Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2011 Earnings Presentation
37 slides from Aegon's earnings presentation, Aug 11, 2011
Slide 1: Second quarter 2011 results
Second quarter 2011 results Alex Wynaendts CEO Analyst & investor presentation The Hague, August 11, 2011
Slide 2: Continued execution of strategy in volatile market environment
Continued execution of strategy in volatile market environment Repurchase of all convertible core capital securities from Dutch State completed Divestment of Transamerica Reinsurance concluded Underlying earnings impacted by unfavorable currency movements and exceptional charges Continued fo
Slide 3: Focus on delivering on targets
Focus on delivering on targets Achieve return on equity of Grow underlying earnings Double fee-based earnings to Increase annual before tax by operational free cash flow to 10-12% 7-10% 30-35% €1.3-1.6 by 2015 on average per annum billion between 2010 and 2015 of underlying earnings by 2015 by 2015
Slide 4: Underlying earnings mainly impacted by adverse currency movements
Underlying earnings mainly impacted by adverse currency movements Adverse impact from lower dollar compared to Q2 2010 of EUR 44 million (Q1 2011: EUR 18 million) Lower fixed annuity earnings due to lower spreads and lower asset balances as the product is de-emphasized – in line with strategy
Slide 5: Earnings impacted by fixed annuities and exceptional charges in NL and UK
Earnings impacted by fixed annuities and exceptional charges in NL and UK Americas’ underlying earnings down due to fixed annuities. Lower Life & Protection earnings were offset by higher variable annuity earnings In the Netherlands higher life results were more than offset by higher provisionin
Slide 6: Higher fee-based earnings offset by lower spreads in US
Higher fee-based earnings offset by lower spreads in US Earnings from Life & Protection declined as a result of unfavorable persistency and lower spreads due to lower interest rates Lower asset balances and lower spreads of fixed annuities caused earnings decrease Variable annuity earnings inc
Slide 7: Net income benefits from gains on investments
Net income benefits from gains on investments Fair value items impacted by continued volatile markets Investment gains mainly a result of strategic reallocation of equities into fixed income in the Netherlands Impairments were linked to US residential mortgage-backed securities and exchange of
Slide 8: Limited exposure to peripheral European countries
Limited exposure to peripheral European countries Total exposure related to peripheral European countries 3.5% of general account Exposure to peripheral European sovereigns remains limited Corporate debt mainly related to defensive sectors, for example utilities General account assets Peripher
Slide 9: Half-year operating expenses at constant currencies remained level
Half-year operating expenses at constant currencies remained level Excluding restructuring charges At constant currencies, excluding restructuring and employee benefit plan costs, expenses remained level ► Reported operating expenses 2% higher due to restructuring in the UK and the Netherlands and
Slide 10: UK on track to deliver GBP 80 million cost savings by year-end 2011
UK on track to deliver GBP 80 million cost savings by year-end 2011 Total operating expenses of GBP 109 million include: Life and Pension ► Restructuring charge of GBP 13 million operating expenses ► Development of new propositions of GBP 7 million (GBP million) 100 ► Customer redress program expe
Slide 11: Sales impacted by re-pricing in the US and UK
Sales impacted by re-pricing in the US and UK At constant currencies, total sales declined 7% Reported total sales* down 15%, affected by weakening of the USD and lower new life sales New life sales declined as higher production in CEE was more than offset by lower volumes in the US and the UK
Slide 12: Successful strategic shift towards fee-based business
Successful strategic shift towards fee-based business US Employer Solutions & Pensions continued to show strong growth US variable annuities deposits at 8-year high as a result of organic growth in traditional channels and the introduction of a new variable annuity rider, Retirement Income Max,
Slide 13: Stable operational free cash flows
Stable operational free cash flows Earnings on the in-force remained strong ► Realized gains on investments in the Netherlands offset by spread compression in the US Release of required surplus continued to be impacted by low interest rates Investments in new business stable compared with Q1 ►
Slide 14: Continued strong excess capital position at the holding
Continued strong excess capital position at the holding Total excess capital of EUR 2.3 billion ► Excess capital of EUR 1.3 billion in operating units ► Holding excess capital of EUR 1.0 billion, above targeted EUR 900 million Repurchase of core capital securities of EUR 1.125 billion offset by
Slide 15: Shareholders' equity stable
Shareholders’ equity stable Revaluation reserve up EUR 0.3 billion to EUR 1.0 billion as a result of lower interest rates Strong IGD ratio of ~ 200% Capital base ratio of 73% after the repayment to the Dutch State ► On target to achieve core capital of at least 75% of total capital by end of 2
Slide 16: Conclusion
Conclusion Repurchase of all convertible core capital securities from Dutch State completed Divestment of Transamerica Reinsurance concluded Underlying earnings impacted by unfavorable currency movements and exceptional charges Continued focus on cost control while restructuring the business
Slide 17: Q&A
Q&A 17
Slide 18: Upcoming events
Upcoming events September October Barclays Financials Conference, New York BofA-ML Conference, London September 13, 2011 October 5, 2011 ING Benelux Conference, London September 14, 2011 CIBC Conference, Montreal September 22, 2011 November December Q3 2011 results AEGON Analyst & Investor Conferenc
Slide 19: Appendix
Appendix 19
Slide 20: New life sales of EUR 431 million
New life sales of EUR 431 million Americas’ sales were down as a result of lower universal life production following repricing The Netherlands leveled at EUR 40 million, traditionally Q1 is the strongest quarter Lower annuity sales following repricing was partially offset by an increase in gro
Slide 21: Continued strong gross deposits reflect shift to fee business
Continued strong gross deposits reflect shift to fee business Strong retirement and stable value deposits in the US Organic growth in traditional channels and the successful launch of the Retirement Income Max rider at the end of Q1 drove strong US variable annuity deposits Lower savings depos
Slide 22: Value of new business of EUR 103 million impacted by currencies
Value of new business of EUR 103 million impacted by currencies Lower volume in life insurance products offset by higher volume of variable annuities in the US Higher mortgages related funding costs and updated mortality assumptions in the Netherlands Lower new business volume in the UK follow
Slide 23: Americas
Americas Underlying earnings before tax amount to USD 469 million, growth in fee-based businesses was more than offset by lower earnings from product spreads Operating expenses increased 4% as a result of higher employee benefit plan expenses and business growth New life sales declined as a re
Slide 24: The Netherlands
The Netherlands Underlying earnings before tax decreased to EUR 74 million as higher life earnings were offset by higher provisioning for longevity and a decline in non-life results Operating expenses increased to EUR 201 million as a result of investments in new distribution capabilities and re
Slide 25: United Kingdom
United Kingdom Underlying earnings before tax decreased to GBP 9 million ► Life earnings improved mainly due to cost savings ► Pensions recorded a loss as the benefits of further business growth and improved market conditions were more than offset by charges related to customer redress and excepti
Slide 26: New Markets
New Markets Underlying earnings before tax increased to EUR 59 million as a result of improved claim experience in CEE and higher performance fees for AEGON asset management Operating expenses increased mainly as a result of growth of the business New life sales growth in CEE driven by strong
Slide 27: Successful shift in focus to life insurance in Central & Eastern Europe
Successful shift in focus to life insurance in Central & Eastern Europe Underlying earnings before tax increased to EUR 29 million as 2010 included higher claims related to storms and floods in Hungary New life sales increased by 25% driven by higher production in Hungary and Turkey Strong sal
Slide 28: Expanding distribution network in Spain
Expanding distribution network in Spain Life, health and pension Merging entities Merging entities partnership with Unnim Caja Navarra Caja Cantabria finalized Caja Burgos Health insurance Caja Canarias Cajastur partnership agreement Caja Sol Caja with Banca Cívica Extremadura ~1500 branches ~70
Slide 29: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets Opening balance March 31, 2011 87.4 37.4 8.9 2.9 Net in- and outflow (2.5) (0.7) 0.1 (0.1) Unrealized / realized results 0.7 0.1 0.0 0.0 Foreign exchange (
Slide 30: Impairments
Impairments Impairments linked to US residential mortgage-backed securities and exchange offers on specific holdings of European banks in the United Kingdom Impairments included recoveries of EUR 15 million Impairments (EUR million) 416 501 385 394 286 212 150 77 92 133 62 100 146 91 64 101 93 3
Slide 31: Investments general account
Investments general account AEGON UNAUDITED INVESTMENTS GENERAL ACCOUNT June 30, 2011 The United New Holdings amounts in EUR millions, except for the impairment data Americas Netherlands Kingdom Markets and other TOTAL Cash / Treasuries / Agencies 15,898 8,292 2,098 1,134 452 27,874 Investment grade
Slide 32: Impairments by asset class
Impairments by asset class AEGON general account investments Q2 2011 impairments / (recoveries) by country unit - IFRS basis (pre-DAC, pre-tax) EUR millions Americas NL UK New Markets Total ABS – Housing - - - - - ABS – Non-housing (0) - - - (0) CMBS 0 - - - 0 RMBS 56 - - - 56 Subtotal structured as
Slide 33: Credit losses in the US trending down
Credit losses in the US trending down Q2 2011 US credit impairments amount to 8 bps ► Annualized level of 29 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 29 9 8 17 17 1 2 4 2 -2 -6 1990 1991 1992 1993 1994 1995 1996 1997 1998 199
Slide 34: Commercial mortgage loans
Commercial mortgage loans USD 11.3 billion commercial mortgage loan portfolio* Sound debt service coverage ratio of 1.7 Average LTV of 65% Own origination CML net impairments - IFRS Weighted average loan-to-value by property type *** (USD million)** (%) 80 70 60 50 40 27 23 30 16 20 6 0 10 0
Slide 35: Reconciliation of effective tax rate Q2 2011
Reconciliation of effective tax rate Q2 2011 Reconciliation of effective tax rate Q2 2011 EUR million Americas The Netherlands United Kingdom New Markets/ Holdings Total Income before tax 278 204 (18) 12 476 Nominal tax rate 35.00% (97) 25.00% (51) 26.50% 5 25.00% 3 (140) Actual income tax (41) (35)
Slide 36: For questions please contact Investor Relations
For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands WWW.AEGON.COM
Slide 37: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This presentation 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 inf