Aegon Ltd. · EURONEXT:AGN
Aegon — Investor Day (June 2018)
35 slides from Aegon's investor day presentation, Jun 19, 2018
Slide 1: Financial transformation and capital framework
Financial transformation and capital framework Matt Rider June 19, 2018 CFO Helping people achieve a lifetime of financial security
Slide 2: Key messages
Key messages 2 Transformation driving excellence in financial management • Acceleration of group-wide finance transformation program to increase efficiency and predictability Key priorities • New disclosures to align with how business is managed and highlight growth potential • Maintain strong capit
Slide 3: Key achievements and priorities
3 Key achievements and priorities
Slide 4: Key achievements driven by ongoing financial transformation
Key achievements & priorities 4 Key achievements driven by ongoing financial transformation Portfolio optimization Divested non-core businesses, while investing in growth ALM processes and hedging program Decreased P&L volatility to acceptable level Solvency II Strengthened Dutch capital position al
Slide 5: Priorities going forward
Key achievements & priorities 5 Priorities going forward Finance Disclosure Capital Financial transformation enhancement management results • Model validation and • Reporting the way the • Managing capital across • Achieving 2018 financial conversion program business is managed multiple frameworks t
Slide 6: Programs focused on increasing control and efficiency
Key achievements & priorities 6 Programs focused on increasing control and efficiency Model Validation Model Conversion • Significant progress made on Model Validation • Finance transformation program includes focus on program conversion of actuarial models for IFRS valuation - Model Validation form
Slide 7: Successful actions to manage profitability of LTC business
Key achievements & priorities 7 Successful actions to manage profitability of LTC business • Consistently pursued rate increases since 2002; good progress latest round of rate increases initiated in 2016 - ~75% of requests completed around expected levels; remainder of requests are pending • Effecti
Slide 8: Long-Term Care developing in line with expectations
Key achievements & priorities 8 Long-Term Care developing in line with expectations • Over the last two years, actual LTC experience under IFRS tracked well against management’s best estimate - IFRS assumptions are reviewed in detail annually, management is closely monitoring emerging experience • S
Slide 9: IFRS 9 / 17 a major change in insurance accounting in 2021
Key achievements & priorities 9 IFRS 9 / 17 a major change in insurance accounting in 2021 Improve comparability to certain degree • Industry will apply similar overarching principles • Significant optionality and interpretational issues remain • In parallel, US GAAP is also moving toward reporting
Slide 10: Reporting Aegon NL aligned with how business is managed
Key achievements & priorities 10 Reporting Aegon NL aligned with how business is managed • Reporting changes to align with legal entity structure - Introduction of Banking and Service business with distinct growth prospects and business models • As of 2018, management’s best estimate for returns on
Slide 11: Reporting changes as a result of business transformation
Key achievements & priorities 11 Reporting changes as a result of business transformation • Prospective change in US expense allocation is the result of business transformation - New expense allocation better reflects expense savings program and the drivers of costs • MCVNB scope for the group chang
Slide 12: Capital management framework
12 Capital management framework
Slide 13: Managing and deploying capital across multiple dimensions
Capital framework 13 Managing and deploying capital across multiple dimensions Local regulatory Group Solvency II Rating agencies Leverage ratio Holding excess framework ratio cash Target range: Target range: Target: Target range: Target range: Target zones based on 150 - 200% AA financial strength
Slide 14: Units within target zones after anticipated changes
Capital framework 14 Units within target zones after anticipated changes United States Netherlands United Kingdom 4Q17 472% 4Q17 199% Opportunity Opportunity Opportunity 450% 190% 4Q17 176% 185% Target Target Target 350% 150% 145% Retention Retention Retention 300% 130% 130% Framework Risk-Based Cap
Slide 15: Group SII ratio to remain within top half of target zone
Capital framework 15 Group SII ratio to remain within top half of target zone • Group Solvency II ratio to remain within top half of target zone after anticipated changes Capital framework Drivers of ratio - The anticipated changes are expected to increase annual 4Q17 Opportunity Anticipated capital
Slide 16: Objective to maintain very strong financial strength ratings
Capital framework 16 Objective to maintain very strong financial strength ratings Downgrade triggers and focus areas1, 2 Financial IFRS Leverage and fixed Internal capital strength Other profitability3 charge cover model rating, outlook Quality of capital AA-, ~ negative A+, - stable Geo
Slide 17: Managing leverage ratio towards low-end of target range
Capital framework 17 Managing leverage ratio towards low-end of target range • Aim to reduce leverage ratio to increase financial flexibility • Gross financial leverage ratio to approach low-end of 26-30% target range - Redemption of EUR 500 million senior debt in August 2018 to reduce leverage by ~
Slide 18: Debt issuance focused on refinancing grandfathered securities
Capital framework 18 Debt issuance focused on refinancing grandfathered securities • Vast majority of grandfathered Tier 1 securities are callable on a quarterly basis - Approximately 40% of securities have fixed coupon of ~6% on average; remainder has a reset coupon of ~2% on average • AGM authoriz
Slide 19: Holding excess cash buffer secures financial flexibility
Capital framework 19 Holding excess cash buffer secures financial flexibility • Targeted holding excess cash provides cushion to cover holding costs and secure annual dividend • Holding excess cash is unencumbered and majority held in money market (MM) investments - Part of holding cash invested in
Slide 20: Capital generation and deployment
20 Capital generation and deployment
Slide 21: Strongly growing normalized capital generation
Capital generation and deployment 21 Strongly growing normalized capital generation Management actions drive free cash flow growth (EUR million) Region Old1 20182 Americas3 ~900 ~925 • US continues to account for the majority of Netherlands4 ~225 ~300 capital generation across the group supported Un
Slide 22: Capital generation driven by Own Funds growth
Capital generation and deployment 22 Capital generation driven by Own Funds growth • Own Funds growth drives capital generation, mainly as a result of excess spreads - Growth in Own Funds to lead to further improvement in quality of capital • SCR release on existing business more than offset by new
Slide 23: Investing in future capital generation
Capital generation and deployment 23 Investing in future capital generation • New business written in 2017 expected to lead to capital generation of EUR ~3.9 billion over time • Capital generation benefit reflects disciplined pricing and product design - Aiming for internal rate of returns in excess
Slide 24: Increased geographical diversification of remittances
Capital generation and deployment 24 Increased geographical diversification of remittances • Geographical diversification of remittances has increased significantly - Continued strong remittances from the Americas - Netherlands and UK to resume regular remittances to the group in 1H18 • Capital inje
Slide 25: Disciplined capital deployment
Capital generation and deployment 25 Disciplined capital deployment Organic • Accelerate organic growth, with continued focus on increasing IRRs and reducing payback periods growth • Increase geographical diversification of capital generation • Manage leverage to lower end of 26% - 30% target range
Slide 26: Conclusion
26 Conclusion
Slide 27: Strong progress on 2018 financial targets
Conclusion 27 Strong progress on 2018 financial targets Run-rate annualized expense savings Strong sales momentum (EUR million) (EUR billion) 20 CAGR 300 +23% EUR 10 CAGR 200 350m* of 100 >10% 0 0 2015 2016 2017 2018 2016 2017 2018 Target TCS agreement Target Cumulative capital return to shareholder
Slide 28: Conclusions
Conclusion 28 Conclusions Deliver on the 2018 group financial targets Complete group-wide finance transformation, with emphasis on IFRS 17 implementation Enhance and align disclosure with how the business is managed Maintain a solid capital position Grow capital generation and remittances to the gro
Slide 29: Q&A session
29 Q&A session
Slide 30: Appendix
Appendix 30 Appendix For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands
Slide 31: New lines of business for NL and UK
Appendix 31 New lines of business for NL and UK Best estimate for investment returns included in NL UEBT NL 2017 underlying earnings NL 2017 business line change NL 2017 revised definition change1 (Business lines and EUR million) (Business lines and EUR million) (Business lines and EUR million) Life
Slide 32: Prospective modification of US expense allocation
Appendix 32 Prospective modification of US expense allocation • New expense allocation better reflects expense savings program and the drivers of costs • No material impact on overall US earnings US 2017 underlying earnings US 2017 underlying earnings pro forma (Business lines and USD million) (Busi
Slide 33: Rating agency profitability and leverage rating triggers
Appendix 33 Rating agency profitability and leverage rating triggers Selected downgrade rating triggers Financial Fixed Net US strength Net Financial charge income statutory rating, outlook UEBT income RoE leverage cover RoE RoC AA-, <€ 2.0bn <€ 1.5bn <8.0% >30.0% <7.0x -- -- negative € 2.1bn € 1.
Slide 34: Investing in Aegon
Appendix 34 Investing in Aegon • Aegon ordinary shares Aegon’s ordinary shares - Traded on Euronext Amsterdam since 1969 Ticker symbol AGN NA and quoted in euros ISIN NL0000303709 SEDOL 5927375NL • Aegon New York Registry Shares (NYRS) Trading Platform Euronext Amsterdam Country Netherlands - Traded
Slide 35: Disclaimer
35 Disclaimer Cautionary note regarding non-IFRS measures This document includes the following non-IFRS-EU financial measures: underlying earnings before tax, income tax, income before tax, market consistent value of new business and return on equity. These non-IFRS-EU measures are calculated by con