Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2021 Earnings Presentation
34 slides from Aegon's earnings presentation, Aug 12, 2021
Slide 1: 2Q 2021 results
2Q 2021 results Lard Friese Chief Executive Officer Duncan Russell Chief Transformation Officer Matt Rider Chief Financial Officer August 12, 2021 Helping people achieve a lifetime of financial security
Slide 2: Steady progress on strategic priorities
Steady progress on strategic priorities 1 Steady progress on strategic priorities and financial targets 2 Executing the operational improvement plan and achieving expense savings 3 Maximizing value of Variable Annuities 4 Continued commercial momentum in Strategic Assets 5 Increasing dividends to sh
Slide 3: Executing on Aegon's granular operating plan
Executing on Aegon’s granular operating plan Initiative delivery • Continued rapid pace and execution (in no. of initiatives) rhythm 44 528 1,140 107 • Executed on 45% of initiatives, which Growth will contribute to the operating result 278 initiatives over time 45% executed 421 • Achieved half of o
Slide 4: Achieving continuous growth in US Strategic Assets
Achieving continuous growth in US Strategic Assets US – Individual Solutions US – Workplace Solutions New life sales New business strain Value of new life Retirement Plans Middle-Market Retirement Plans Middle-Market (in USD million) (in USD million) business written sales net deposits (in USD milli
Slide 5: Consistently delivering in NL and UK Strategic Assets
Consistently delivering in NL and UK Strategic Assets NL UK Mortgage Workplace net Net growth Knab Workplace net Retail net Platform Revenues origination deposits customers deposits deposits expenses/AuA gained/(lost) on (in EUR billion) (in EUR million) (in 1,000 customers) (in GBP million) (in GBP
Slide 6: Growing in Asset Management and Growth Markets
Growing in Asset Management and Growth Markets Asset Management Growth Markets (Spain & Portugal, China1, Brazil) Third-party Operating margin Operating result New life sales Value of new life New premium net deposits Global Platforms Strategic (in EUR million) business production Global Platforms (
Slide 7: Financial Assets
Financial Assets Duncan Russell Chief Transformation Officer 7
Slide 8: Framework to maximize the value of Financial Assets
Framework to maximize the value of Financial Assets Unilateral actions Bilateral actions Third-party solution • Actions under our own control • Requires interaction and • Transfer risk to third party should it consideration of stakeholders maximize value • Example: • Examples: • Examples: - Expansio
Slide 9: Actions to maximize the value of Variable Annuities
Actions to maximize the value of Variable Annuities Bilateral action to accelerate and increase cash flows 1 • Offer to repurchase Variable Annuities with GMIB riders for lump-sum payments Lump-sum RBC ratio buy-out • Offers alternative to policyholders whose circumstances may have changed and creat
Slide 10: Dynamic hedging program to cover key risks of legacy variable annuity book
Dynamic hedging program to cover key risks of legacy variable annuity book Hedging interest Sensitivities of legacy VA book rate risk 1 Currently, statutory reserves are based on a (Reserve change in USD billion prescribed grading of interest rates to 3.0% in from -100bps move in interest rates1) •
Slide 11: Roadmap towards creating value from Variable Annuities
Roadmap towards creating value from Variable Annuities Unilateral actions Bilateral actions Potential third-party solution • Expansion of hedging program on • Lump-sum offer to buy-out • Potential vertical slice trades, legacy VA block Variable Annuities with GMIB reinsurance, or outright sale of (p
Slide 12: 2Q 2021 Financial Results
2Q 2021 Financial Results Matt Rider Chief Financial Officer 12
Slide 13: Financial results 2Q 2021
Financial results 2Q 2021 Addressable expense savings1 Free Cash Flows2 • Achieved over half of our 2023 (from expense initiatives) expense savings target EUR 220 million EUR 175 million • Expense savings, higher equity markets and normalization of claims experience in the US drive increase in opera
Slide 14: On track to deliver expense savings target
On track to deliver expense savings target Addressable expenses • Expense initiatives drove the (in EUR million, in constant currency) reduction of expenses by EUR 220 million, representing 55% of the 2023 -8% expense savings target 3,058 • Investments in growth initiatives increased expenses by EUR
Slide 15: Operating result increases by 62% to EUR 562 million
Operating result increases by 62% to EUR 562 million Operating result (in EUR million) Expense savings Operating result • Addressable expense reduction from operational 347 improvement plan initiatives, and lower spend in the 2Q 2020 COVID-19 pandemic environment Americas 149 Equity markets and inve
Slide 16: Net result of EUR 849 million benefits from fair value gains
Net result of EUR 849 million benefits from fair value gains Net result (2Q 2021, in EUR million) Non-operating items • Fair value gains were driven by revaluations on Operating result 562 investments. In addition, the newly implemented interest rate macro hedge paid off Fair value items 468 • Reali
Slide 17: Capital position of main units above the operating level
Capital position of main units above the operating level • Positive impact from market movements, mainly driven 1Q 2021 428% by higher equity markets, and by private equity and +16%-pts real estate revaluations RBC ratio 444% 2Q 2021 • Management actions had a favorable impact and US, regulated enti
Slide 18: Cash Capital at Holding in upper half of operating range
Cash Capital at Holding in upper half of operating range Cash Capital at Holding (in EUR million) • Free cash flow well covered by 275 1,500 operating capital generation of 40 1,386 EUR 376 million for the quarter (100) (17) (4) 1,191 • Some units paid their half-yearly Free Cash Flow Opera- remitta
Slide 19: Delivering on capital deployment commitments
Delivering on capital deployment commitments • Steady progress on strategic priorities and financial targets • Announced redemption of USD 250 million floating rate supports increase of the interim dividend by EUR 0.02 to perpetual capital securities with 4% coupon EUR 0.08 per common share • After
Slide 20: Concluding remarks
Concluding remarks Lard Friese Chief Executive Officer 20
Slide 21: Key messages
1 Steady progress on strategic priorities and financial targets 2 Executing the operational improvement plan and achieving expense savings Key 3 Maximizing value of Variable Annuities messages 4 Continued commercial momentum for Strategic Assets 5 Increasing dividends to shareholders Clear strategic
Slide 22: 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 23: Progressing well on the Variable Annuities Financial Asset
Progressing well on the Variable Annuities Financial Asset US Variable Annuities Performance Dynamic hedge effectiveness1 Capital generation (in %) 99% (in USD million) 302 840 98% 99% 99% 567 97% 97% 302 169 79 2Q20 3Q20 4Q20 1Q21 2Q21 2Q20 3Q20 4Q20 1Q21 2Q21 Developments ✓ About 90% of variable a
Slide 24: Progressing on rate increases for the LTC Financial Asset
Progressing on rate increases for the LTC Financial Asset US Long-Term Care (LTC) Performance Actual to expected Progress on rate Capital claims ratio (in %) 52% increases program (value of approved rate increases as % of total program) generation (in USD million) 138 87% 73% 138 70% 43% 52% 59% 4 3
Slide 25: Improving capital position of the NL Life Financial Asset
Improving capital position of the NL Life Financial Asset NL Life book Performance Solvency II Remittances Operating capital ratio (in %) 172% to Aegon NL (in EUR million) 25 generation (in EUR million) 67 174% 67 170% 172% 159% Operating level (150%) 149% 32 28 25 25 25 27 Min. dividend payment lev
Slide 26: Group Solvency II ratio amounts to 208%
Group Solvency II ratio amounts to 208% Own funds (OF) and Solvency Capital Requirement (SCR) development (in EUR million) SII 194% +3% -2% +3% +6% +3% 208% • Solid contribution from operating 19,436 capital generation including 47 42 favorable net claims experience (165) 335 • Market variance resul
Slide 27: Well-managed capital sensitivities
Well-managed capital sensitivities Solvency II sensitivities (in percentage points, 2Q 2021) Scenario Group NL Life3 UK Life4 US US RBC Equity markets +25% +6% +2% +5% +16% +16%5 Equity markets -25% -13% -4% -8% -32% -41% Interest rates +50 bps +2% -1% +2% +4% +4% Interest rates -50 bps -5% +2% -3%
Slide 28: Net recoveries in 2021 year-to-date
Net recoveries in 2021 year-to-date Impairments on US general account fixed income assets (in bps) 120 91 82 64 48 52 37 33 27 25 17 17 17 19 Average 9 8 8 22 1 2 4 2 1 3 1 (6) (2) (2) (9) (3) (6) 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 201
Slide 29: Conversion of RBC to Solvency II
Conversion of RBC to Solvency II • Conversion methodology for US operations has been agreed with DNB, subject to regular review • Calibration of US insurance entities followed by subsequent adjustment for US debt and holding items - Calibration of US insurance entities is consistent with EIOPA’s gui
Slide 30: Leverage ratio benefits from debt reduction in 2020 and increased shareholders' equity
Leverage ratio benefits from debt reduction in 2020 and increased shareholders’ equity Gross financial leverage Gross financial leverage ratio (in EUR billion) (in %) 7.4 32.2% 7.0 6.7 6.7 6.1 30.7% Senior 2.4 6.0 2.3 1.8 1.7 1.2 1.3 29.2% 28.6% 27.9% 25.8% Hybrid 5.0 4.7 4.9 4.9 4.7 4.8 2016 2017 2
Slide 31: Main economic assumptions
Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.2 n.a. 0.9 2021: 2% 2021: 4% 2021: 4% Annual gross equity market return (price appreciation + dividends) 2022 onwards 8% 2022 onwards 6.5% 2022 onwards 6.5% Main assumptions for financial targets US 10-year governmen
Slide 32: Aegon Investor Relations
Aegon Investor Relations Stay in touch Upcoming events 2021 Contact Investor Relations Jan Willem Weidema Barclays Virtual Conference September 14/15 +31 70 344 8028 Head of Investor Relations Karl-Otto Grosse-Holz +31 70 344 7857 Bank of America Virtual Investor Relations Officer September 21 CEO C
Slide 33: Investing in Aegon
Investing in Aegon Aegon ordinary shares Aegon New York Registry Shares (NYRS) • Traded on Euronext Amsterdam • Traded on NYSE since 1991 and since 1969 and quoted in euros quoted in US dollars • One Aegon NYRS equals one Aegon Amsterdam-listed common share • Cost effective way to hold international
Slide 34: Disclaimer
Disclaimer Cautionary note regarding non-IFRS-EU measures This document includes the following non-IFRS-EU financial measures: operating result, income tax, result before tax, market consistent value of new business, return on equity and addressable expenses. These non-IFRS-EU measures, except for a