Aegon Ltd. · EURONEXT:AGN
Aegon — Investor Presentation (May 2016)
50 slides from Aegon's investor presentation, May 2016
Slide 1: Accelerate, connect, deliver
1 Accelerate, connect, deliver Investor presentation May-June 2016 Helping people achieve a lifetime of financial security
Slide 2: Story line
Accelerate, connect, deliver 2 Story line Transformed the profile of the company by focusing on fee business Achievements Substantially improved the strength of our balance sheet since 2010 Doubled free cash flows after holding expenses Broaden relationships with our customers throughout the
Slide 3: Achievements and priorities
Accelerate, connect, deliver 3 Achievements and priorities Helping people achieve a lifetime of financial security
Slide 4: Changed company profile
Achievements and priorities 4 Changed company profile Result of executing on our strategy While growing our fee business Optimized value Generated average annual of backbook sales growth of 12% since Addressed Realized material cost 2010 legacy issues savings in established Invested in digital
Slide 5: Maintained a strong capital position
Achievements and priorities 5 Maintained a strong capital position Allowing dividends to shareholders of EUR 1.4 billion since 2010 Solid group Solvency II ratio ~155%* Q1 2016 Robust balance sheet Strong ratings S&P AA- financial strength rating Operational free cash flow growth Growing Doubled fre
Slide 6: Aegon's strategic priorities
Achievements and priorities 6 Aegon’s strategic priorities • Offer solutions throughout the lifecycle • EUR 200 million expense reduction program in US, NL and holding • Provide omni-channel distribution • Simplifying our business by digitizing • Expand guidance and advice processes and increasing c
Slide 7: Benefit from global trends
Achievements and priorities 7 Benefit from global trends Well positioned to capitalize on new trends and regulation Persistently low interest rates Shift from state and corporate benefits to individual responsibility for financial security Increased competition as a result of blurring boundaries in
Slide 8: Serving customers throughout their lives
Achievements and priorities 8 Serving customers throughout their lives Opportunity to provide products and services across the lifecycle …to trusted provider of …through guidance retail solutions and advice… From worksite relationship… At & after retirement Situation Retirees looking for income and
Slide 9: Reducing expenses
Achievements and priorities 9 Reducing expenses Achieving cost savings by simplifying our businesses Strong expense track Additional cost savings …by simplifying record 2010-2015 in 2016-2018… the business Expenses up only 1% per USD 150 million savings • Reduce complexity year while growing sales b
Slide 10: Strategically allocated capital
Achievements and priorities 10 Strategically allocated capital Continue to increase capital to core businesses Optimized Portfolio Divest non-core business Enhance backbook value Optimize capital allocation • Divested UK annuity book • Operationally separate UK • Grow asset management backbook from
Slide 11: 2018 financial targets
Achievements and priorities 11 2018 financial targets Executing on our strategy Year-end Commitment Management actions 2018 target Strong sales • Sales driven by higher gross deposits in Retirement plans and CAGR of 10% growth Asset Management during Q1 • Completed voluntary separation plan in the A
Slide 12: Capital update
Accelerate, connect, deliver 12 Capital update Helping people achieve a lifetime of financial security
Slide 13: Capital management policy
Capital update 13 Capital management policy 140-170% target Solvency II range at Group level Group EEA country units Opportunity SII ratio Target: 130% – 150% SII Ratio 1 170% SCR Aegon Target Group 140% SCR Americas Target* 350 – 450% life RBC US holding** -50% 2 Caution SII equivalence @250% 120 –
Slide 14: Solvency II ratio at ~155%
Capital update 14 Solvency II ratio at ~155% Ratios mainly impacted by adverse market impacts Capital return to Q4 2015 Capital generation Market impacts Other Q1 2016 shareholders ~160% +2% (6%) +5% (6%) ~155%* • Capital generation • Wider mortgage spread in NL • Pro forma UK • EUR 400 million shar
Slide 15: ALM rebalancing in the Netherlands
Capital update 15 ALM rebalancing in the Netherlands Results volatility due to difference in valuation curves • NL guarantee hedges adjusted to Solvency II curve vs IFRS curve Q1 2016 Solvency II curve, resulting in lowered (in years) hedge durations • IFRS results volatility due to difference in 3.
Slide 16: Cash and capital deployment
Accelerate, connect, deliver 16 Cash and capital deployment Helping people achieve a lifetime of financial security
Slide 17: Leverage and fixed charge coverage
Cash and capital deployment 17 Leverage and fixed charge coverage Remain within target ranges • Gross financial leverage of 28.7% as of Q1 2016 - Leverage cut by ~25% since 2011 • Fixed charge coverage of 6.7x full year 2015 - Fixed charges reduced by more than 40% - Preferred dividend eliminated Gr
Slide 18: Recalibrated cash flows
Cash and capital deployment 18 Recalibrated cash flows In line with Solvency II framework • Americas operational free cash flows expected to grow after 2018, as growth of the fee businesses more than offsets a lower contribution from fixed annuities and run-off businesses • Netherlands remains stabl
Slide 19: Capital generation
Cash and capital deployment 19 Capital generation Mainly driven by the Americas Capital generation* 2016-2018 • Gross capital generation in the Americas (EUR billion) and NL benefits from cost savings 8.4 (4.2) • Rising contribution to free cash flow CEE, Spain & Portugal generation from UK, Asset M
Slide 20: Capital deployment strategy
Cash and capital deployment 20 Capital deployment strategy Focused on returning capital to shareholders • 70% of EUR 3.0 billion deployable capital allocated to dividends and share buyback • Capital injections mainly in Asia to support growth Capital deployment 2016-2018 (EUR billion) Americas NL EU
Slide 21: Q1 2016 results
Accelerate, connect, deliver 21 Q1 2016 results Helping people achieve a lifetime of financial security
Slide 22: Q1 results impacted by volatile markets
Overview 22 Q1 results impacted by volatile markets Strong sales momentum reflects successful implementation of strategy • Underlying earnings were up as higher earnings from Europe more than offset lower US earnings • Solvency II ratio at end of Q1 2016 ~155% as a result of the share buyback, 2015
Slide 23: Underlying earnings before tax increased
Earnings 23 Underlying earnings before tax increased Results impacted by lower equity markets • In the Americas earnings declined mainly because of the recurring impact of the Q3 2015 actuarial assumption changes and model updates and lower fee income from lower average equity markets • Higher earni
Slide 24: Lower fee earnings in the Americas
Earnings 24 Lower fee earnings in the Americas Lower average balances as a result of lower average equity markets • Unfavorable equity market returns during the first half of the quarter resulted in lower average account balances • Lower average account balances resulted in USD 15 million lower fee
Slide 25: Net income impacted by fair value items
Earnings 25 Net income impacted by fair value items Losses on alternative investments and hedges 1 2 3 UEBT to net income development in Q1 2016 (EUR million) FV investments FV hedging with FV hedging without accounting match accounting match EUR (104) million EUR (101) million EUR (152) million UEB
Slide 26: Continued strong sales
Sales 26 Continued strong sales A result of strategic shift to fee-based businesses • Gross deposits up to EUR 30 billion driven by US Retirement Plans and Asset Management - Net deposits increased to EUR 7.9 billion • New life sales were lower as higher indexed universal life sales in the United St
Slide 27: Final DOL Fiduciary Rule
Regulation 27 Final DOL Fiduciary Rule Better understanding the implications of the complex regulation Key takeaways Potential impact Actions • Comes into full effect as of • Short-term negative impact • Focused on ensuring January 1, 2018 (with certain of 10 - 20% on VA sales in organizational read
Slide 28: Cost savings programs progressing
Strategy 28 Cost savings programs progressing Benefits of cost savings program to be reflected as of second half of 2016 Americas Netherlands Holding & Other • Reduce complexity by • Cost savings identified on • Aligning reporting structure transforming to ONE existing book in: with business units T
Slide 29: Executing on strategy
Strategy 29 Executing on strategy Focus on core growth areas and capital return Investor day Completion 1st Sale of 2/3 UK Sale of remaining January 13 tranche SBB annuity book UK annuity book Presented strategy March 31 April 11 May 23 update to the market Completed first tranche Reinsured 2/3 of U
Slide 30: Appendix
Accelerate, connect, deliver 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: Upcoming events
Calendar 31 Upcoming events May June New York, May 31 London, June 8 London, June 23 Deutsche Bank Global Barclays UK Savings Autonomous Insurance Financials Conference Conference Rendez-Vous London, May 25 Paris, June 7 Amsterdam, June 22 Des Moines, June 28 JP Morgan Insurance Goldman Sachs Kepler
Slide 32: Index
Appendix 32 Index Press subject to go directly to the section Strategy Q1 2016 Q1 2016 support Asset portfolio Financials Slide 33-35 Slide 36-38 Slide 39-50
Slide 33: Aegon at a glance
Strategy support 33 Aegon at a glance Focus History Employees Life insurance, pensions & Our roots date back to the Close to 30,000 employees asset management for first half of the 19th century (March 31, 2016) 30 million customers 34% 9% Europe AAM Asia <1% Earnings Investments Paid out 57% America
Slide 34: Responsible business
Strategy support 34 Responsible business Embedded in our operations Our commitment: “To act responsibly and to create positive impact for all our stakeholders” Putting our customers at Having a responsible Empowering our Promoting retirement the center of what we do investments approach employees re
Slide 35: Committed to financial education
Strategy support 35 Committed to financial education Conduct research, educate the public and lead dialogue on financial issues International presence Partnering up Established Centers for Building relationships with longevity and retirement in the respected partners in the field of US, the Netherla
Slide 36: General account investments
Asset portfolio 36 General account investments By geography March 31, 2016 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 18,316 20,952 261 62 39,592 Investment grade corporates 39,434 10,024 3,071 - 52,528 High yield (and
Slide 37: Structured assets and corporate bonds
Asset portfolio 37 Structured assets and corporate bonds By rating March 31, 2016 amounts in EUR millions AAA AA A BBB <BBB NR Total Structured assets by rating Commercial MBS 4,396 1,068 317 144 135 - 6,059 Residential MBS 2,351 304 205 221 2,109 - 5,189 Non-housing related ABS 3,059 900 1,783 500
Slide 38: US energy & commodity exposure
Asset portfolio 38 US energy & commodity exposure Direct and indirect by rating March 31, 2016 amounts in EUR millions Unrealized gain AAA AA A BBB <BBB/NR Total / (loss) Independent - 3 327 634 139 1,104 (57) Oil field services - 41 181 1 157 380 (77) Midstream - - 231 1,002 85 1,317 (21) Integrate
Slide 39: Underlying earnings
Financials 39 Underlying earnings Increased to EUR 462 million Underlying earnings before tax • Lower earnings in Americas as a result of lower fee Americas Europe income from lower markets, one-time employee (USD million) (EUR million) expenses, reduction of VA closed block balances and recurring e
Slide 40: Fair value items
Financials 40 Fair value items Impacted by alternative investments and hedge programs Total of EUR (358) million FV hedging with FV hedging without accounting match accounting match FV investments FV other EUR (101) million EUR (152) million EUR (104) million EUR (1) million Derivatives ∆: EUR 2,314
Slide 41: Gross deposits
Financials 41 Gross deposits Increased to EUR 30.1 billion Gross deposits • Higher gross deposits in the Americas as a result of the Americas Europe Mercer acquisition, growth in pensions and mutual (USD billion) (EUR billion) funds, partially offset by lower deposits in variable annuities • Gross d
Slide 42: New life sales
Financials 42 New life sales Amounted to EUR 266 million • New life sales in the Americas were stable, as higher indexed UL sales offset lower sales in standard UL and term life products • Lower new life sales in Europe as higher sales in Turkey were more than offset by lower sales in Poland • New l
Slide 43: MCVNB of EUR 133 million
Financials 43 MCVNB of EUR 133 million Impacted by margin pressure, low interest rates and methodology change • Higher MCVNB in the Americas mainly driven by a higher contribution from life insurance, offsetting a lower contribution from VA • MCVNB in Europe decreased as a result of a change in the
Slide 44: Operating expenses
Financials 44 Operating expenses Increased to EUR 960 million Operating expenses • Operating expenses in the Americas increased driven Americas Europe by the Mercer acquisition and one-time employee (USD million) (EUR million) expenses • Operating expenses in Europe remained stable as lower restruct
Slide 45: Capital generation and capital buffer
Financials 45 Capital generation and capital buffer Impacted by adverse financial markets • Capital generation of EUR 0.3 billion, excluding market impacts of EUR (0.7) billion and one-time items of EUR (0.2) billion • Capital buffer in the holding decreased to EUR 1.0 billion driven by completion o
Slide 46: Capital allocated to run-off businesses
Financials 46 Capital allocated to run-off businesses Further reduced in Q1 2016 • Current capital allocated to run-off businesses of USD 1.3 billion • Capital intensive run-off businesses negatively impact return on equity - Capital allocated to run-off businesses included in RoE calculations, but
Slide 47: Main economic assumptions
Financials 47 Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.10 n.a. 0.71 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 forward curve
Slide 48: Earnings sensitivities
Financials 48 Earnings sensitivities To equity markets and reinvestment yields Macro hedge equity sensitivity estimates • Protection of capital position main purpose of macro Total equity return in quarter Fair value items impact hedging program -8% ~USD (10) million • IFRS accounting mismatch betwe
Slide 49: Investing in Aegon
Financials 49 Investing in Aegon Aegon’s ordinary shares • Aegon ordinary shares Ticker symbol AGN NA - Traded on Euronext Amsterdam since 1969 ISIN NL0000303709 and quoted in euros SEDOL 5927375NL Trading Platform Euronext Amsterdam • Aegon New York Registry Shares (NYRS) Country Netherlands - Trad
Slide 50: Disclaimer
Accelerate, connect, deliver 50 Disclaimer Cautionary note regarding non-IFRS measures This document includes the following non-IFRS financial measures: underlying earnings before tax, income tax, income before tax and market consistent value of new business. These non-IFRS measures are calculated b