near prime” portfolio is supersenior, meanin
Slide 14: Commercial mortgage backed securities
Commercial mortgage backed securities � The CMBS portfolio has been structured defensively, with over 80% AAA-rated securities � Below-AAA exposures have been positioned conservatively, particularly for 2006 and 2007 vintage deals, when standards were most aggressive � CMBS and Commercial Real Estat
Slide 15: Alternatives and derivatives earnings impact
Alternatives and derivatives earnings impact � Alternative investments, including hedge funds, private equity, and real estate provided better than expected returns, adding EUR 90 million to earnings � Credit spread widening produced EUR 50 million of mark-to-market losses in our credit derivatives
Slide 16: Credit derivatives exposures
Credit derivatives exposures Our credit derivatives are corporate credit exposures, not mortgage or subprime credit Q4 fair value Total fair value Notional value change at year-end (EUR billion) (EUR million) (EUR million) � Tranched Credit Protection – Or “Synthetic CDOs” (24) (30) 4.5 � Credit Def
Slide 17: No synthetic subprime CDOs
No synthetic subprime CDOs � No synthetic subprime or mortgage-related CDOs � Sold protection on very senior tranches of the CDX (index of 125 investment grade corporate bonds) � Average duration 4.7 years � Accounting for all credit derivatives is mark-to-market through operating earnings � Market
Slide 18: Conclusion
EGON _~— a! PY _~ ed —- Aiknowledge _ Conclusion Don Shepard, CEO
Slide 19: Profitable growth
Profitable growth Dividend Value of new business (EUR) (EUR million) 0.62 927 0.55 775 0.42 0.45 0.40 550 489 331 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 Internal Rate of Return 18.4% 14.5% 12.5% 12.4% 11.3% 2003 2004 2005 2006 2007 19
Slide 20: Successful expansion strategy
Successful expansion strategy 20
Slide 21: Conclusions
Conclusions � No material impairments in Q4 2007 - high quality investment portfolio � Solid fourth quarter masked by one-offs in Q4 2006 � Strong underlying growth in 2007 � Good sales and deposits growth in 2007 � Full year dividend increased 13% � Value of new business growth on track 21
Slide 22: Q&A
EGON Q&A
Slide 23: Thank you!
THANK YOU! For questions please contact AEGON Investor Relations P.O. Box 85 2501 CB The Hague The Netherlands P: +31 70 344 8305 F: +31 70 344 8445 E: gca-ir@aegon.com 23
Slide 24: Appendix
Appendix CEGON
Slide 25: Americas performance
Americas performance Net operating earnings Net underlying earnings up 1% up 29% � Savings and retirement deposits up (USD million) (USD million) 31% to USD 2.3 billion; pension deposits up 43% to USD 3.4 billion 551 558 555 � Total revenue generating 431 investments increase 14% to USD 326 billion,
Slide 26: The Netherlands performance
The Netherlands performance Net operating Net underlying earnings* earnings* � New life sales up 7% to EUR 72 (EUR million) (EUR million) million, driven by higher group pension and immediate annuity 117 167 sales 96 62 � Total revenue generating investments EUR 65.8 billion at 31 Dec 2007 4Q06 4Q07
Slide 27: United Kingdom performance
United Kingdom performance � New life sales down 4% to GBP Net operating earnings* (GBP million) 276 million; exceptional activity in 2006 due to Pension A-day 45 43 � Total revenue generating investments up 9% to GBP 53.2 billion 4Q06 4Q07 � Value of new business total GBP 157 million in 2007, up G
Slide 28: Other countries performance
Other countries performance � New life sales amounted to EUR 88 Net operating earnings* (EUR million) million, up 13% at constant 4Q06 4Q07 currency � Revenue generating investments EUR 11 billion, up 37% (4) � Successful start of mandatory pension fund in Romania, bringing (10) total number of CEE
Slide 29: Structured assets detail
Structured assets detail Mortgage-backed and Asset-backed Securities IFRS Book Value (EUR million) as of 31 December 2007 Ratings hierarchy of S&P, Moody’s, Unrealized Fitch, Internal, NAIC AAA <AAA Total gains / (losses) Total CMBS 3,759 778 4,536 (26) Agency MBS 1,074 0 1,074 5 Jumbos 1,147 22 1,1
Slide 30: Subprime unrealized losses
Subprime unrealized losses Amortized costs / (unrealized loss) (EUR million) 31 December 2007 Collateral Insured Senior Subordinated Sub/residual Total Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized costs loss costs loss costs loss costs loss
Slide 31: CDO summary
CDO summary � No purchases of ABS CDOs since 2001 � Therefore, negligible subprime exposure � Primarily corporate credit collateral Collateral by type EUR million Tranches by rating EUR million Leveraged bank loans 640 AAA 746 Corporate bonds 177 AA 196 Commercial real estate and CMBS 188 A 39 Asset
Slide 32: Sub-prime and second lien exposure
Sub-prime and second lien exposure Amortized costs (EUR million) as of 31 December 2007 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB Subprime 1st lien 734 336 26 45 - 1 - - 1,141 mortgages – fixed rate Subprime 1st lien 308 30 333 3
Slide 33: Sub-prime by vintage
Sub-prime by vintage Amortized costs - fixed (EUR million) as of 31 December 2007 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB 2003 & prior 261 204 1 2 - 1 - - 469 2004 77 20 20 36 - - - - 153 2005 146 - 5 7 - - - - 158 2006 125 17
Slide 34: Second lien by vintage
Second lien by vintage Amortized costs (EUR million) as of 31 December 2007 Ratings hierarchy of S&P, AAA AA Below Moody’s, Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB 2003 & prior 76 30 - 10 - 5 3 1 124 2004 - 43 - - - - - - 43 2005 9 65 - - - - - - 73 2006 - 142 - 32 - - - 3 1