Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2011 Earnings Presentation
42 slides from Aegon's earnings presentation, May 12, 2011
Slide 1: First quarter 2011 results and Embedded Value 2010
First quarter 2011 re results sults and Embedded Valu Valuee 2010 Jan Nooitgedagt CFO Analyst & investor presentation The Hague, May 12, 2011
Slide 2: Key messages
Key messages � Solid progress on strategic objectives objectives � Underlying earnings impacted by exce exceptional ptional charges and longevity provisioning � Continued focus on cost control � Strong earnings and sales of pensions pensions and variable annuities in the US � Strong excess capital o
Slide 3: Continued focus on execution of strategy in Q1
Continued focus on execution of strat strateegy gy in Q1 � Divestment Tran Transamerica Reinsurance for total after-tax after consideration of Reallocate capital USD 1.4 billion � Increased fee business, business, reduced spread business in the US ► Strong earni earnings ngs and sales of US pensions
Slide 4: Key benefits of Transamerica Reinsurance divestment
Key benefits of Transamerica Reinsur Reinsuraance nce divestment � Divestment Divestment of non-core non life reinsurance activities � Supports Supports repurchase of remaining core capital securities 1 Execution of AEGON’s strategy � Retained Retained blocks of business put in run-off � Reduction R
Slide 5: Results highlighted
Results highlighted Underlying earnings before tax Operational free cash flows (EUR million) EUR million Q1 2011 � Earnings on in force 523 � Return on free surplus 17 446 483 452 452 414 � Release of required surplus (1) � New business strain (275) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 � Operational free c
Slide 6: Underlying earnings impacted by UK charges and NL longevity provisioning
Underlying earnings impacted by UK c charges harges and NL longevity provisioning � Americas’ earnings up 2% driven by strong strong pensions and variable annuities ► As of Q1 BOLI/COLI and life reinsurance re reported ported in run-off businesses � Earnings in the Netherlands lower due to h higher
Slide 7: Higher provisioning for longevity in the Netherlands
Higher provisioning for longevity in the the Netherlands � New projected mortality tables (2010 – 206 2060) 0) showed a strong increase in life expectancy ► One-off impact on excess capital of EUR 22 2255 million in Q4 2010 � Provisioning based on actual/observed mo mortality rtality is taken throug
Slide 8: Continued focus on cost control
Continued focus on cost control � Operating expenses up 3% due to restruct restructuring uring charges and currency movements ► down by 1% excluding restructuring charges charges and at constant currencies � Americas: declined 2% as a result of conti continued cost reduction initiatives � The Nether
Slide 9: Net income benefits from lower impairments and positive result run-off businesses
Net income benefits from lower impairme impairmennts ts and positive result run-off businesses � Fair value items impacted by exceptional lloss oss on strategic allocation funds in the Netherlands � Investment gains as a result of normal trad trading ing in the investment portfolio � Lower impairmen
Slide 10: Impairments at lowest level in almost three years
Impairments at lowest level in almost tthree hree years � Impairments mostly linked to US residentia residentiall mortgage-backed securities � Impairments included recoveries of EUR 2 266 million Impairments (EUR million) 416 501 385 394 286 212 150 77 92 133 62 146 91 64 101 93 325 355 330 69 11 28
Slide 11: BOLI/COLI and Life reinsurance reported in run-off businesses as of Q1
BOLI/COLI and Life reinsurance report reported ed in run-off businesses as of Q1 � Net earnings from run-of businesses of EU EURR 13 million � Average capital allocated to run-off busine businesses sses of EUR 2.7 billion (incl. life reinsurance) ► Return on capital of run-off businesses of 1. 1.9%
Slide 12: Sales growth in fee-based businesses – key area of focus
Sales growth in fee-based businesses – key area of focus � Sales composite introduced, consisting of n new life sales, new premiums accident & health and general insurance and 1/10 of gross depos deposits its � New life sales stable; higher pension sales sales in the Netherlands and strong sales in
Slide 13: Strategic shift toward fee-based business – Pensions
Strategic shift toward fee-based busine business – Pensions � US pension business continues to show st strong rong results ► Success in smaller case market (<USD 20 m million) illion) as a result of high quality third-party administration and Plan Administration Serv Service ice Support (PASS) produ
Slide 14: Strategic shift toward fee-based business – Variable annuities
Strategic shift toward fee-based busine business – Variable annuities � US variable annuities gross deposits rose 46% compared with Q1 2010 ► Growth in all traditional channels ► Market rationalization ► Newly launched VA rider well received ► Select competitors leave the market ► Fast-to-market str
Slide 15: Continued strong excess capital position
Continued strong excess capital positi position on � Excess capital of EUR 3.7 billion ► Excess capital of EUR 2.4 billion in operatin operatingg units ► Holding excess capital of EUR 1.3 billion, do down wn on EUR 1.125 billion payment to Dutch State partly offset by EUR 0.9 billion equity issuance
Slide 16: Operational free cash flows
Operational free cash flows � Operational cash flow disclosure on a qua quarterly rterly basis going forward � During the first quarter, earnings on the in-force remained strong � Investments in new business as expected ► Shift in business mix ► Higher sales volumes for key fee-businesse businessess
Slide 17: Core capital ratio stable at 75%
Core capital ratio stable at 75% � Core capital ratio negatively impacted by rrepurchase epurchase of core capital securities (EUR 750m + EUR 375m premium) almost fully offset byby:: ► Equity issuance of EUR 903 million ► Other items, mainly consisting of retained e earnings, arnings, up-streamed di
Slide 18: Shareholders' equity down mainly on weaker US dollar
Shareholders’ equity down mainly on w weaker eaker US dollar � Positive revaluation reserve of EUR 0.7 bil billion lion at end of first quarter 2011, down versus Q4 2010 as a result of higher interest rates � Other changes included the EUR 375 milli million on premium on the repurchase of core capit
Slide 19: Total embedded value up 6% to EUR 18.9 billion
Total embedded value up 6% to EUR 1 188.9 .9 billion � Total embedded value increased mainly du duee to positive performance of in-force business as a result of cost savings, improved financial m markets arkets and strengthening of currencies EUR million, except per share data 2010 2009 Δ Embedded v
Slide 20: Increase embedded value life insurance driven by operating returns
Increase embedded value life insuranc insurancee driven by operating returns � Value of new business in 2010 of EUR 555 555 million � Positive performance of in-force portfolio a ass a result of cost savings, improved financial markets and strengthening of currencies a against gainst the euro ► Chan
Slide 21: Conclusion
Conclusion � Solid progress on strategic objectives objectives � Underlying earnings impacted by exce exceptional ptional charges and longevity provisioning � Continued focus on cost control � Strong earnings and sales of pensions pensions and variable annuities in the US � Strong excess capital of
Slide 22: Analyst & Investor Conference
Analyst & Investor Conference Conference London, June 21- 22, 2011 An invitation will be send to you soon 22
Slide 23: Q&A
Q&A 23
Slide 24: Upcoming events
Upcoming events June August August September Goldman Sachs Conference, Q2 2011 resul results ts ING Benelux conference Paris August 11, 201 2011 1 September 14, 2011 June 8, 2011 AEGON Analyst & Investor Conference, London June 21-22, 2011 October November Novem ber December BoA-ML Conference Q3 201
Slide 25: Appendix
Appendix 25
Slide 26: New life sales demonstrate continued strong franchise
New life sales demonstrate continued strong franchise � New life sales stable at EUR 501 million ► Americas’ sales were level compared to 2010 2010 at USD 154 million ► The Netherlands up 5% as a result of a large large single premium contract ► UK decreased as higher group pension sales sales were
Slide 27: Continued strong gross deposits
Continued strong gross deposits � Gross deposits of EUR 7.4 billion ► Strong US pension deposits and growth of vvariable ariable annuities partly offset by lower inflow of retail mutual funds ► Lower savings deposits in the Netherlands a and nd lower asset management inflows � Net outflow of EUR 2.1
Slide 28: Value of new business
Value of new business � Value of new business of EUR 118 million, million, lower due to strategic change in business mix ► Higher margins in life, pensions and variable variable annuities in the US ► Lower margins on mortgages and updated m mortality ortality assumptions in the Netherlands ► Decreas
Slide 29: Americas
Americas � Underlying earnings before tax increased 2 2%% to USD 474 million, mainly due to cost savings, growth of the pension and variabl variablee annuities businesses and improved financial markets � Operating expenses decreased 2% as a re result sult of continued cost reduction initiatives whil
Slide 30: The Netherlands
The Netherlands � Underlying earnings before tax decreased decreased to EUR 81 million as a result of higher provisioning for longevity � Operating expenses increased 4% as a re result sult of investments in new distribution capabilities � New life sales increased to EUR 65 million million due to a
Slide 31: United Kingdom
United Kingdom � Underlying earnings before tax decreased decreased to GBP 10 million ► Life earnings improved due to cost savings a and nd growth of the business ► Pensions recorded a loss due to a charge of of GBP 21 million mainly related to the customer redress program � Operating expenses sligh
Slide 32: New Markets
New Markets � Underlying earnings before tax increased tto o EUR 59 million as a result of Variable Annuities Europe and asset management, partly offs offset et by investments in Asia � New life sales improved due to business g growth rowth in Central & Eastern Europe � Gross deposits decreased due
Slide 33: Limited exposure to peripheral European sovereigns actively reduced
Limited exposure to peripheral Europe European an sovereigns actively reduced EUR million * Dec 31,2010 March. 31, 2011 Portugal 32 30 ▼ Greece 45 5 ▼ Ireland 32 29 ▼ Italy 112 84 ▼ Spain 904 866 ▼ 33 * At fair value
Slide 34: General account investments roll-forward
General account investments roll-forw forward ard General account investment roll-forward EUR billion Americas Americas The Netherlands United Kingdom New Markets Opening balance December 31, 2010 93.6 37.2 9.3 2.8 Net in- and outflow (1.0) (1.0) 0.7 (0.1) 0.1 Unrealized / realized results 0.2 (0.4)
Slide 35: Investments general account
Investments general account AEGON UNAUDITED INVESTMENTS GENERAL ACCOUNT March 31, 2011 The United New Holdings amounts in EUR millions, except for the impairment data Americas Am ericas Netherlands Kingdom Markets and other TOTAL Cash / Treasuries / Agencies 15,507 9,274 1,857 1,237 320 28,195 Inves
Slide 36: Impairments by asset class
Impairments by asset class AEGON general account investments Q1 2011 impairments / (recoveries) by country unit - IFRS basis (pre-DAC DAC, pre-tax) EUR millions Americas Americas NL UK New Markets Total ABS – Housing - - - - - ABS – Non-housing (0) (1) - - (1) CMBS (14) - - - (14) RMBS 63 - - - 63 S
Slide 37: Credit losses in the US trending down
Credit losses in the US trending down � Q1 2011 credit impairments amount to to 7 bps ► Annualized level of 28 bps US credit losses in bps of fixed income assets 120 91 82 average of 33 bps 64 48 52 44 44 since 1990 37 27 25 28 9 8 17 17 1 2 4 2 -2 -6 1990 1991 1992 1993 1994 1995 1996 1997 1998 199
Slide 38: Commercial mortgage loans
Commercial mortgage loans � USD 12.0 billion commercial mortgage mortgage loan portfolio* � Sound debt service coverage ratio of 1.7 � Average LTV of 66% � Own origination CML net impairments - IFRS Weighted average loan-to-value by property type *** Weighted (USD million) million)** ** (%)) (% 80 8
Slide 39: Reconciliation of effective tax rate Q1 2011
Reconciliation of effective tax rate Q1 2 2011 011 Reconciliation of effective tax rate Q1 2011 EUR million Americas The Netherlands United Kingdom New Markets/ Holdings Total Income before tax 324 46 34 (27) 377 Nominal tax rate 35.00% (113) 25.00% (12) 26.50% (9) NM 10 (124) Actual income tax (61)
Slide 40: Transaction highlights of the divested life reinsurance business
Transaction highlights of the divested life reinsurance business Gross written premium 2010 � USD 2.2 billion Net underlying earnings 2010 � USD 102 million Cash proceeds � USD 0.9 billion Capital release � USD 0.5 billion Total after-tax consideration � USD 1.4 billion Prepaid cost of reinsurance a
Slide 41: For questions please contact Investor Relations
For questions please contact Investor Rel Relaations tions +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands WWW.AEGON.COM
Slide 42: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This document includes certain non-GAAP GAAP financial measures: underlying earnings before tax and value of new business. business. The reconciliation reconc of underlying earnings before tax to the most comparable IFRS measure is provided in N