Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2010 Earnings Presentation
32 slides from Aegon's earnings presentation, May 12, 2010
Slide 1: First quarter 2010 results & Embedded value 2009
First quarter 2010 results & Embedded value 2009 Jan Nooitgedagt, CFO Analyst & Investor presentation May 12, 2010
Slide 2: Key messages
Key messages o Further improvement of underlying earnings o Continued execution of strategy o Robust sales and deposits, evidence of strong franchise o Continued strong capital position Local knowledge. Global power. 2
Slide 3: 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) 478 488 567 557 415 538 390 484 492 -98 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Revenue-generating investments Gross deposits* (EUR billion) (EUR billion
Slide 4: Continued focus on execution of strategy
Continued focus on execution of strategy Reallocate capital towards o Running off institutional spread-based business in the US on track Increased fee business, reduced spread business businesses with higher o o Distribution partner added for retirement products in the US growth and return prospects
Slide 5: Robust sales in key areas
Robust sales in key areas o New life sales driven by increase in Americas and Central & Eastern Europe offset by Spain and United Kingdom o Gross deposits* up on strong pensions and asset management o US fixed annuities and UK immediate annuities managed lower o Value of new business decline mainly
Slide 6: Solid underlying earnings in all country units
Solid underlying earnings in all country units o Solid underlying earnings in all units as a result of – Improved equity markets, higher account balances and investment income in the Americas – Higher investment income and lower operating expenses in the Netherlands – Lower claims, higher investment
Slide 7: Focus on operational excellence
Focus on operational excellence o Achieved significant improvement in customer service levels – Invest in improving operational capabilities o Building on strong brand names AEGON and Transamerica o Continue to be cost efficient operator Operating expenses (EUR million) – Enhance web capabilities 84
Slide 8: Net income driven by solid underlying earnings
Net income driven by solid underlying earnings o Solid underlying earnings in all country units o Investment gains because of ALM* driven bond sales o Impairments at lowest level in seven quarters o Run-off businesses in line with expectations Underlying earnings to net income development in Q1 2010
Slide 9: Impairments at lowest level in seven quarters
Impairments at lowest level in seven quarters o Impairments are trending down, but remain above AEGON’s long-term average expectations o Q1 2010 impairments partly driven by Ambac related impairments of EUR 43 million Impairments (EUR million) 416 501 385 394 286 212 150 146 91 64 101 93 69 11 325 3
Slide 10: Run-off businesses perform in line with expectations
Run-off businesses perform in line with expectations Run-off balances (USD billion) o Earnings in line with expectations 40 o Spread earnings impacted by 35 high cash balances and 30 short-term LIBOR-rates 25 o Spread balances of USD 18.7 20 billion are running off as 15 foreseen 10 5 0 Q1 09 Q2 09
Slide 11: Continued strong capital position
Continued strong capital position o Excess capital above AA capital adequacy requirements stable at EUR 3.7 billion – Earnings contribution offset by higher capital requirements o Capital preservations of EUR 0.1 billion in Q1 2010 – Primarily the result of the reduction of institutional spread-base
Slide 12: Shareholders' equity continues to improve
Shareholders’ equity continues to improve o Shareholders' equity rose 20% sequentially, due to improvement in revaluation reserves, strengthening of the dollar and net income o Shareholders’ equity per common share of EUR 7.28 Shareholders’ equity development Q1 2010 (EUR billion) 12.2 0.4 1.2 0.8 (
Slide 13: Limited exposure to peripheral European sovereigns
Limited exposure to peripheral European sovereigns EUR million (as per March 31, 2010)* Portugal 59 Greece 108 Ireland 125 Italy Italy 109 Spain 1,793 * At fair value Local knowledge. Global power. 13
Slide 14: AEGON is well prepared for Solvency II
AEGON is well prepared for Solvency II o AEGON supports the principles of Solvency II o AEGON has been preparing since 2005 – Internal economic capital model more conservative than QIS 4 – Economic pricing embedded in product pricing o Outcome QIS 5 still uncertain, latest specifications have eased
Slide 15: Total embedded value of EUR 9.65 per common share
Total embedded value of EUR 9.65 per common share o TEV per common share declined mainly due to: – Higher market value of debt – Issuance of common shares EUR billion, except per share data 2009 2008 Δ Embedded value life insurance 23.3 22.9 2% Total embedded value (TEV) 17.8 18.5 (4)% TEV per commo
Slide 16: Increase embedded value life driven by operating returns
Increase embedded value life driven by operating returns o Positive performance from both VNB and existing in-force book o In-force performance partly driven by favorable maintenance expenses as a result of cost reduction measures o Capital market impact driven by – Increase in risk free fixed inter
Slide 17: Stable free surplus
Stable free surplus o Free surplus generated on in-force lower, mainly due to negative hedge result in the Netherlands o Investment in new business decreased due to lower capital intensive production in the Americas and lower production in the UK o ‘Other’ mainly reflects an increase in required sur
Slide 18: Conclusion
Conclusion o Further improvement of underlying earnings o Continued execution of strategy o Robust sales and deposits, evidence of strong franchise o Continued strong capital position Local knowledge. Global power. 18
Slide 19: Q&A
Q&A Local knowledge. Global power. 19
Slide 20: Upcoming AEGON events in 2010
Upcoming AEGON events in 2010 June 9 Goldman Sachs Financials Conference, Madrid (CEO) 22-23 Analyst and Investor Conference – London August 12 Q2 2010 results (CEO) September 3 Nomura Financial Services Conference, London (CFO) 30 BoA-ML Financial Conference, London (CFO) November 11 Q3 Q3 2010 res
Slide 21: Appendix
Appendix Click on the picture to see the entire report Local knowledge. Global power. 21
Slide 22: Robust new life sales demonstrate solid franchise
Robust new life sales demonstrate solid franchise o New life sales of EUR 538 million – Americas’ new life sales improved 9% compared with Q1 2009 – The Netherlands recorded higher individual life sales offset by lower pension sales – UK sales were down as a result of lower immediate annuity volumes
Slide 23: Continued strong deposits
Continued strong deposits o Gross deposits* of EUR 7.8 billion, a sequential increase of 16% – Pensions, mutual funds, variable annuities and asset management deposits were all strong – Fixed annuities were managed lower o All country units recorded net deposits, which totaled EUR 0.7 billion* Gross
Slide 24: Value of new business
Value of new business o Value of new business of EUR 146 million – Higher value of new business from Netherlands and variable annuities in Europe was offset by decreases in the UK, Americas and Spain – Fixed annuity sales in the US and immediate annuity sales in the UK declined following repricing o
Slide 25: Americas
Americas o Underlying earnings increased to USD 524 million o New life sales increased 9% compared with Q1 09 because of growth across most distribution channels o Net deposits* of USD 0.7 billion as pension inflows were offset by outflows from variable annuities in Canada and fixed annuities in the
Slide 26: The Netherlands
The Netherlands o Underlying earnings rose 44% to EUR 104 million – all businesses contribute to increase o New life sales were in line with Q1 09 as higher individual life sales and immediate annuities were offset by lower pension sales o Net deposits improved due to a net inflow of savings deposit
Slide 27: United Kingdom
United Kingdom o Underlying earnings increased as financial markets improved o Operating expenses decreased 1% year on year following the transfer of asset management o New life sales decreased as higher pension and retirement sales were offset by closure of the employee benefit business and lower i
Slide 28: New Markets
New Markets o Underlying earnings increased as a result of higher results in most units o New life sales declined as sales growth in both Central & Eastern Europe and China was offset by lower sales in Spain o Net deposits rose due to improved life and asset management deposits o License for Hubei p
Slide 29: Net impairments by asset class
Net impairments by asset class AEGON general account investments (consolidated in EUR millions) Q1 2010 impairments / recoveries by country unit - IFRS basis (pre-DAC, pre-tax) Americas NL UK New Markets* Total ABS – Housing 57 - - - 57 ABS – Non-housing 1 - - - 1 CMBS 6 - - - 6 RMBS 68 - - - 68 Sub
Slide 30: Commercial mortgage loans
Commercial mortgage loans o USD 13.4 billion commercial mortgage loan portfolio o Sound debt service coverage ratio of 1.9 o Average LTV of 65% o Own origination o Riskier asset types avoided CML impairments (USD million)** Weighted average loan-to-value by property type* (%) 80 70 60 20 22 50 40 Q4
Slide 31: For questions please contact Investor Relations
For questions please contact Investor Relations T: +31 70 344 8305 E: [email protected] www.aegon.com P.O. Box 85 2501 CB The Hague The Netherlands Local knowledge. Global power. 31
Slide 32: 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