Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2017 Earnings Presentation
36 slides from Aegon's earnings presentation, Aug 10, 2017
Slide 1: 2Q 2017 Results & Capital update
2Q 2017 Results 2Q 2017 Results & Capital update Alex Wynaendts Matt Rider The Hague – August 10, 2017 CEO CFO Helping people achieve a lifetime of financial security
Slide 2: Highlights
Overview 2 Highlights • Capital injection of EUR 1 billion contributes to pro forma NL solvency ratio of ~175%1 Strengthening Dutch capital • NL ratio well within new 150–190% target range; LAC-DT set at 75% at 2Q 2017 position • Aegon NL to resume dividend payments; expected 2017 dividend of EUR 10
Slide 3: Highlights 2Q 2017 results
Overview 3 Highlights 2Q 2017 results • Underlying earnings increase significantly driven by improved claims experience and favorable markets • Return on equity improves 160 basis points to 8.4% due to strong net underlying earnings • Group solvency ratio increases significantly to 185% • Strong sal
Slide 4: Earnings up due to improved claims and favorable markets
Earnings 4 Earnings up due to improved claims and favorable markets • Improved claims experience in Life and Health in the US and Dutch non-life business • Favorable markets drive higher account balances resulting in higher fee-based earnings • Lower negative adjustment to intangible assets as a res
Slide 5: Expense reductions of EUR 350 million on track for 2018
Earnings 5 Expense reductions of EUR 350 million on track for 2018 Declining core operating expenses (EUR million – rolling 4 quarters ) 3,900 • Successful expense savings program drives reduction in core operating expenses 3,750 • Acquisitions in US and UK in key business lines add to scale. Relate
Slide 6: Strong net income mainly due to gain on divestment
Earnings 6 Strong net income mainly due to gain on divestment Underlying earnings to net income development in 2Q 2017 (EUR million) UEBT 2Q 2017 535 Loss from fair value items Mainly driven by adverse credit spread movements Fair value items (191) and losses on hedges to protect capital Realized ga
Slide 7: Solid sales and improved margins
Sales 7 Solid sales and improved margins • Gross deposits of EUR 35 billion mainly driven by strong institutional platform sales in the UK - Asset management and UK platform flows drove net deposits of EUR 2.3 billion • Lower new life sales driven by lower US term life and indexed universal life sal
Slide 8: Capital update
8 Capital update Helping people achieve a lifetime of financial security
Slide 9: Highlights of capital update
Overview 9 Highlights of capital update • Capital injection of EUR 1 billion contributes to pro forma NL solvency ratio of ~175%1 Strengthening • NL ratio well within new 150–190% target range; LAC-DT set at 75% at 2Q 2017 Dutch capital position • Solid capital position and growing capital generatio
Slide 10: Comprehensive plan to increase NL capitalization level
Capital update 10 Comprehensive plan to increase NL capitalization level • Comprehensive plan adds ~40%-points and brings NL Solvency II ratio to ~175% on a pro forma basis • Increased ratio well within new target range of 150–190% • Closed current methodological discussions with DNB - LAC-DT factor
Slide 11: Clear benefits for Aegon NL from increased capital ratio
Capital update 11 Clear benefits for Aegon NL from increased capital ratio Illiquid investments ~(5)-(10)% • Resuming dividend payments to group; expected 2017 dividend of EUR 100m in 1H181 Benefiting from • Regaining focus on execution of strategy; investing in core fee-based solutions higher capit
Slide 12: Divestment of UMG at attractive price
Capital update 12 Divestment of UMG at attractive price UMG divestment ~6% Monetizing • Divestment to Aon for EUR 295 million; attractive 21x P/E ratio top-3 position • EUR ~225 million uplift in own funds to drive 6%-points solvency ratio uplift for Aegon NL • Sale is in line with strategy to focus
Slide 13: On track to execute on risk profile enhancements
Capital update 13 On track to execute on risk profile enhancements Risk profile ~5-10% Solvency Action Timing Comment • Derisking actions include selling impact1 EUR ~1 billion worth of corporate Completed General account bonds, mostly BBB-rated +2% pts 2Q 2017 Completed +2% derisking • Internal mod
Slide 14: Increased financial flexibility allows for capital injection
Capital update 14 Increased financial flexibility allows for capital injection Capital injection Holding cash flows ~25% (2H 2017, in EUR billion) • Holding excess capital increased to 1.3 EUR 1.7 billion in 2Q 2017 Divestment proceeds UK (0.2) - Regular US and CEE dividends of (0.4) 2 EUR 0.4 billi
Slide 15: Capital management focused on protecting capital generation
Capital update 15 Capital management focused on protecting capital generation New capital management policy Aegon NL • New capital management policy based on Opportunity Trigger to discuss additional amended philosophy opportunities for capital deployment 190% • Target zone lifted and widened from 1
Slide 16: Increased capital position improves shock absorbency
Capital update 16 Increased capital position improves shock absorbency Aegon NL Solvency II sensitivities (Pro forma for comprehensive plan) Capital management policy • Additional buffer added resulting in higher Target target of 150–190%, which improves the Impact on capital ability to absorb shock
Slide 17: Sustainable capital generation and dividends from Aegon NL
Capital update 17 Sustainable capital generation and dividends from Aegon NL • Growth in capital generation as a result of illiquid investment strategy and reduction in capital intensity - Shift to illiquid investments limits short-term SCR release, while it drives EUR ~50 million step-up in excess
Slide 18: Group solvency ratio increases significantly to 185%
Capital update 18 Group solvency ratio increases significantly to 185% • Divestment of majority of US run-off businesses and completion of the Rothesay Part VII transaction combined were the main drivers of the increased ratio on a comparable basis • Capital generation of EUR 0.6 billion including m
Slide 19: Amendment of US conversion methodology
Capital update 19 Amendment of US conversion methodology • Agreement with DNB to amend deduction & aggregation methodology for US, to be reviewed annually - Conversion factor lowered from 250% to 150%1 for US regulated entities - Own funds reduced by 100% RBC requirement1 to reflect transferability
Slide 20: Updated group capital zones
Capital update 20 Updated group capital zones New Old zones zones Europe Opportunity 200% 2Q17 NL: 150–190% Solvency II New 185% UK: 145–185% Solvency II Opportunity Target 170% Americas1 150% Target US regulated entities: 350–450% RBC Transferability restriction: -100% on own funds 140% New Convers
Slide 21: Strong capital generation outlook for the group
Capital update 21 Strong capital generation outlook for the group Normalized capital generation (EUR million) Region Old1 20182 Comments Americas3 ~900 ~850 Capital generation stable at USD 1 billion; after run-off divestment Netherlands4 ~225 ~300 Excludes UFR change & temporary illiquid strain; af
Slide 22: Conclusion
Capital update 22 Conclusion Strengthened Dutch capital position allows for dividend payments Closed current methodological discussions with regulator Achieved level playing field with amended US conversion methodology Recalibrated target zones protect capital generation and dividends Commit
Slide 23: Appendix
23 Appendix For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands
Slide 24: Calendar of events
Calendar 24 Calendar of events London, Sep 21 London, Sep 27 & 28 Singapore, Aug 16 Netherlands, Sep 7 London, Sep 12 Aegon UK Bank of America Merrill Roadshow Roadshow Roadshow deep dive Lynch Conference New York, Sep 7 Paris, Sep 14 Milan, Sep 28 Hong Kong, Aug 18 KBW Insurance Kepler Cheuvreux JP
Slide 25: Aegon at a glance
Strategy support 25 Aegon at a glance Focus Sales Asia Life insurance, pensions & Total sales of asset management for over € 7.9bn 26 million customers (2017 YTD) 2% Europe Americas 33% History Employees 59% Our roots date back to the Over 29,000 employees 6% first half of the 19th century (June 30,
Slide 26: Americas: Strong earnings improvement
Financials 26 Americas: Strong earnings improvement • Underlying earnings up to USD 374 million, mostly driven by improved claims experience and favorable equity markets • Operating expenses increased by 4% due to higher restructuring charges and one-time favorable variable employee expenses in 2Q 2
Slide 27: Europe: Favorable markets drive solid earnings
Financials 27 Europe: Favorable markets drive solid earnings • Underlying earnings increased to EUR 195 million mainly driven by higher account balances and favorable markets in the UK and improved claims experience in Dutch non-life business • Operating expenses increased by 12% due primarily to th
Slide 28: Asia: Continued earnings growth in HNW and China
Financials 28 Asia: Continued earnings growth in HNW and China • Underlying earnings increased to USD 12 million, mainly due to higher earnings from HNW business and China • New life sales increased by 7% as a result of strong demand for new critical illness product in China • Net deposits decreased
Slide 29: Asset management: Improved net deposits
Financials 29 Asset management: Improved net deposits • Underlying earnings declined by 14% as lower expenses were more than offset by lower management fees • Lower operating expenses driven by lower expenses in the Americas • Net inflows of EUR 2.5 billion mainly from the Americas, the Netherlands
Slide 30: Capital generation and excess capital
Capital and assumptions 30 Capital generation and excess capital • Capital generation excluding market impacts and one-time items of EUR 0.3 billion • Holding excess capital increased to EUR 1.7 billion at the end of the second quarter due to the dividends received from the US and CEE, and special d
Slide 31: Progress on financial targets
Strategy 31 Progress on financial targets Year-end Commitment 2Q 2017 results 2018 target Strong sales growth CAGR of 10% >10% Reduce operating expenses EUR 350 million EUR ~160 million Increase RoE 10% 8.4% Excess capital at Holding EUR 1.0 – 1.5 billion EUR 1.7 billion Return capital to shareholde
Slide 32: General account investments
Financials 32 General account investments June 30, 2017 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 18,079 16,904 371 163 35,517 Investment grade corporates 32,890 3,934 3,483 - 40,307 High yield (and other ) corporates
Slide 33: Updated Solvency II sensitivities
Financials 33 Updated Solvency II sensitivities Solvency II sensitivities (in percentage points) Scenario Group US NL UK Capital markets • Group Solvency II ratio well within target Equity markets +20% +3% +2% +3% -7% zone of capital management policy Equity markets -20% -5% -10% -6% +8% Interest ra
Slide 34: Main economic assumptions
Capital and assumptions 34 Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.10 n.a. 0.85 Annual gross equity market return (price appreciation + dividends) 8% 7% 7% Main assumptions for financial targets US NL UK 10-year government bond yields Develop in line with
Slide 35: Investing in Aegon
35 Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA • Aegon ordinary shares ISIN NL0000303709 - Traded on Euronext Amsterdam since 1969 SEDOL 5927375NL and quoted in euros Trading Platform Euronext Amsterdam Country Netherlands • Aegon New York Registry Shares (NYRS) Aegon’s New York
Slide 36: Disclaimer
36 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