Aegon Ltd. · EURONEXT:AGN
Aegon — Citigroup Financial Services Conference 2009
98 slides from Aegon's conference presentation, January 2009
Slide 1: Mark Mullin, President, AEGON Americas
Mark Mullin President, AEGON Americas Citigroup Financial Services Conference, New York January 2009 Unlocking the global potential 1
Slide 2: Key messages
Key messages Insurance industry attractive despite current challenges Capital scarcity will lead to more rational pricing for risks taken Insurance industry will focus on its core business again AEGON in a good position with focus on capital preservation AEGON has the right strategy in the current e
Slide 3: AEGON at a glance
AEGON at a glance AEGON conducts business in more Global operations than 20 countries around the world, - 40 million customers with major operations in the U.S., - 32,000 employees worldwide the Netherlands and the U.K. - EUR 350 billion in revenue generating investments AEGON Americas - Includes th
Slide 4: AEGON a pure life and pensions company
AEGON a pure life and pensions company Offering a wide range of life insurance, pension and long-term investment and savings products 3% 1% 17% Underlying earnings before tax 9M08 Life and protection Individual savings and retirement products 45% Pensions and asset management Institutional products
Slide 5: Global fundamentals look attractive
Global fundamentals look attractive Fundamental demographic and economic changes = Opportunity Increasing longevity Need for long and aging populations term protection Financial market volatility Need for accumulation products Reduced safety net from government, employers Need for financial and fami
Slide 6: High ambitions to drive sustainable profitable growth
High ambitions to drive sustainable profitable growth “To be a global leader in helping customers secure their financial futures” Leadership Secure financial futures o Focus on largest and fastest growing o Build on our expertise in life global profit pools and pensions o Build scale and competitive
Slide 7: Positive industry trends in US savings and protection markets
Positive industry trends in US savings and protection markets Lower US mortality rates; aging baby boomers AEGON Product manages Government retirement benefits diversification risks for customers continues to add inadequate; responsibility shifting and provides AEGON value a broad range to the indiv
Slide 8: 3 priorities designed to capitalize on long term growth opportunities
3 priorities designed to capitalize on long term growth opportunities Reallocate capital toward • Focus on retirement and pension products 1 businesses with higher • Execute selected securitizations and other capital efficiency transactions growth and returns • Expand distribution and continue build
Slide 9: Americas well diversified
Americas well diversified Underlying earnings 9M 08 before tax Embedded value FY 07 4% 14% Life and protection 23% Individual savings 46% and retirement 15% 42% Pension and asset management 6% Institutional 8% Life reinsurance 21% 21% • Retail businesses provide steady cash flow through market disru
Slide 10: Americas – aligned with the long term opportunities
Americas – aligned with the long term opportunities Life and Individual Savings Employer Solutions Alternative Protection and Retirement and Pensions Markets AEGON Financial Transamerica Capital Diversified Investment Institutional Markets Partners Management Advisors Division Monumental Transameric
Slide 11: Global financial turmoil
Global financial turmoil GDP growth expectations1 (EUR million) Total US credit market debt/GDP2 (%) US 350 2.0% Eurozone 300 1.0% UK 250 200 0.0% 150 100 -1.0% 1925 1930 1935 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 Jun 08 Jul 08 Aug 08 Sep 08 Oct 08 Nov 08 Credit sprea
Slide 12: Need for capital buffer
Insurance industry faces challenges globally Financial markets o Volatility o Illiquidity Increased cost of capital and less availability of capital o Closed capital markets Need for capital Regulators buffer o Focus on capital o Take a more Increased required capital conservative stance Customers o
Slide 13: Impact on AEGON — current priorities: Capital, Costs, Contingency
Impact on AEGON — current priorities Capital Costs Contingency The three Cs Long term Short term Overview Moving forward Conclusion fundamentals challenges Unlocking the global potential 13
Slide 14: Capital: improve capital efficiency
Capital: improve capital efficiency Optimize Capital releases from back book capital Reinsurance structure Insurance linked securities Reduce capital Equity risk intensity by further Interest rate risk reducing risks Credit risk Maximize Manage portfolio of risks diversification Reset retention limi
Slide 15: Capital: ongoing acceleration of de-risking and capital release
Capital: ongoing acceleration of de-risking and capital release Capital preservation and risk mitigation actions important to enhance capital buffer Completed execution EUR 729 million of capital preservation and risk mitigation actions; continued in Q4 to release EUR 600 - 800 million, including: o
Slide 16: Costs: reduce operating expenses
Costs: reduce operating expenses More than EUR 150 million in AEGON’s major operating units in 2009 Americas committed to cutting $140 million Category Savings Salary reductions 52 Restructuring / discontinued operations 41 IT efficiencies 28 Other 19 Total in USD 140 Total in EUR* 100 * Calculated
Slide 17: Contingency: strong capital position provides sufficient buffer
Contingency: strong capital position provides sufficient buffer Pro-forma September 30, 2008 post draw down Insurance Group Directive EUR 5.0 billion EUR 8.0 billion (IGD) surplus capital (160%) (195%) S&P risk-based insurance capital model excess EUR 312 million EUR 312 million capital in operating
Slide 18: Equity market sensitivity
Equity market sensitivity Based on equity markets as of September 30, 2008 Estimated impact on earnings Estimated impact on capital (12 month period, EUR million) (EUR million) Assumed Assumed equity market equity market decline of 20% 40% decline of 20% 40% -700 Direct Direct -900 Fees Fees DAC Gua
Slide 19: US variable annuity guarantees
US variable annuity guarantees Per September 30, 2008 Total % of Hedged Net amount Statutory fund fund value (USD billion) fund value at risk reserve value hedged Direct - GMIB 9.3 1.2* 13% 2.1 0.5 Direct - GMWB 5.5 5.5 100% 0.8 0.1 Reinsurance 8.7 8.2 94% 0.7 0.3 Total living benefits 23.5 14.9 63%
Slide 20: Variable annuity action steps
Variable annuity action steps May 2009 Jan 2009 Nov 2008 Will introduce significant product changes Implemented increased rider Investment mix benefit charge Complete repricing Benefit changes Benefit feature changes of 15 bps Products will continue to be subject to our strict risk management and pr
Slide 21: Active management of US investment portfolio
Active management of US investment portfolio Shifts in US investment portfolio* $119.2 billion as of September 30, 2008 Cash/Treasuries/Agency High Yield Corporate o Increased Cash position Emerging Markets Debt o IG Corporate bond actions: ABS – Reduced total exposure MBS & CMO – Increased diversif
Slide 22: Bond prices declined in all sectors
Bond prices declined in all sectors Percentage of Q4 07 Q3 08 portfolio US AFS bond portfolio Market value / Market value / amortized cost amortized cost amortized cost 9% Commercial MBS 99% 90% 2% Agency MBS 101% 97% 9% Non-agency RMBS and subprime* 93% 72% 9% Non-housing related asset-backed secur
Slide 23: AEGON's liquidity position remains very strong
AEGON’s liquidity position remains very strong Even under a prolonged stress environment AEGON unlikely to be a “forced seller” of securities into distressed markets Normal scenario Nightmare scenario Total AEGON liquidity (EUR million) Total AEGON liquidity (EUR million) Available Available 100 100
Slide 24: Proactive short term actions
Proactive short term actions Executing capital efficiency transactions across the organization Reducing additional risk from our balance sheet Cutting costs Implementing contingency plans Incorporating significant changes in our variable annuity products Actively managing our investment portfolio to
Slide 25: Business model provides a solid foundation
Business model provides a solid foundation Liability creation & Capital & risk Asset management management management o Local knowledge o Local risk decisions o Liability-driven within integrated investment global risk framework management People Knowledgeable and entrepreneurial Long term Short ter
Slide 26: America's business portfolio review
America’s business portfolio review On-going portfolio review is occurring Assess the economic impact on our business units – is it cyclical or structural Evaluate how the competitive landscape has changed Evaluate impact on distribution and partners Evaluate impact on customer needs and preferences
Slide 27: In conclusion....
In conclusion…. AEGON is proactively addressing the challenges resulting from the current environment and is positioned to benefit from future opportunities Insurance industry attractive despite current challenges Capital scarcity will lead to more rational pricing for risks taken Insurance industry
Slide 28: Q&A
Q&A Unlocking the global potential 28
Slide 29: Upcoming events
Upcoming events March 12, 2009 AEGON Full year 2008 results April 22, 2009 AEGON Annual General Meeting May 14, 2009 AEGON Q1 2009 results and EV 2008 June 9 and 10, 2009 AEGON Analyst and Investor Conference, London August 13, 2009 AEGON Q2 2009 results November 12, 2009 AEGON Q3 2009 results Decem
Slide 30: 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 31: For questions please contact Investor Relations
Unlocking the global potential For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Unlocking the global potential 31
Slide 32: Appendix
Appendix Slide I Management of US general account 33 II US investment portfolio detail 47 Ill UK investment portfolio detail 68 lV Netherlands investment portfolio detail 74 V Other countries investment portfolio detail 77 VI 3Q08 results 79 VII Capital 96 Unlocking the global potential 32
Slide 33: Appendix I: Management of US general account
Appendix I Management of US general account Unlocking the global potential 33
Slide 34: Q3: an extraordinary quarter
Q3: an extraordinary quarter o The Q3 environment - Acceleration of Debt Crisis - Failures of major financial institutions - Deleveraging of the financial sector - Darkening economic outlook - Gapping credit spreads and declining non-government bond prices - Increasingly aggressive global policy res
Slide 35: Credit losses in the Americas remain manageable
Credit losses in the Americas remain manageable Credit losses in bps of assets (includes only bonds and mortgages) 82 64 54 48 44 44 37 average of 25 bps 27 25 since 1990 17 17 9 8 1 2 4 2 -6 -2 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 YTD 2008 o Duri
Slide 36: US fair value items: credit derivatives
US fair value items: credit derivatives o Our credit derivatives are corporate credit exposures, not mortgage or subprime credit o Risk of permanent loss on our tranched credit protection is very low due to seniority Q3 Q3 YTD Notional value fair value change fair value change Tranched Credit Protec
Slide 37: Unrealized losses
Unrealized losses The revaluation account increased by EUR 2.5 billion in Q3, due to the increase in unrealized losses in AFS bonds o Why such a large change? o Is it consistent with generic market changes or is it idiosyncratic? o Does it portend large future impairments? Unlocking the global poten
Slide 38: Why such a large change in unrealized losses?
Why such a large change in unrealized losses? o As a life insurer, AEGON invests in long-term, investment grade bonds to match long-term liabilities o Long-term bond prices are very sensitive to changes in discount rates, and market yields have been rising sharply for all non-government bonds o Spik
Slide 39: Bond prices declined in all sectors
Bond prices declined in all sectors Percentage of Q3 08 Q2 08 portfolio US AFS bond portfolio Market value / Market value / amortized cost amortized cost amortized cost 9% Commercial MBS 90% 95% 2% Agency MBS 97% 100% 9% Non-agency RMBS and subprime 72% 79% 9% Non-housing related asset-backed securi
Slide 40: Generic or idiosyncratic?
Generic or idiosyncratic? o Generic investment grade interest rates rose by 140 to 190 basis points – AEGON USA’s portfolio market yield rose from 7.01 to 8.51% during Q3, or 150 basis points o Generic investment grade bond prices fell by 5 to 8% – AEGON USA’s AFS bond portfolio prices declined from
Slide 41: Future impairments?
Future impairments? o Since 1970, the relationship between investment grade credit spreads and subsequent impairments has been weak BBB spreads sorted lowest to highest with corresponding 1, 3, 5 year default losses for the period 1970-2007 1,2 4% 3% 2% 1% 0% 1997 1994 1996 1995 1992 1993 1998 1989
Slide 42: Future impairments?
Future impairments? o During the Depression, some correlation was seen, but milder than one might have guessed BBB spreads sorted lowest to highest with corresponding 1 year BBB default losses for the corresponding period 1920-2007 1,2 6% 5% 4% 3% 2% 1% 0% 1965 1955 1956 1982 1946 1950 1959 1988 196
Slide 43: Significant shift into higher rated assets
Significant shift into higher rated assets Subprime in US investment portfolio o As stated in previous EUR 2.7 billion as per September 30, 2008 presentations, AEGON USA has restructured its asset portfolio defensively in numerous ways: – Reducing and upgrading corporate exposures 25% 40% 65% 73% 74
Slide 44: Reduced exposure to financials
Reduced exposure to financials Financials as % of general account o Actively reduced financial assets in US investment portfolio sector exposure, esp. in 2007 EUR 11.2 billion as per September 30, 2008 and 2008 16.4% 15.7% 14.6% 12.3% 2005 2006 2007 Q3 YTD 2008 Corporate high yield as % of general a
Slide 45: Sector-specific risk mitigants
Sector-specific risk mitigants o Subprime: The portion of the subprime portfolio from which most impairments will come is the hybrid mezzanine sector, which is USD 731 million book value, and has a remaining unrealized loss of USD 449 million. Other portions are expected to avoid significant princip
Slide 46: Investments summary
Investments summary o The large market price change in the AEGON AFS portfolio was consistent with generic interest rate increases in Q3 o The macroeconomic environment is highly stressed. Credit spreads presage a period of elevated impairments but AEGON expects them to remain at manageable levels d
Slide 47: Appendix II: US investment portfolio detail
Appendix II US investment portfolio detail September 30, 2008 Unlocking the global potential 47
Slide 48: US general account well diversified
US general account well diversified Total investments General account EUR 206 billion EUR 85.2 billion Loans 16% Off balance sheet Other 37% 11% Real estate General <1% account Shares 41% 1% Bonds Policyholder 72% account 22% Note: data as per September 30, 2008 Unlocking the global potential 48
Slide 49: Asset allocation is typical for the US life industry
Asset allocation is typical for the US life industry Total invested assets of EUR 83.3 billion* Asset allocation of USD 119.2 billion – September 30, 2008 45,1% 46,0% AEGON Industry 18,3% 14,9% 13,6%13,3% 11,4% 6,7% 7,1% 5,6% 5,4% 6,1% 2,0% 1,9% 0,9% 1,7% Cash & Govt Corp. Bonds EM Bonds MBS/ABS CMB
Slide 50: 94% of US bond portfolio is investment grade
94% of US bond portfolio is investment grade AEGON US bond portfolio quality profile EUR 61 billion (USD 87 billion)* – September 30, 2008 B Below B BB 2.0% 0.4% 3.7% BBB 31.3% A & above 62.6% * Based on market value of bonds – IFRS basis; Ratings based on hierarchy of S&P, Moody’s, Fitch, Internal,
Slide 51: Credit quality is typical for the US industry
Credit quality is typical for the US industry AEGON US bond portfolio quality profile EUR 61 billion (USD 87 billion)* – September 30, 2008 67,2% 62.6% AEGON Industry 31,3% 26,0% 3,7% 3,9% 2,4% 2,9% A & above BBB BB B & below Industry data source: Lehman Brothers 2007 annual survey of top 20 Insuran
Slide 52: Corporate bonds breakdown AEGON USA
Corporate bonds breakdown AEGON USA Total corporate bonds USD 54 billion (per September 30, 2008) Utility other 3% Utility 14.3% Natural gas 32% Sovereign 0.5% Electric 65% Technology Transportation Basic industry 6% 6% 10% Other industry Capital goods 1% 13% Energy Industrial 11% 60.4% Communicatio
Slide 53: US corporate bonds by quality and sector
US corporate bonds by quality and sector AEGON US corporate bond portfolio EUR 38 billion (USD 54 billion)* – September 30, 2008 BIG AAA AA Utility 7,5% 1,8% 10,0% 14,3% Financial 24,8% Sovereign 0.5% BBB A 43,9% 36,8% Industrial 60,4% Ratings are based on a hierarchy of S&P, Moody’s, Fitch, Interna
Slide 54: US corporate bonds by quality and sector
US corporate bonds by quality and sector (in EUR million) AAA AA A BBB <BBB Total Financial 393 2,406 4,576 1,812 153 9,340 Industrial 241 1,279 7,606 11,343 2,237 22,708 Sovereign 9 52 119 0 0 180 Utility 31 33 1,526 3,345 450 5,385 Total 675 3,771 13,828 16,500 2,839 37,612 AAA AA A BBB <BBB Total
Slide 55: Structured assets of US
Structured assets of US AEGON US structured assets portfolio quality profile EUR 21.5 billion (USD 30.7 billion)* – September 30, 2008 BB & Lower BBB Housing- 2.4% CDO 4,9% 7.5% related ABS A 13,3% CMBS 4.7% 27,6% AA 11.7% Non- Housing- related ABS AAA 27,9% 73.7% Residential MBS 26,3% High quality
Slide 56: US structured assets detail
US structured assets detail Mortgage-backed and Asset-backed Securities Amortized costs as of September 30, 2008 (EUR million) Unrealized Unrealized Ratings hierarchy of S&P, Moody’s, Fitch, Internal, NAIC AAA <AAA Total gains / change from (losses) June 30, 2008 Total CMBS 5,103 831 5,934 (528) (28
Slide 57: US commercial mortgage backed securities
US commercial mortgage backed securities o The CMBS portfolio has been structured defensively, with over 80% AAA-rated securities o Below-AAA exposures have been positioned conservatively, particularly for 2006 and 2007 vintage deals, when standards were most aggressive o CMBS and Commercial Real Es
Slide 58: AEGON USA CMBS portfolio
AEGON USA CMBS portfolio Vintage Year Capital Structure Classification ($ in millions by Amortized Cost) Amortized Unrealized CMBS -- Total Exposure 2008 2007 2006 2005 Pre-2005 Cost Fair Value Gain/(Loss) AAA $390 $1,959 $1,877 $847 $2,377 $7,449 $6,872 ($577) AA - 114 220 121 380 835 681 (154) A 4
Slide 59: US prime and near-prime residential MBS
US prime and near-prime residential MBS o Almost all of AEGON’s Prime and Near-prime Residential MBS are rated AAA o The Near-prime portfolio is composed of primarily Fixed-rate Alt-A and Negative Amortization Floating-rate mortgage securitizations o A majority of the “near prime” portfolio is super
Slide 60: US subprime summary
US subprime summary o Negligible subprime CDOs: EUR 17 million held at fair value o Senior subprime tranches hold up well under stress tests, and are unlikely to be permanently impaired o EUR 511 million are mezzanine tranches of securitizations collateralized by subprime hybrid-ARM loans, and these
Slide 61: US subprime unrealized losses
US subprime unrealized losses Amortized costs / (unrealized loss) September 30, 2008 (EUR million) Collateral Insured Senior Subordinated Sub/residual Total Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized Amortized Unrealized costs loss costs loss costs loss costs
Slide 62: US sub-prime and second lien exposure
US sub-prime and second lien exposure Amortized costs as of September 30, 2008 (EUR million) Ratings hierarchy of S&P, AAA AA AA- A BBB+ BBB BBB- <BBB Moody’s, Fitch, Internal, NAIC AAA wrapped AA+ AA wrapped wrapped A+ A wrapped wrapped BBB wrapped BBB- wrapped <BBB wrapped Total Subprime 1st lien
Slide 63: US sub-prime by vintage
US sub-prime by vintage Amortized costs - fixed as of September 30, 2008 (EUR million) Ratings hierarchy of S&P, Moody’s, AAA AA Below Fitch, Internal, NAIC AAA AA+ AA A BBB Total wrapped wrapped BBB 2004 & prior 326 152 14 33 59 1 - - 584 2005 150 - 5 6 - - - - 160 2006 105 - 1 - 17 - - 22 145 2007
Slide 64: US second lien by vintage
US second lien by vintage Amortized costs as of September 30, 2008 (EUR million) Ratings hierarchy of S&P, Moody’s, Fitch, Internal, AAA AA AA- A BBB BB- Below <BBB Total NAIC AAA wrapped AA wrapped wrapped A wrapped BBB wrapped wrapped BBB wrapped 2004 & prior 66 8 6 28 6 4 - 3 9 14 - - 144 2005 5
Slide 65: US CDO summary
US CDO summary o No purchases of ABS CDOs since 2001 o Therefore, negligible subprime exposure o Primarily corporate credit collateral Collateral by type EUR million Tranches by rating EUR million Leveraged bank loans 704 AAA 756 Corporate bonds 145 AA 226 Commercial real estate and CMBS 192 A 37 As
Slide 66: No synthetic subprime CDO's
No synthetic subprime CDO’s US investment portfolio detail o No synthetic subprime or mortgage-related CDOs o Sold protection primarily on very senior tranches of the CDX (index of 125 investment grade corporate bonds) o Accounting for all credit derivatives is mark to market through earnings o Mark
Slide 67: Market movement Q3
Market movement Q3 US investment portfolio detail o During Q3, non-government investment grade bonds’ - Yields rose by 140 to 190 basis points - Prices fell by 5% to 8% - Credit spreads widened by 170 to 250 basis points Credit Spreads Yield to Maturity Price (% of Par) Lehman Index Jun 30 Sep 30 ∆
Slide 68: Appendix III: UK investment portfolio detail
Appendix Ill UK investment portfolio detail September 30, 2008 Unlocking the global potential 68
Slide 69: UK general account mainly bonds
UK general account mainly bonds Total investments General account EUR 60 billion EUR 6 billion Shares Loans 1% <1% Off balance sheet 5% General account Policyholder 10% account Bonds 85% 99% Note: data as per September 30, 2008 Unlocking the global potential 69
Slide 70: UK general account portfolio
UK general account portfolio Percentage of Market value / UK general account* book value amortized cost 5% Asset backed securities 89% 1% Basic industries 90% 7% Communications 88% 7% Consumer, cyclical 92% 2% Consumer, non-cyclical 92% 3% Energy 95% 48% Financial 84% 11% Government 98% 7% Industria
Slide 71: Rating split of UK general account
Rating split of UK general account o The rating split of the UK general account demonstrates the conservative positioning of our portfolio o A downgrade below investment grade is a trigger for considering a sale o Other main trigger being concerns about the credit Market value / Index Fund Differenc
Slide 72: UK investments conservatively positioned
UK investments conservatively positioned The UK general account is conservatively positioned versus the iBoxx corporate bond index for all investment grade corporates rated AA to BBB Index Fund Difference Sector split* % % % Non-financials 31% 35% 4% Asset/mortgage-backed 10% 8% -2% Sub-sovereigns 3
Slide 73: Comfortable with our exposure to UK financials
Comfortable with our exposure to UK financials o We have been cautious on banks and are therefore underweight in our portfolio Market value / Index Fund Difference Financials break down* amortized cost % % % Banks 83% 37% 25% -13% Insurance 85% 10% 12% 2% Other financial 87% 9% 8% 0% Total 84% 56% 4
Slide 74: Appendix IV: Netherlands investment portfolio detail
Appendix lV Netherlands investment portfolio detail September 30, 2008 Unlocking the global potential 74
Slide 75: Dutch general account well diversified
Dutch general account well diversified Total investments General account EUR 63 billion EUR 31 billion Off balance Loans sheet 32% 19% Other <1% Real estate 7% General account Shares 50% 5% Policyholder account Bonds 31% 55% Note: data as per September 30, 2008 Unlocking the global potential 75
Slide 76: All collateralized assets investment grade
All collateralized assets investment grade Netherlands investment portfolio detail External ratings hierarchy of S&P, Market Total Unrealized Moody’s, Fitch AAA AA A BBB <BBB value / book (all figures in EUR million) exposure loss value (%) ABS 147 11 15 0 0 173 -13 92% RMBS 970 14 3 0 0 987 -12 99%
Slide 77: Appendix V: Other countries investment portfolio detail
Appendix V Other countries investment portfolio detail September 30, 2008 Unlocking the global potential 77
Slide 78: Other countries general account mainly bonds
Other countries general account mainly bonds Total investments General account EUR 14 billion EUR 5 billion Off balance Loans sheet 13% 44% Other 2% General account Shares 38% 3% Bonds 82% Policyholder account 18% 18% Note: data as per September 30, 2008 Unlocking the global potential 78
Slide 79: Appendix VI: 3Q08 results
Appendix VI 3Q08 results Unlocking the global potential 79
Slide 80: Underlying earnings impacted by world financial markets turmoil
Underlying earnings impacted by world financial markets turmoil o Underlying earnings before tax in Q3 impacted by – lower fees in US and UK – reserve strengthening, mainly related to VA’s sold pre-2004 in US – higher mortality charges in US life reinsurance – provisioning in NL for unit linked poli
Slide 81: Financial markets and impairments had a negative impact
Financial markets and impairments had a negative impact o Net income mainly impacted by underperformance of fair value items and impairment charges – Impairment charges in Q3 mainly related to Lehman Brothers, Washington Mutual (EUR 336 million) and US housing related asset-backed securities (EUR 46
Slide 82: Fair value items performance
Fair value items performance Total underperformance of fair value items (EUR million) Americas Netherlands Holding Total Canadian segregated funds (41) Alternative investments** (224) (384) Total return annuities* (61) VA GMWB* (60) Credit derivatives (67) 123 (54) Private equity Debt held at FV * R
Slide 83: Americas – net deposits of USD 3 billion
Americas – net deposits of USD 3 billion o Fundamentals of business remain Underlying earnings before tax (USD million) intact but results impacted by financial 699 markets turmoil 578 o Economic downturn impacted sales of high net worth and middle market products Q3 07 Q3 08 o Very strong FA deposi
Slide 84: The Netherlands – individual life sales up 10%
The Netherlands – individual life sales up 10% o Underlying earnings declined to Underlying earnings before tax (EUR million) EUR 74 million, mainly due to costs of modifying unit-linked insurance 107 products and charges related to a 74 group of pension products o Life sales down 46%, due to slowdo
Slide 85: United Kingdom – continued strong sales
United Kingdom – continued strong sales o Sales growth across most lines of Underlying earnings before tax (GBP million) businesses o Underlying earnings decline due to 46 lower financial markets and 28 investments for growth Q3 07 Q3 08 o VNB up 13% on higher margins and volumes New life sales over
Slide 86: Other countries – strong growth of deposits
Other countries – strong growth of deposits o Strong increase in deposits driven by Underlying earnings before tax (EUR million) retail mutual funds and variable annuity sales in Asia 55 o Weakness in financial markets 42 resulted in decline in life sales o Underlying earnings in Central & Eastern E
Slide 87: Excess capital roll-forward
Excess capital roll-forward Excess capital in operating units development Q3 2008 (EUR million) 729 (315) 842 (662) (313) (29) 312 59 Q2 08 Excess Estimated Investments in Capital Dividend paid Change in Other Q3 08 Excess Capital Statutory country units preservation to holding target capital (inclu
Slide 88: Shareholders' equity development
Shareholders’ equity development o Shareholders’ equity excluding revaluation reserve is 71.5% of total capital base – above target o Decline in revaluation reserves driven by wider credit spreads o Revaluation reserve stands at negative EUR 5.5 billion Shareholders’ equity (EUR million) 11.621 (329
Slide 89: Calculation of financial flexibility
Calculation of financial flexibility Financial flexibility (EUR billion) (EUR million) 1.8 Shareholders’ equity 9,412 Revaluation reserve 5,458 Shareholders’ equity 14,870 excl. revaluation reserve Group equity 19,232 Capital leverage 1,568 0.8 Total capital base 20,800 Target is minimum 70% of tota
Slide 90: Contingency: equity market sensitivity
Contingency: equity market sensitivity Based on equity markets as of September 30, 2008 Estimated impact on earnings Estimated impact on capital (12 month period, EUR million) (EUR million) Assumed Assumed equity market equity market decline of 20% 40% decline of 20% 40% -700 Direct Direct -900 Fees
Slide 91: US variable annuity guarantees
US variable annuity guarantees Per September 30, 2008 Total % of Hedged Net amount Statutory fund fund value (USD billion) fund value at risk reserve value hedged Direct - GMIB 9.3 1.2* 13% 2.1 0.5 Direct - GMWB 5.5 5.5 100% 0.8 0.1 Reinsurance 8.7 8.2 94% 0.7 0.3 Total living benefits 23.5 14.9 63%
Slide 92: Interest rate sensitivity
Interest rate sensitivity Based on interest rates as of September 30, 2008 Impact on earnings Impact on capital (12 month period, EUR million) (EUR million) Assumed* Assumed* interest rate interest rate decline of 1% 2% decline of 1% 2% 270 175 -250 -450 o Lower funding costs o Reserve strengthening
Slide 93: Limited DAC at risk, only 11% of DAC related to US annuities
Limited DAC at risk, only 11% of DAC related to US annuities DAC per line of business Other Americas Netherlands UK Total countries Life & 41% 5% 2% 4% 53% protection Ind. savings 11% 11% & retirement Pensions & 1% 27% 27% asset man. Institutional 2% 2% products Life 7% 7% reinsurance Total 61% 6% 2
Slide 94: Impact of potential credit impairments manageable
Impact of potential credit impairments manageable Impact on IFRS net income Impact on available capital Impact on Impact on IFRS net IFRS net available available Losses DAC offset Taxes income income Losses DAC offset Taxes capital capital No DAC offset -445 -550 -624 -780 336 -1.200 420 -1.200 240
Slide 95: Strong liquidity position
Strong liquidity position Even under a prolonged stress environment AEGON unlikely to be a “forced seller” of securities into distressed markets Liquidity management Stress scenario Assumptions: o Extreme possibility of ‘frozen’ markets for (EUR billion) years anticipated 100 o Impaired capital mark
Slide 96: Appendix VII: Capital
Appendix VII Capital Unlocking the global potential 96
Slide 97: AEGON secured additional core capital of EUR 3 billion
AEGON secured additional core capital of EUR 3 billion Capital facility EUR 3 billion Public Market Vereniging AEGON Dutch State EUR ~89% of ~11% of 100% of Non-voting securities EUR common common preferred shares shares shares EUR 3 billion AEGON N.V. Unlocking the global potential 97
Slide 98: Capital position
Capital position AEGON to reinforce capital buffer significantly above AA level requirements Expected June 30, 2008 September 30, 2008 changes in Q4 + Underlying Capital Base Ratio earnings 74% 71.5% (debt / equity ratio) - Market S&P risk-based insurance movements capital model excess EUR 842 milli