Aegon Ltd. · EURONEXT:AGN
Aegon — Debt Investor Presentation (October 2014)
66 slides from Aegon's debt investor presentation, October 2014
Slide 1: SAECURE 15 Investor Presentation October 2014
SAECURE 15 Investor Presentation October 2014 1
Slide 2: Disclaimer
Disclaimer This presentation has been prepared by AEGON Hypotheken B.V. (“AEGON” or the “Company”). For the purposes of this disclaimer, Deutsche Bank AG, HSBC Bank plc, ING Bank N.V., J.P. Morgan, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A., trading as Rabobank International and any of the
Slide 3: Disclaimer (cont.)
Disclaimer (cont.) The information contained herein is confidential and is intended for use only by the intended recipient. This presentation is not intended for U.S investors. The presentation nor any copy of it may be taken or transmitted into the United States of America, its territories or posse
Slide 4: Content
Content Page Executive Summary 5 AEGON Highlights 10 The Dutch Economy and Housing Market 13 The Dutch Residential Mortgage Market 19 AEGON Residential Mortgage Loan Origination, Underwriting & Servicing 29 Transaction Overview 40 The SAECURE Program 47 Appendix 1: The Dutch RMBS Mar
Slide 5: Executive summary
Executive summary 5
Slide 6: Executive Summary
Executive Summary AEGON is pleased to announce the proposed issuance of securities by SAECURE 15 B.V. as Issuer The intention is to offer notes under the SAECURE 15 transaction which will comprise notes denominated in EUR (Reg S only) The issue is collateralised by first and sequentially lower r
Slide 7: Preliminary capital structure and transaction features
Preliminary capital structure and transaction features Proposed Note Structure Credit Series Currency Note Size1 Fitch / S&P WAL2 FORD Coupon until FORD Coupon after FORD Status enhancement 3 Class A1 EUR [23.2%] [AAAsf / AAA(sf)] [2.0]yrs [30 Jan 2020] 3m Euribor+ [ ]bps 3m Euribor+ [ ]bps [8]% O
Slide 8: Key Portfolio Characteristics
Key Portfolio Characteristics Key Portfolio Characteristics Geographical Distribution Weighted Average LTMV [110%- (Provisional Portfolio as of 31 August 2014) Friesland 3.0% Groningen 3.3% 120%], [<50%], [50%- 4.2% 0.4% 70%], Characteristic Value 10.7% Principal balance Noord-Holland 14.9% 1,583,17
Slide 9: SAECURE Comparisons
SAECURE Comparisons SAECURE 15 SAECURE 14 SAECURE 13 SAECURE 12 Closing date [October 2014] March 2014 March 2013 December 2012 Deal size* (EUR) [ ] 1,501,700,000 1,223,500,000 1,467,900,000 Offering Reg S Only Reg S Only Reg S Only Reg S Only Notes offered Class A1 Class A2 Class A1 Class A2 Class
Slide 10: AEGON Highlights
AEGON Highlights 10
Slide 11: AEGON at a glance
AEGON at a glance Underlying earnings before tax of EUR 1 billion in H1 2014 Over 150 12% 5% 4% Life years of Americas 5% Individual Savings and Retirement The Netherlands 23% 44% history 24% 59% United Kingdom Pensions New Markets Asset management 24% Other AA- financial Life insurance, pensions st
Slide 12: AEGON Netherlands N.V. (AEGON NL)
AEGON Netherlands N.V. (“AEGON NL”) AEGON NL is wholly owned by AEGON N.V. and a core member Underlying earnings before tax (Unaudited) of the AEGON group AEGON NL offers a wide range of financial products and services EUR millions H1 2014 to its clients, including pensions, insurance (life and
Slide 13: The Dutch Economy and Housing Market
The Dutch Economy and Housing Market 13
Slide 14: The Dutch economy
The Dutch economy Highlights of the Dutch economy Unemployment rate comparison Source: Eurostat, CPB Source: Eurostat 14% One of the most stable and open economies in Europe Netherlands UK Eurozone US with one of the highest GDP per capita 12% 11.5% ► Y-o-Y real GDP growth rate -0.7% and is foreca
Slide 15: The Dutch economy (cont'd)
The Dutch economy (cont’d) Sovereign debt (% of GDP) Deficit (% of GDP) Source: Bloomberg, IMF1 Source: Bloomberg Netherlands UK Germany France US Netherlands UK Germany France US 115 15 105 101.5% 95 93.5% 10 85 90.6% 5.8% 75 78,4% 5 4.3% 73.5% 65 3.3% 55 2.5% 0 45 -0.1% 35 25 -5 1992 1994 1996 199
Slide 16: Dutch household financials
Dutch household financials Overview Source: Eurostat, Dutch Central Bank The vast majority of household debt in the Netherlands is residential mortgage debt (EUR 631 bn as at Q2 2014) vs remaining consumer credit (EUR 23 bn as at Q2 2014) The incentive for consumers to maximise their mortgage de
Slide 17: The Dutch housing market: HPI comparison
The Dutch housing market: HPI comparison House price development (2000 values rebased at 100) Source: ECB, S&P/Case-Shiller, Nationwide 300 Netherlands UK Ireland Spain US 250 220 200 166 154 150 128 118 100 50 0 2000 2001 2001 2002 2003 2004 2005 2006 2006 2007 2008 2009 2010 2011 2011 2012 2013 20
Slide 18: The Dutch housing market: Supply and Demand
The Dutch housing market: Supply and Demand Supply dynamics Building permits and newly built homes Source: CBS, Ministry of Housing, VROM Source: CBS Supply in the Dutch housing market is relatively inelastic x 1000 Annual new house requirement ► Limited land available for housing according to Min
Slide 19: The Dutch Residential Mortgage Market
The Dutch Residential Mortgage Market 19
Slide 20: Overview of the Dutch mortgage market
Overview of the Dutch mortgage market Mortgage debt outstanding Mortgage lending market share in the Netherlands Source: Dutch Central Bank (Q1 2014); Source: Land Registry (Kadaster) EUR bn total mortgage debt outstanding (LHS) EUR bn ING 20.7% 700 year-on-year change (RHS) 60 ABN AMRO 20.1% 50 Rab
Slide 21: Key characteristics of the Dutch residential mortgage market
Key characteristics of the Dutch residential mortgage market Predominantly prime, owner occupied Products Very little buy-to-let, non-conforming and sub-prime Mostly fixed rate mortgage loans Mortgage loans are provided predominantly on the basis of income (LTMVs are a less significant basis
Slide 22: Main mortgage products
Main mortgage products products fter January Annuity mortgage loans – fixed monthly Main mortgage Repayment payments Evolution of Redemption Types in AEGON Portfolio* 1st 2013 Source: AEGON (2006 – 2014 Q1) mortgage Linear mortgage loans – principal loans component comprising an equal, fixed amo
Slide 23: Code of Conduct: Industry self-regulation
Code of Conduct: Industry self-regulation Overview of the Code of Conduct Selected Code of Conduct guidelines The Code of Conduct is endorsed by AEGON as Detailed affordability calculations well as almost all banks, savings banks, ► Regardless of product type, calculates monthly mortgage loan mo
Slide 24: Mortgage loan foreclosures in the Netherlands
Mortgage loan foreclosures in the Netherlands In the first half of 2014 the number of foreclosures amounted to 539 compared to 437 in the same period in 2013 There were 1,931 forced sales between Q2 2013 and Q2 2014 (≈ 0.047% of total dwellings) compared to 2143 forced sales between Q2 2012 and
Slide 25: Tax incentives are the main reason behind higher LTMVs
Tax incentives are the main reason behind higher LTMVs2 Double tax incentive for mortgage loan borrowers1 Rational borrower behaviour in the Netherlands: Maximise amount of the mortgage loan secured on prime residence Mortgage loan Savings Take out non-amortizing mortgage loans with long maturit
Slide 26: Recent policy developments impacting the housing and RMBS market
Recent policy developments impacting the housing and RMBS market 2001 ► Reduction of the tax benefit by permitting tax deductibility only for the first 30 years of the mortgage loan term 2004 ► Realized home equity is no longer tax deductible and has to be reinvested in next property 2011 ► Transact
Slide 27: The NHG mortgage loan guarantee
The NHG mortgage loan guarantee NHG (Nationale Hypotheek Garantie) refers to the public mortgage loan insurance scheme supporting home ownership in the Netherlands Every person in the Netherlands can obtain a guarantee from the Stichting WEW, a Dutch state guaranteed non-profit organization, for
Slide 28: Evolution of NHG Coverage
Evolution of NHG Coverage Typical NHG mortgage 120.00 Allocation of loss loans originated before Year Loss for Originator Loss for WEW* (NHG) 100.00 2013 Year 1 - 40.00 80.00 Year 2 0.94 39.06 60.00 Year 3 1.93 38.07 Principal Savings Loanpart 40.00 Year 4 2.95 37.05 Year 5 4.01 35.99 Principal Inte
Slide 29: AEGON Residential Mortgage Loan Origination, Underwriting & Servicing
AEGON Residential Mortgage Loan Origination, Underwriting & Servicing 29
Slide 30: AEGON NL organization
AEGON NL organization AEGON NL consists of Business Lines: Business Line Life & Mortgages, Business Line Pension and Business Line Non-Life. AEGON Business Line Life & Mortgages, the servicer of the mortgage loans, has a team of 140 people (121 FTE) located in Leeuwarden (115 front office and 25
Slide 31: AEGON NL mortgage lending organization
AEGON NL mortgage lending organization Life & Financial Marketing NL Sales Mortgages Services Product development Distribution and Sales Application processing Distribution partners Marketing department Sales department Accepting and monitoring Credit assessment and new brokers and processing depart
Slide 32: AEGON NL mortgage lending organization (cont'd)
AEGON NL mortgage lending organization (cont’d) AEGON NL has two entities for its mortgage lending business, AEGON Hypotheken B.V. and AEGON Levensverzekering N.V., which offer its mortgage loans under the “AEGON” brand name mainly to Dutch citizens with collateral only in the Netherlands ► As of
Slide 33: AEGON NL mortgage lending organization (cont'd)
AEGON NL mortgage lending organization (cont’d) The mortgage loans are widely distributed over the whole of the Netherlands and are also well diversified by borrower age ► AEGON has defined the following as its key target groups for the sale of mortgage loans: young customers buying their first ho
Slide 34: Residential mortgage loan production
Residential mortgage loan production AEGON’s customers are increasingly switching to AEGON mortgage loan part production - by interest reset period (longer term) fixed interest rates (especially 20-year Source: AEGON (%) July 2013 – June 2014 interest reset terms) due to the low absolute long term
Slide 35: AEGON underwriting process
AEGON underwriting process AEGON has a robust underwriting process that allows it to make lending decisions on a timely basis Integrated and efficient approach from proposal to disbursement of the mortgage loan, including origination and administration of supplementary insurance products The u
Slide 36: Underwriting criteria & credit process
Underwriting criteria & credit process Borrower Underwriting criteria based on Code of Conduct criteria Credit searches with BKR (National Credit Register) and SFH (Fraud Register) Owner occupied properties Collateral Mandatory valuation of the property Mandatory damage and fire insurance
Slide 37: Detailed income underwriting
Detailed income underwriting Underwriting Process: Stage 1 “Pre-approval” AEGON key documentation requirements (similar to market practice) Application tested against AEGON’s standard criteria, databases for credit history and fraud and, where Customer data: necessary, subject to an additional r
Slide 38: Detailed income underwriting (cont'd)
Detailed income underwriting (cont’d) Overview of the national credit register (“BKR”) Source: BKR as of November 2012 BKR is a non-profit organization which was founded in 1965 by the Dutch finance industry to administer the Central Credit Information System (“CKI”) ► CKI stores data on loans and
Slide 39: Changes in AEGON underwriting criteria
Changes in AEGON underwriting criteria 2008 ► Credit mortgage loan discontinued 2009 ► LTMV capped at 109% 2010 ► Discontinued AEGON BeleggingsHypotheek (Investment mortgage loan) 2011 ► LTMV capped at 106% by all market participants ► Introduction of AEGON BankspaarHypotheek (Bank savings mortgage
Slide 40: Transaction Overview
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Slide 41: SAECURE 15 structure overview
SAECURE 15 structure overview SAECURE 15 transaction structure is typical for Dutch RMBS issues Dutch Special Purpose Vehicle (“SPV”) owned by an independent foundation (‘Stichting’) Legal title transfer of mortgage loan receivables through silent assignment (‘stille cessie’) at closing Mortga
Slide 42: Structural Features
Structural Features Principal Priority of Payments The Notes of each Class rank pari passu without any preference or priority among Notes of the same Class. Payments of principal on the Class A2 Notes are time subordinated to, inter alia, payments of principal on the Class A1 Notes. Reserve Accoun
Slide 43: Structural Features (cont.)
Structural Features (cont.) Interest Rate Swap Selected eligibility criteria To hedge the risk of a difference between the rate of Borrowers were at the time of origination, residents of the interest to be received by the Issuer on the Mortgage Netherlands and not employed by a Seller or any of
Slide 44: WAL and CPR Analysis
WAL and CPR Analysis Overview CPR The WAL of the Class A1 and Class A2 Notes, assuming1 Source: Moody’s Dutch Prime and NHG RMBS Indices and AEGON a CPR of [5.0]% and an Issuer call on the FORD (NPD Investor Reports falling in [30/01/2020]2), is [2.0] years and [5.3] years, SAECURE Series Actual A
Slide 45: Simplified interest priority of payments (prior to enforcement)
Simplified interest priority of payments (prior to enforcement)1 Available Revenue Funds Mortgage Loan Interest + Senior Expenses and Servicing Fee Interest on Issuer Accounts Proceeds credit insurance (interest) + + = Cash Advance Facility Interest Rate Swap Payment Prepayment penalties Interest on
Slide 46: Simplified principal priority of payments (prior to enforcement)
Simplified principal priority of payments (prior to enforcement)1 Available Principal Funds Mortgage Loan Principal repayments and prepayments Purchase of Further Advance + Receivables2 Credit insurance proceeds (principal) Net foreclosure proceeds of mortgage + = Principal on Class A1 Notes until f
Slide 47: The SAECURE Program
The SAECURE Program 47
Slide 48: Outstanding net balance of SAECURE RMBS transactions
Outstanding net balance of SAECURE RMBS transactions Outstanding Net Balance Source: Investor Reports (2006 – 2014) 10 SAECURE 1* SAECURE 2* SAECURE 3* SAECURE 4* SAECURE 5* 9 SAECURE 6 NHG* SAECURE 7 SAECURE 8 NHG SAECURE 9 SAECURE 10 SAECURE 11 SAECURE 12 SAECURE 13 NHG SAECURE 14 NHG 8 7 EUR (Bil
Slide 49: Performance of SAECURE RMBS transactions
Performance of SAECURE RMBS transactions Overview Arrears (>=2months) across all SAECURE transactions Source: Investor Reports, (bps of curr. balance) (2006 – 2014) Current arrears performance of outstanding 3.0 2 <= 3 monthly payments 3 <= 4 monthly payments SAECURE transactions is very strong 4
Slide 50: Performance of SAECURE RMBS transactions (cont'd)
Performance of SAECURE RMBS transactions (cont’d) No. of defaulted loans across all SAECURE transactions* Recovery Source: Investor Reports (2006 – 2014) Recovery Rate on NHG RMBS (SAECURE 6, 8, 13 and 14) 200 177 180 improved from 94% at the end of Q1 2013 to 99% at the end 160 of Q2 2014. 140 12
Slide 51: Successful Dutch mortgage loan operation
Successful Dutch mortgage loan operation AEGON NL’s portfolio of prime residential mortgage Mortgage loan portfolio loans amounted to €26.5bn at the end of the second Source: AEGON (2006 – Q2 2014) quarter of 2014 In 2013, AEGON increased their portfolio by €2.3bn through a combination of new mo
Slide 52: Appendix 1: The Dutch RMBS Market in Perspective
Appendix 1: The Dutch RMBS Market in Perspective 52
Slide 53: Performance of Dutch RMBS
Performance of Dutch RMBS 60+ day Delinquencies Moody’s Outlook for Dutch RMBS Source: Moody’s, Dutch and UK RMBS Prime Indices, Source: Moody’s announcements dated 21 May 2014 and May/June, 2014 and Moody’s, Jumbo Mortgage Credit 18 August 2014 Indexes, July 2014 12% Moody's collateral outlook fo
Slide 54: Prime RMBS cumulative losses
Prime RMBS cumulative losses Cumulative Losses (bps) 250 Dutch Prime 226 225 UK Prime 200 US Prime Typical annual excess spread p.a. in Dutch RMBS 175 150 125 100 75 51 50 50 25 10 0 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Source : AEGON; Moody’ s, Dutch RMBS and NHG RMBS Pri m e Indi
Slide 55: Prepayment rates
Prepayment rates Dutch prepayments are relatively insensitive to interest Prepayment rates rates due to high prepayment penalties: Source: Moody’s, Dutch and UK RMBS Prime Indices, ► Annual partial prepayments are typically only possible up May/June, 2014 and Moody’s, Jumbo Mortgage Credit to 10%
Slide 56: Selected Dutch RMBS – Spreads at issuance – WAL ~ 2 years
Selected Dutch RMBS – Spreads at issuance – WAL ~ 2 years Spreads at issuance – Transactions with WAL ~ 2 years (bps) Source: Concept ABS, Bloomberg 140 Arena 2011-II 120 Dutch MBS BV XVI STORM 2012-1 STORM 2011-IV Arena BV 2011-1 STORM 2012-2 100 SAECURE 10 Orange Lion 2011-6 Phedina 2011-1 STORM 2
Slide 57: Selected Dutch RMBS – Spreads at issuance – WAL ~ 5 years
Selected Dutch RMBS – Spreads at issuance – WAL ~ 5 years Spreads at issuance – Transactions with WAL ~ 5 years (bps) Source: Concept ABS, Bloomberg Arena 2011-II 160 Dutch MBS BV XVI STORM 2011-IV STORM 2012-1 STORM 2012-3 Arena BV 2011-1 DMPL X Orange Lion 2011-6 STORM 2012-2 Dolphin Master Issuer
Slide 58: Appendix 2: Detailed Dutch Residential Mortgage Market Practises
Appendix 2: Detailed Dutch Residential Mortgage Market Practises 58
Slide 59: Mortgage loan structure
Mortgage loan structure Costs @ 4% = 4 Transfer Tax @ 2% = 2 Savings Mortgage Loan Part Taxes and other costs = 56 related to the Additional property purchase can protection also be funded by the through mortgage loan Required for Annuity The total disability / property Annuity Mortgage mortgage loa
Slide 60: Affordability calculation based on the Code of Conduct
Affordability calculation based on the Code of Conduct Affordability tables provided by NIBUD For borrowers below 65 years of age Mortgage lenders closely follow the affordability recommendations provided by Nationaal Instituut Percentage of gross income that can be used for mortgage loan payments
Slide 61: The social security infrastructure in the Netherlands
The social security infrastructure in the Netherlands as of 1 July 2013 Unemployment Insurance Act All employees under the age of 65 who meet past service requirements and lose their (WW) job receive unemployment benefits Payable from the first day of unemployment Sickness Benefits Act (ZW) ► Em
Slide 62: Focus on foreclosure in the Netherlands
Focus on foreclosure in the Netherlands 1 Foreclosure Further recourse to other wealth including salary A mortgage loan lender can repossess and Full recourse to the borrower sell a property by public auction without ► After foreclosure, any remaining debt remains enforceable until court order d
Slide 63: Repossession & sale process in the Netherlands
Repossession & sale process in the Netherlands Stage 5c Stage 6 Stage 7 Action to receive payment Sale process Up to 1 Year¹ Post-sale Letter of lien of salary Third party guarantor Yes Bailiff appointed Successful Joint voluntary sale to collect any remaining debts² Borrower cooperation Unsuccessfu
Slide 64: NHG triggers, requirements and foreclosure process
NHG triggers, requirements and foreclosure process NHG Guarantee Triggers: Income test run Compare maximum -Unemployment Gather recent (according to NHG cost of living with -Divorce income data Conditions) current cost of living -Disability for work Decision NHG Borrower can stay in current house an
Slide 65: For questions relating to SAECURE please contact
For questions relating to SAECURE please contact: Ed Beije Sibylla Bantema Senior Vice President Corporate Treasury Director Mortgage Operations T: +31 70 344 8407 T: +31 58 244 3131 E: [email protected] E: [email protected] Guus Schoorlemmer Niels Roek Director Capital Management & Policies Senior
Slide 66: Thank you
OWN WAN VAY ARKY