Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2011 Earnings Presentation
25 slides from Aegon's earnings presentation, May 12, 2011
Slide 1: First quarter 2011 results and Embedded Value 2010
First quarter 2011 results and Embedded Value 2010 Jan Nooitgedagt CFO Media c conference onference call The Hague, May 12, 2011
Slide 2: Key messages
Key messages Solid progress on strategic objectives Underlyying gearnin gs imp pacted by y excep ptional charg ges and long gevity ypprovisioning g Continued focus on cost control St Strong earnings i and d sales l off pensions i and d variable i bl annuities iti iin th the US Strong exces
Slide 3: Continued focus on execution of strategy in Q1
Continued focus on execution of strategy in Q1 Divestment Transamerica Reinsurance for total after-tax consideration of Reallocate capital USD 1.4 billion Increased fee business, reduced spread business in the US ► Strong earnings and sales of US pensions and variable annuities Successful refo
Slide 4: Results highlighted
Results highlighted Underlying earnings before tax Operational free cash flows (EUR million) EUR million Q1 2011 Earnings E i on in i force f 523 Return on free surplus 17 446 483 452 452 414 Release of required surplus (1) New business strain (275) Q1 10 Q2 10 Q3 10 Q4 10 Q1 11 Operationa
Slide 5: Underlying earnings impacted by UK charges and NL longevity provisioning
Underlying earnings impacted by UK charges and NL longevity provisioning Americas’ earnings up 2% driven by strong pensions and variable annuities ► As of Q1 BOLI/COLI and life reinsurance reported in run-off businesses Earnings in the Netherlands lower due to higher provisioning for longevity o
Slide 6: Higher provisioning for longevity in the Netherlands
Higher provisioning for longevity in the Netherlands New projected mortality tables (2010 – 2060) show a strong increase in life expectancy ► One-off impact on excess capital of EUR 225 million in Q4 2010 Provisioning based on actual/observed mortality is taken through underlying earnings in lin
Slide 7: Continued focus on cost control
Continued focus on cost control Operating expenses up 3% due to restructuring charges and currency movements ► down by 1% excluding restructuring charges and at constant currencies Americas: declined 2% as a result of continued cost reduction initiatives The Netherlands: higher on investments
Slide 8: Net income benefits from lower impairments and positive result run-off businesses
Net income benefits from lower impairments and positive result run-off businesses Fair value items impacted by exceptional loss on strategic allocation funds in the Netherlands Investment gains as a result of normal trading in the investment portfolio Lower impairments were mostly linked to US
Slide 9: Impairments at lowest level in almost three years
Impairments at lowest level in almost three years Impairments mostly linked to US residential mortgage-backed securities Impairments included recoveries of EUR 26 million Impairments p (EUR million) 416 501 385 394 286 212 150 77 92 133 62 146 91 64 101 93 325 355 330 69 11 284 34 16 7 193 4 143
Slide 10: Sales growth in fee-based businesses – key area of focus
Sales growth in fee-based businesses – key area of focus Sales composite introduced, consisting of new life sales, new premiums accident & health and general insurance and 1/10 of gross deposits New life sales stable; higher pension sales in the Netherlands and strong sales in Central & Eastern
Slide 11: Strategic shift toward fee-based business – Pensions
Strategic shift toward fee-based business – Pensions US pension business continues to show strong results ► Success in smaller case market (<USD 20 million) as a result of high quality third-party administration and Plan Administration Service Support ((PASS)) product ► Focus on ‘Not-for-Profit’ a
Slide 12: Strategic shift toward fee-based business – Variable annuities
Strategic shift toward fee-based business – Variable annuities US variable annuities gross deposits rose 46% compared with Q1 2010 ► Growth in all traditional channels ► Market rationalization ► Newly launched VA rider well received ► Select competitors leave the market ► Fast-to-market strategy p
Slide 13: Continued strong excess capital position
Continued strong excess capital position Excess capital of EUR 3.7 billion ► Excess capital of EUR 2.4 billion in operating units ► Holding excess capital of EUR 1 1.33 billion billion, down on EUR 1 1.125 125 billion payment to Dutch State partly offset by EUR 0.9 billion equity issuance Earnin
Slide 14: Operational free cash flows
Operational free cash flows Operational cash flow disclosure on a quarterly basis going forward During the first quarter, earnings on the in-force remained strong Investments in new business as expected ► Shift in business mix ► Higher sales volumes for key fee-businesses fee businesses Targ
Slide 15: Core capital ratio stable at 75%
Core capital ratio stable at 75% Core capital ratio negatively impacted by repurchase of core capital securities (EUR 750m + EUR 375m premium) almost fully offset by: ► Eq quity y issuance of EUR 903 million ► Other items, mainly consisting of retained earnings, up-streamed dividends and holding e
Slide 16: Total embedded value up 6% to EUR 18.9 billion
Total embedded value up 6% to EUR 18.9 billion Total embedded value increased mainly due to positive performance of in-force business as a result of cost savings, improved financial markets and strengthening of currencies EUR million, except per share data 2010 2009 Δ Embedded value life insurance
Slide 17: Conclusion
Conclusion Solid progress on strategic objectives Underlyying gearnin gs imp pacted by y excep ptional charg ges and long gevity ypprovisioning g Continued focus on cost control St Strong earnings i and d sales l off pensions i and d variable i bl annuities iti iin th the US Strong excess
Slide 18: Q&A
Q&A 18
Slide 19: For questions please contact:
For questions please contact: G Greg T Tucker k +31 70 344 8956 [email protected] OR Dick Schiethart +31 70 344 8956 Dick schiethart@aegon com [email protected] WWW.AEGON.COM
Slide 20: Appendix
Appendix 20
Slide 21: Key benefits of Transamerica Reinsurance divestment
Key benefits of Transamerica Reinsurance divestment Divestment of non-core life reinsurance activities Supports repurchase of remaining core capital securities 1 Execution of AEGON’s AEGON s strategy Retained blocks of business put in run-off Reduction of capital employed in the US Cash pr
Slide 22: BOLI/COLI and Life reinsurance reported in run-off businesses as of Q1
BOLI/COLI and Life reinsurance reported in run-off businesses as of Q1 Net earnings from run-of businesses of EUR 13 million Average capital allocated to run-off businesses of EUR 2.7 billion (incl. life reinsurance) ► Return on capital of run run-off off businesses of 1 1.9% 9% Capital intens
Slide 23: Shareholders’ equity down mainly on weaker US dollar
Shareholders’ equity down mainly on weaker US dollar Positive revaluation reserve of EUR 0.7 billion at end of first quarter 2011, down versus Q4 2010 as a result of higher interest rates Other changes included the EUR 375 million premium on the repurchase of core capital Return on equity of 7
Slide 24: Increase embedded value life insurance driven by operating returns
Increase embedded value life insurance driven by operating returns Value of new business in 2010 of EUR 555 million Positive performance of in-force portfolio as a result of cost savings, improved financial markets and strengthening of currencies against the euro ► Changes in operating assumptio
Slide 25: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This d Thi documentt iincludes l d certain t i non-GAAP GAAP financial fi i l measures: underlying d l i earnings i b before f ttax and d value l off new b business. i Th The reconciliation ili ti off underlying d l i earnings i b before f ttax