Aegon Ltd. · EURONEXT:AGN
Aegon — H1 2019 Earnings Presentation
37 slides from Aegon's earnings presentation, Aug 15, 2019
Slide 1: 1H 2019 Results
1H 2019 Results Alex Wynaendts CEO Matt Rider CFO August 15, 2019 Helping people achieve a lifetime of financial security
Slide 2: First step in delivery of 2019 – 2021 targets
First step in delivery of 2019 – 2021 targets Target delivery Targets 2019 - 2021 Results 1H 2019 Normalized capital generation1 EUR 4.1 billion cumulative for 2019 – 2021 EUR 714 million +20% vs 1H18 Dividend pay-out ratio Of normalized capital generation1, 2 45 – 55 % assessed at full year 43% f
Slide 3: Significant progress in all parts of the portfolio
Significant progress in all parts of the portfolio Portfolio actions 1H19 by strategic category Underlying earnings before tax (in EUR million, 1H19) Manage for Value Drive for Growth • NL Life: Started transfer of • US: Increased business focus through organizational administration of defined benef
Slide 4: Capital generation and new business strain in line with 2019 – 2021 targets
Capital generation and new business strain in line with 2019 – 2021 targets Key portfolio metrics • Strong normalized capital generation in all strategic portfolio categories supported by inforce actions • Investing the vast majority of new business strain in growth in Drive for Growth category - In
Slide 5: Net outflows despite higher gross deposits
Net outflows despite higher gross deposits Deposits Gross deposits Net deposits (in EUR billion) (in EUR billion) (13) 66 64 65 4 59 58 11 (4) 8 (3) 24 37 32 33 (9) 27 3 3 3 3 (2) (3) 13 12 10 (4) (7) (8) (2) 13 12 (27) (1) 22 16 20 18 22 1H17 2H17 1H18 2H18 1H19 1H17 2H17 1H18 2H18 1H19 • US: Retir
Slide 6: Life and protection sales impacted by headwinds and product exits
Life and protection sales impacted by headwinds and product exits Insurance sales development New Life sales New business in A&H and P&C (APE, in EUR million) (new premium production, in EUR million) 469 427 530 422 398 405 86 8 65 70 52 67 80 132 354 141 140 138 137 4 274 68 442 81 4 155 182 251 22
Slide 7: Clear actions to address current challenges
Clear actions to address current challenges Group challenges and key actions Current challenges Key actions Financial markets Low interest rates put Variable Annuity • Balancing competitive position with profitability of and Life sales under pressure new sales Dislocated credit spreads impact capita
Slide 8: Improved commercial momentum while investing in customer services
Improved commercial momentum while investing in customer services Deep dive: US Workplace Solutions Organizational realignment Commercial momentum Written sales Retirement Plans • Combined Retirement Plans, employee (in USD billion) benefits and Stable Value Solutions 9.9 under one management team •
Slide 9: Increasing market shares for core products
Increasing market shares for core products Deep dive: US Individual Solutions Organizational realignment Commercial momentum in strategic products Market shares1 • Provide Variable and Fixed Annuities, Life, Mutual Funds and Accident & Health solutions by one 6.7% 4Q17 4Q18 1Q19 6.3% dedicated leade
Slide 10: 1H 2019 Financials
1H 2019 Financials EGON
Slide 11: Financial highlights 1H 2019
Financial highlights 1H 2019 Capital generation IFRS Capital position and dividend Underlying earnings Group solvency ratio Capital generation EUR 1,010 million 197% EUR 714 million -5% compared with 1H18 -14pp compared with YE18 Excl. one-time items and market impacts Net income Holding excess cash
Slide 12: Group Solvency II ratio of 197%
Group Solvency II ratio of 197% OF and SCR development (in EUR billion) • Expected return (+10%) reflects strong business performance SII 211% +10% -4% -15% -9% +3% 197% • Capital return (-4%) primarily driven by external dividends to shareholders • Market variances (-15%) mainly driven by adverse c
Slide 13: Strong capital positions US and UK; NL in retention zone
Strong capital positions US and UK; NL in retention zone Local solvency ratio by unit 1H19 472% • Ratio increase mainly from retained capital generation and favorable one-time items 2H18 • Benefit from higher equity markets more than offset by the impact from lower 465% US interest rates RBC 1H18 49
Slide 14: Credit spread mismatch impacts Dutch capital position
Credit spread mismatch impacts Dutch capital position Spread impact on NL Solvency II • Solvency II ratio of Aegon NL declined to 152% in 1H 2019 mainly driven by market movements. Adverse spread movements on both assets and insurance liabilities reduced Own Funds by EUR 1.3 billion - Spread widenin
Slide 15: Dutch mortgage spreads widened to historically high levels
Dutch mortgage spreads widened to historically high levels Dutch mortgage spreads (in basis points) • In 1H 2019, mortgage spreads increased to 171bps as a 250 result of a strong decrease in the risk-free interest rates which has not yet been reflected in commercial tariffs 200 • Mortgages continue
Slide 16: Well-managed capital sensitivities
1H 2018 Results Well-managed capital sensitivities Solvency II sensitivities (in percentage points, 1H 2019) Scenario Group US NL UK Equity markets +25% +13% +35% +4% -4% Equity markets -25% -14% -25% -8% -3% Interest rates +50 bps +6% +7% +6% +2% Interest rates -50 bps -8% -13% -4% -1% Credit sprea
Slide 17: Lower underlying earnings mainly driven by Retirement Plans and Variable Annuities
Lower underlying earnings mainly driven by Retirement Plans and Variable Annuities in US and AAM Underlying earnings before tax (in EUR million) UEBT 1,064 1H18 • Retirement Plans and Variable Annuities in US reported lower fee income from lower average US Retirement Plans and VA (75) balances and i
Slide 18: Net income amounts to EUR 618 million
Net income amounts to EUR 618 million Underlying earnings to net income development in 1H19 (in EUR million) UEBT 1H19 1,010 Fair value items Fair value losses mainly driven by a shortfall in the Liability Fair value items (394) Adequacy Test (LAT) in NL as a result of adverse credit spread movement
Slide 19: Fair value items in NL driven by spread movements
Fair value items in NL driven by spread movements • Liability Adequacy Test (LAT) is performed to assess the adequacy of insurance liabilities on a market consistent basis 1 • Credit spread movements drove LAT breakage in 1H 2019 • Negative impact interest rate movements on LAT sufficiency was offse
Slide 20: Well diversified remittances and capital generation
Well diversified remittances and capital generation Capital generation and gross remittances (1H19, in EUR million) Normalized Gross Region capital remittances generation1 • Normalized capital generation and Americas 519 397 remittances from United States remained Netherlands 202 - strong United Kin
Slide 21: Holding excess cash remains at comfortable level above target range
Holding excess cash remains at comfortable level slightly above EUR 1 – 1.5 billion target range Holding excess cash • Gross remittances of EUR 765 million included a special dividend of EUR 112 million from the United Kingdom and EUR 131 million proceeds from the divestment of Czech Republic and Sl
Slide 22: Delivering on our targets with increasing returns to shareholders
Delivering on our targets with increasing returns to shareholders Dividend EUR 0.15 DPS EUR 765 million 43 % +7% vs. 1H 2018 >50% of gross remittances Dividend pay-out ratio of guidance for 2019 normalized capital generation1; full-year target of 45 – 55% 1. Capital generation excluding market impac
Slide 23: Appendix
Appendix For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Helping people achieve a lifetime of financial security
Slide 24: Aegon at a glance
Aegon at a glance Earnings What we do Underlying earnings before tax Life insurance, pensions & asset management for approximately €1,010 million (1H19) 28.5 million customers Deposits (YE18) Asia Gross deposits€65 billion 3% Net deposits €(2.7) billion NL (1H19) History Americas 30% Our roots date
Slide 25: Commercial momentum improves in the US, UK completes Cofunds integration
Commercial momentum improves in the US, and UK completes last part of Cofunds integration Drive for Growth businesses1 Normalized capital generation2 Underlying earnings before tax Americas • Increased organizational business (in EUR billion) (in EUR million) focus with two dedicated 661 leadership
Slide 26: Disciplined capital allocation in growth markets, Japan JV divestment, Mexico wind-down
Disciplined capital allocation in growth markets, divesting stake in Japanese JV, and wind-down of Mexico Scale-up for the Future businesses1 Normalized capital generation2 Underlying earnings before tax Americas • Mutual Funds: Lower fee income (in EUR billion) (in EUR million) from lower balances
Slide 27: Actively managing capital efficiency in Manage for Value businesses
Actively managing capital efficiency in Manage for Value businesses Manage for Value businesses1 Normalized capital generation2 Underlying earnings before tax Americas • Fixed Annuities: Favorable (in EUR billion) (in EUR million) intangible adjustments and improved persistency, both driven 417 by l
Slide 28: Conversion of RBC to Solvency II
Conversion of RBC to Solvency II Next review in 2H19 • Conversion methodology for US operations has been agreed with DNB, to be reviewed annually • Calibration of US insurance entities followed by subsequent adjustment for US debt and Holding items - Calibration of US insurance entities is consisten
Slide 29: IFRS sensitivity towards market movements
IFRS sensitivity towards market movements • As a result of the LAT deficiency, future IFRS results in Aegon NL will become more sensitive to credit spread movements, especially in case basis risk materializes • Interest rate movements will have limited impact, as the interest rate risk is economical
Slide 30: Updated US macro equity tail hedge sensitivities
Updated US macro equity tail hedge sensitivities Macro hedge target: RBC Capital RBC sensitivities to declining equity markets 0% • Equity tail hedge to protect statutory capital remains the purpose of the macro hedge program • Base run-rate costs of the program have increased due to -50% addition o
Slide 31: Long Term Care continues to develop in line with expectations
Long Term Care continues to develop in line with expectations LTC actual versus expected claims ratio (in %, in USD million, actively managed block) • IFRS assumptions are reviewed in detail annually; management monitors monthly emerging 140% 80 experience 130% 60 • IFRS results are the leading indi
Slide 32: LTC management actions support reserve sufficiency
LTC management actions support reserve sufficiency LTC reserves (in USD billion, at June 30, 2019) 10.6 1.1 2.3 1.3 6.4 6.1 Adequacy of statutory reserves supported by management actions 3 0.5 Management actions 5.9 2 IFRS reserves NPV rate Investment Reinsurance IFRS Statutory 1 excl. mgmt actions
Slide 33: Leverage ratio remains within target range of 26 – 30%
Leverage ratio remains within target range of 26 – 30% Gross financial leverage ratio (in %) 32.2% 30.7% • Gross financial leverage ratio at 1H19 within target zone 29.2% 29.3% Target zone • Slight increase in gross financial leverage as positive 26 – 30% impact of retained earnings was more than of
Slide 34: General account investments
General account investments June 30, 2019 amounts in EUR millions, except for the impairment data Americas Europe Asia Holdings & other Total Cash/Treasuries/Agencies 14,702 17,041 517 127 32,387 Investment grade corporates 33,108 4,762 4,277 2 42,149 High yield (and other ) corporates 2,075 14 238
Slide 35: Main economic assumptions
Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.15 n.a. 0.88 Annual gross equity market return (price appreciation + dividends) 8% 6.5% 6.5% Main assumptions for financial targets US 10-year government bond yields Grade to 4.25% in 10 years time NL 10-year governm
Slide 36: Investing in Aegon
Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA ISIN NL0000303709 • Aegon ordinary shares SEDOL 5927375NL Trading Platform Euronext Amsterdam - Traded on Euronext Amsterdam since 1969 Country Netherlands and quoted in euros Aegon’s New York Registry Shares • Aegon New York Registry S
Slide 37: Disclaimer
Disclaimer Cautionary note regarding non-IFRS-EU measures This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax, income before tax, market consistent value of new business and return on equity. These non-IFRS-EU measures are calculated by con