Aegon Ltd. · EURONEXT:AGN
Aegon — BoAML Financials Conference 2010
45 slides from Aegon's conference presentation, September 2010
Slide 1: Execution of strategy
Execution of strategy Alex Wynaendts CEO BoA ML Financials Conference London, September 2010
Slide 2: Key messages
Key messages � AEGON transformed significantly over recent years � Ambition to be a leader in chosen markets by 2015 � Ambition to improve growth and return profile � Repayment Dutch State remains priority 2
Slide 3: AEGON transformed significantly over recent years
AEGON transformed significantly over recent years Less geared to financial markets General account equity exposure NL excess capital interest rate sensitivity (EUR billion) (EUR billion) 10 � 2% interest rate decrease 6 8 � 2% interest rate increase 4 6 2 4 - 2 (2) 0 (4) 2005 2006 2007 2008 2009 2Q1
Slide 4: Actively mitigating effects of low interest rates
Actively mitigating effects of low interest rates Interest rate risk management of on-balance sheet assets (EUR 291 billion) New Markets US long term US term life UK BOLI/COLI care & whole life annuities A&H NL savings NL life & US variable US fixed US run-off US universal UK pensions pensions annui
Slide 5: AEGON's ambition
AEGON’s ambition “To be a leader in all of our chosen markets by 2015” � Reallocate capital � Increase returns � Optimize ONE AEGON … resulting in sustainable profitable growth 5
Slide 6: Strategic priorities: Reallocate capital
Strategic priorities Reallocate capital Reallocate capital Local knowledge. Global power. 6
Slide 7: Ambition to improve growth profile by reallocating capital
Ambition to improve growth profile by reallocating capital Rebalance capital across geographies 10% 5 10% 9% 20-25% 40-45% 2009 53% 2015 28% 25 30% ■ North America (US, Canada) ■ Western Europe (Netherlands, United Kingdom) ■ New Markets (Spain, Central & Eastern Europe, Asia, Latin America) ■ Globa
Slide 8: Portfolio review – exploring strategic options for life reinsurance
Portfolio review – exploring strategic options for life reinsurance � Limited long-term strategic fit of AEGON’s life reinsurance unit, Transamerica Reinsurance, with core business of life insurance, pensions and asset management � Exploring strategic options, including identifying a suitable buyer
Slide 9: Franchise value of Transamerica Reinsurance
Franchise value of Transamerica Reinsurance � Leading position among life reinsurers: #3 in US and #7 globally � Strong in US traditional life reinsurance – 20% new business market share – Top 3 facultative reinsurer � #1 in product consulting & development in US � Recognized internationally for qua
Slide 10: Strategic priorities: Increase returns
Strategic priorities Reallocate capital Increase returns Local knowledge. Global power. 10
Slide 11: Execution of strategy demonstrated by strong results
Execution of strategy demonstrated by strong results Underlying earnings before tax New life sales (EUR million) (EUR million) 590 522 557 478 488 538 415 390 484 492 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Revenue-generating investments Gross deposits* (EUR billion) (EUR billion
Slide 12: Continued focus on increasing Group returns
Continued focus on increasing Group returns Return on Equity (RoE) 10% 5% 0% 2008 2009 YTD 2010 � Strategic focus supports increase in RoE – Shift to fee-based from spread-based business – Reallocate capital geographically – Reduce costs � Improve annual cash flows from current normalized* level of
Slide 13: Strategic review of UK business
Strategic review of UK business Ambition Execution � Focus on growth market segments � Exited bulk annuities and employee benefit markets � Target 25% cost reduction by � Close third party pension administration and end 2011 employee benefits software businesses � Focus on capital light model � Rest
Slide 14: Leverage leading market positions in the UK
Leverage leading market positions in the UK � Focus on growth market segments where AEGON has a leading position – At Retirement � Growing market with GBP 16 billion of funds maturing annually – Workplace savings � Attractive market with GBP 800 billion of assets Workplace or p ace Att Retirement et
Slide 15: Adapting operating model to changing environment
Adapting operating model to changing environment Changing environment requires change in industry cost structure Deliver operational excellence � Continue to be cost efficient operator – Enhance web capabilities – Reduce number of administration platforms – Decrease costs per policy � Effective and
Slide 16: Strategic priorities: Capital
Strategic priorities Reallocate capital Capital Local knowledge. Global power. 16
Slide 17: Continued strong capital position
Continued strong capital position � Excess capital above S&P AA capital adequacy requirements of EUR 3 billion � Core capital* at 74% of total capital base – above threshold of 70%; managing to 75% by end 2012 � Common shareholders’ equity per share of EUR 8.83 per June 30, 2010 Shareholders’ equity
Slide 18: AEGON concluded approval process with European Commission
AEGON concluded approval process with European Commission � Early repayment schedule agreed at more favorable terms – EUR 0.5 billion – repaid at 10.3% premium in August 2010 – Premium of 10.6% over first EUR 1.5 billion – Remaining EUR 1.5 billion to be repaid at 50% premium before end of June 2011
Slide 19: Strategic priorities: Optimize ONE AEGON
Strategic priorities Reallocate capital Optimize ONE AEGON Local knowledge. Global power. 19
Slide 20: Optimize ONE AEGON
Optimize ONE AEGON � One balance sheet – efficient use of capital � Leverage and standardize best practices – Product innovation – Distribution knowledge – Brand management – Underwriting and risk management – IT infrastructure � Consistent performance management Delivering more than the sum of the
Slide 21: Conclusion
Conclusion � AEGON transformed significantly over recent years – Improving risk profile – Shifting focus from spread to fee-based products � Ambition to improve return profile – Strategic focus supports increase in return on equity and cash flow � Ambition to improve growth profile – Reallocate capi
Slide 22: Q&A
Q&A LIFE INSURANCE PENSIONS INVESTMENTS WEGON
Slide 23: Repayment to Dutch State
Repayment to Dutch State Appendix 1
Slide 24: EUR 500 million has been repaid from operating companies excess capital
EUR 500 million has been repaid from operating companies excess capital � EUR 500 million has been repaid end of August 2010 – Premium of 10.3% (EUR 52 million) – Accrued interest of 8.5% (EUR 11 million) � Repayment of EUR 500 million from excess capital up-streamed from operating companies during
Slide 25: Agreement to full repayment by end of June 2011
Agreement to full repayment by end of June 2011 � Agreed repayment of remaining EUR 1.5 billion at: – Premium of 50% – No accrued interest � Early repayment contingent upon: – Ability to up-stream cash from operating companies – Ability to utilize excess capital – Progress of disposals – Market cond
Slide 26: AEGON will temporarily be subject to limited behavioral constraints
AEGON will temporarily be subject to limited behavioral constraints � Behavioral constraints in the Dutch market: – Not to pursue top 3 price leadership in residential mortgages and internet savings – S&P no longer to publish AA- insurance financial strength rating on AEGON Levensverzekering N.V – A
Slide 27: Second quarter 2010 results
Second quarter 2010 results Appendix 2
Slide 28: Continued focus on execution of strategy in Q2
Continued focus on execution of strategy in Q2 Reallocate capital � Run-off institutional spread-based business in the US on track � Increased fee business, reduced spread business in the US � Capital preservations of EUR 250 million in Q2 2010 � Exploring strategic options for Transamerica Re, incl
Slide 29: Strong sales and deposits
Strong sales and deposits � New life sales increased 22% YoY driven by almost all units, especially by increased sales in the US and the UK � Gross deposits* up on strong US pensions and asset management � Fixed annuities continued to be managed lower � VNB declined due to earlier repricing of immed
Slide 30: Increased new life sales demonstrate continued strong franchise
Increased new life sales demonstrate continued strong franchise � New life sales increased by 22% to EUR 590 million compared with Q2 2009 – Americas’ new life sales improved 13% mainly due to retail life sales – The Netherlands recorded higher pension and life sales – UK production increased 25% as
Slide 31: Continued strong deposits
Continued strong deposits � Gross deposits of EUR 7.6 billion, an increase compared with Q2 2009 of 16% – Strong asset management, US pensions and US mutual funds deposits – Fixed annuities were managed lower � All country units recorded net deposits*, in total EUR 1.0 billion Gross deposits Q2 2010
Slide 32: Value of new business
Value of new business � Value of new business of EUR 148 million – Lower value of new business mainly due to the decrease of immediate annuity sales in the UK following earlier repricing and lower sales in Spain – Fixed annuity sales in the US are managed lower – New Markets represents 22% of the to
Slide 33: Underlying earnings increase 26%
Underlying earnings increase 26% � Americas earnings rose 47% due to higher fee and investment income as well as lower expenses; Q2 09 included several exceptional charges � Strong earnings in the Netherlands; Q2 09 included a provision release � Results in the UK rose due to increased annuity book
Slide 34: Operating expenses declined by 2% at constant currencies
Operating expenses declined by 2% at constant currencies � Total operating expenses increased 3% due to dollar and pound sterling strengthening against the euro; however at constant currencies declined by 2% � Operating expenses: – Americas decreased on a comparable basis as result of cost savings –
Slide 35: Net income driven by strong underlying earnings
Net income driven by strong underlying earnings � Investment gains as a result of bond sales � Impairments at lowest level in two years, approaching long-term assumptions � Other charges impacted by one-time provision for settlement in the US � Run-off businesses better than expected due to better p
Slide 36: Impairments at lowest level in two years
Impairments at lowest level in two years � US impairments continued their downward trend, approaching AEGON’s long-term assumption of 30-35 bps � Q2 2010 impairments are primarily related to US housing related securities � Impairments expected to remain at somewhat elevated levels Impairments (EUR m
Slide 37: Net impairments by asset class
Net impairments by asset class AEGON general account investments (in EUR millions) Q2 2010 impairments / recoveries by country unit - IFRS basis (pre-DAC, pre-tax) Americas NL UK New Markets Total ABS – Housing 19 - - 19 ABS – Non-housing - - - CMBS 8 - - 8 RMBS 57 - - 57 Subtotal structured
Slide 38: Annualized credit losses in the US decrease considerably
Annualized credit losses in the US decrease considerably � In Q2 2010 US credit losses in bps of fixed income assets amounted to 10 bps a further decrease compared with 19 bps in Q1 2010 � Annualized 1H 2010 credit impairments amount to 58 bps US credit losses in bps of fixed income assets 120 91 82
Slide 39: Total general account portfolio composition
Total general account portfolio composition June 30, 2010 Amounts in EUR billions The United New Holdings and Americas Netherlands Kingdom Markets Other TOTAL Cash / Treasuries / Agencies 15,574 10,074 1,365 1,120 719 28,852 Investment grade corporates 44,273 5,022 6,122 807 - 56,224 High yield (and
Slide 40: Commercial mortgage loans
Commercial mortgage loans � USD 13.6 billion commercial mortgage loan portfolio* � Sound debt service coverage ratio of 1.8 � Average LTV of 65% � Own origination CML net impairments - IFRS (USD million) million)** ** Weighted average loan-to-value by property type (%) 80 70 60 50 40 30 20 32 23 16
Slide 41: Limited exposure to peripheral European sovereigns reduced
Limited exposure to peripheral European sovereigns reduced EUR million * March 31, 2010 June 30, 2010 Portugal 59 47 Greece 108 70 Ireland 125 89 Italy 109 106 Spain 1,793 1,231 * At fair value 41
Slide 42: Excess capital lower due to higher S&P capital requirements
Excess capital lower due to higher S&P capital requirements � Excess capital of EUR 3.0 billion above S&P’s AA capital adequacy requirements – EUR 1.9 billion in operating units (Q1: EUR 2.4 billion) – EUR 1.1 billion at the holding company (Q1: EUR 1.3 billion) Excess capital development Q2 2010 (E
Slide 43: Life reinsurance
Life reinsurance � Strong underlying earnings of USD 33 million � New life sales stable � 89% of premium income US domestic � 20% new business market share in US traditional life reinsurance � Leading position among life reinsurers: #3 in US and #7 globally Underlying earnings before tax New life sa
Slide 44: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This press release includes certain non-GAAP financial measures: underlying earnings before tax and value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment in
Slide 45: For questions please contact Investor Relations
For questions please contact Investor Relations T: +31 70 344 8305 E: ir@aegon.com www.aegon.com P.O. Box 85 2501 CB The Hague The Netherlands