Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2016 Earnings Presentation
44 slides from Aegon's earnings presentation, Aug 11, 2016
Slide 1: Q2 2016 Results
Q2 2016 Results Alex Wynaendts Darryl Button The Hague – August 11, 2016 CEO CFO Helping people achieve a lifetime of financial security
Slide 2: Solid capital ratio despite volatile markets
Overview 2 Solid capital ratio despite volatile markets Net loss of EUR 385 million mainly due to divestment of UK annuity book • Solvency II ratio increased to an estimated 158% as capital generation and management actions more than offset adverse market impacts • Underlying earnings before tax imp
Slide 3: Increased Solvency II ratio
Capital 3 Increased Solvency II ratio Management actions drive Solvency II ratio up Group Local solvency ~155% +2% +2% +5% (2%) (4%) 158% SII ratio ratio by unit US NL UK OF OF ~450% 154% 145% 17.7 17.8 RBC SII SII Management actions SCR SCR 11.4 11.3 Q1 Capital UK annuity Improvements Market impact
Slide 4: Netherlands Solvency II refinements
Capital 4 Netherlands Solvency II refinements Management actions improve Solvency II ratio What changed? Why change? Impact on ratio? • Additional interest rate hedges have • Reduce the sensitivity of the ratio for been implemented pre-Brexit changes in market conditions and volatility in staff pens
Slide 5: Solvency II sensitivities updated
Capital 5 Solvency II sensitivities updated Group sensitivities updated for NL hedging changes and UK divestment Solvency II sensitivities • Changes in ALM and hedging programs in the (In percentage points) Netherlands reflected in updated sensitivities Scenario Group US NL UK • UK annuity portfolio
Slide 6: Holding excess capital at EUR 1.1 billion
Capital 6 Holding excess capital at EUR 1.1 billion Net dividends from the units offset capital return and holding expenses • Regular dividends supported by capital generated at the units • Dividends received from the Americas, CEE, Spain and Aegon Asset Management • Expected total 2016 capital retu
Slide 7: Underlying earnings before tax
Earnings 7 Underlying earnings before tax Results impacted by adverse claims experience in the US • Lower Americas earnings mainly due to adverse claims experience, low interest rates and lower earnings from Variable Annuities • Higher earnings from Europe as a result of lower DPAC amortization in t
Slide 8: Addressing underperformance in the US
Earnings 8 Addressing underperformance in the US 5 part plan to enhance earnings and improve returns 1 2 3 4 5 Address deterioration of Strategic overhaul of Disposition of non-core Rationalized location Focused and disciplined profitability in Life & business lines and assets strategy in light of O
Slide 9: Expense savings on track
Earnings 9 Expense savings on track Americas ahead of planned expense savings 2018 target Americas Expense savings vs target • Reducing complexity by transforming to ONE Transamerica • Completed voluntary separation incentive plan USD (EUR million) EUR 74 • Reducing consulting related costs 150 mill
Slide 10: Net loss mainly due to Other charges
Earnings 10 Net loss mainly due to Other charges UK annuity divestments and fair value items offset realized gains Underlying earnings to net income development in Q2 2016 (EUR million) UEBT Q2 16 435 Fair value items Americas: Netherlands: Fair value items (378) • Alternative investments • Interest
Slide 11: Continued strong gross deposits
Sales 11 Continued strong gross deposits Life sales reflects focus on profitability • Higher gross deposits driven by US retirement plans, asset management, savings deposits in NL and external growth of the platform business in the UK - Net deposits amounted to EUR 1.2 billion • New life sales decli
Slide 12: Actively managing profitability of sales
Sales 12 Actively managing profitability of sales MCVNB being impacted by low interest rates Development of MCVNB and US 10-year interest rate (in EUR million and %) • Product adjustments in • Changed business mix in UK • Product re-pricing in the Americas • Product adjustments in Americas • Entered
Slide 13: Progress on financial targets
Strategy 13 Progress on financial targets Capital return, excess capital and expense savings on track Year-end Half-year Commitment 2018 target 2016 results Strong sales growth CAGR of 10% >10% Reduce operating expenses EUR 200 million EUR 74 million Increase RoE 10% 7.1% Excess capital at Holding E
Slide 14: Aegon acquires Cofunds and becomes the leading UK platform business
Creating the leading UK platform 14 Aegon acquires Cofunds and becomes the leading UK platform business
Slide 15: Unique opportunity to accelerate execution of strategy
15 Unique opportunity to accelerate execution of strategy Market • Number 1 retail platform leadership • Number 3 in workplace savings market Leveraging • Becoming a pure play digital provider technology • Leveraging state-of-the-art technology Creating the leading Achieving cost • GBP ~60 million c
Slide 16: Becoming a pure play digital provider
Creating the leading UK platform 16 Becoming a pure play digital provider Accelerating strategic transformation of Aegon UK Completing strategic transformation 2017 and future Transformational M&A transactions 2016 From insurance to platform business • Digital provider across the value chain 2011-20
Slide 17: Clear leader in fast-growing market
Creating the leading UK platform 17 Clear leader in fast-growing market • Achieving leadership positions in fast-growing markets following Cofunds acquisition - Number 1 retail platform - Number 3 in workplace savings market Leading market position1 Continued platform market growth (4Q15, market sha
Slide 18: Attractive synergies from acquisition
Creating the leading UK platform 18 Attractive synergies from acquisition • GBP ~60 million of cost synergies within two years representing ~25% of digital cost base1 - Cost synergies will be realized by leveraging Aegon’s existing state-of-the-art platform - Building on Aegon UK’s strong track reco
Slide 19: Modest investment drives cash flow growth
Creating the leading UK platform 19 Modest investment drives cash flow growth • Capital benefit from cost savings limits net investment for Cofunds acquisition • Aegon will recognize GBP ~150 million Solvency II benefit as a result of cost savings1 - Cost synergies will be equally split between Aego
Slide 20: Appealing financial rationale
Creating the leading UK platform 20 Appealing financial rationale Cofunds acquisition to deliver substantial value Capital benefit of GBP ~150 million resulting from cost savings Modest investment Net capital investment for acquisition and restructuring of GBP ~50 million1 Attractive Payback per
Slide 21: Thank you!
21 Thank you! For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands
Slide 22: Upcoming events
Calendar 22 Upcoming events September London, Sep 6 Edinburgh, Sep 14 Paris, Sep 16 Roadshow following Roadshow following Kepler Cheuvreux Q2 results Q2 results Autumn Conference The Netherlands, Sep 7 London, Sep 13 New York, Sep 15 London, Sep 27-28 Roadshow following Q2 results KBW UK Barclays Fi
Slide 23: Analyst & Investor conference
Calendar 23 Analyst & Investor conference Hosted in New York on Thursday December 8, 2016 • Please mark in your calendar • Invitation to follow in September
Slide 24: Index
Appendix 24 Index Click subject to go directly to the section Acquisition Strategy Q2 2016 Q2 2016 Cofunds support Asset portfolio Financials Slide 25-27 Slide 28-30 Slide 31-33 Slide 34-43
Slide 25: Profile of the Cofunds business
Acquisition Cofunds 25 Profile of the Cofunds business Cofunds provides platform services to advisors charging fees over assets Offering Asset development • Cofunds, founded in 2001 as a first mover in the (in GBP billion) UK Platform Market and currently the market leader CAGR with GBP 77 billion i
Slide 26: Building on complementary strengths
Acquisition Cofunds 26 Building on complementary strengths Leveraging strong existing skillset • Assets: GBP 77bn (GBP 28bn retail) • Assets: GBP 12bn • Assets: GBP 8bn Platform, GBP 46bn Traditional (GBP 21bn to be upgraded) Profile • Customers: 750,000 (retail) • Customers: 350,000 • Customers: 2
Slide 27: Advisor and customer benefits
Acquisition Cofunds 27 Advisor and customer benefits Substantially enhancing adviser proposition and distribution capability Superior Minimal Enhanced Major new proposition disruption distribution business relationship • Continuous platform • No requirement for an • Cofunds and Aegon • New business
Slide 28: Aegon at a glance
Strategy support 28 Aegon at a glance Focus History Employees Life insurance, pensions & Our roots date back to the Over 29,000 employees asset management for first half of the 19th century (June 30, 2016) 30 million customers 34% 9% Europe AAM Asia <1% Earnings Investments Paid out 57% Americas Und
Slide 29: Responsible business
Strategy support 29 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 30: Raising awareness
Strategy support 30 Raising awareness Second quarter retirement research highlights Research publication Published the 5th Aegon Retirement Readiness survey covering 16,000 people in 15 countries. Global presence Launched new longevity institute in Brazil collaborating with the Aegon Center for Long
Slide 31: General account investments
Asset portfolio 31 General account investments By geography June 30, 2016 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 20,731 18,415 280 221 39,647 Investment grade corporates 42,015 5,808 3,401 - 51,223 High yield (and o
Slide 32: Structured assets and corporate bonds
Asset portfolio 32 Structured assets and corporate bonds By rating June 30, 2016 amounts in EUR millions AAA AA A BBB <BBB NR Total Structured assets by rating Commercial MBS 4,322 946 254 88 132 - 5,741 Residential MBS 2,208 329 197 214 2,010 - 4,957 Non-housing related ABS 3,215 902 1,154 317 250
Slide 33: US energy & commodity exposure
Asset portfolio 33 US energy & commodity exposure Direct and indirect by rating June 30, 2016 amounts in EUR millions Unrealized gain AAA AA A BBB <BBB/NR Total / (loss) Independent - 3 364 721 151 1,238 69 Oil field services - - 195 41 145 382 (19) Midstream - - 251 1,107 98 1,457 82 Integrated 2 5
Slide 34: Fair value items
Financials 34 Fair value items Impacted by alternative investments and hedge programs Total of EUR (378) million FV hedging with FV hedging without accounting match accounting match FV investments FV other EUR (283) million EUR (74) million EUR (14) million EUR (7) million Derivatives ∆: EUR 1,217m
Slide 35: Underlying earnings
Financials 35 Underlying earnings Declined to EUR 435 million Underlying earnings before tax • Lower earnings in Americas as a result of adverse Americas Europe claims experience, lower earnings from VA due to (USD million) (EUR million) reduction of closed block and lower margins and the recurring
Slide 36: Gross deposits
Financials 36 Gross deposits Increased to EUR 23.0 billion Gross deposits • Higher gross deposits in the Americas as a result of the Americas Europe acquisition of Mercer’s DC business, partially offset by (USD billion) (EUR billion) lower deposits in Variable Annuities • Gross deposits in Europe up
Slide 37: New life sales
Financials 37 New life sales Amounted to EUR 244 million • New life sales in the Americas decreased, driven by all product categories • New life sales in Europe were stable as higher sales in Turkey, Hungary and Spain were offset by lower sales in Poland and pensions in the Netherlands • New life sa
Slide 38: MCVNB of EUR 100 million
Financials 38 MCVNB of EUR 100 million Impacted by margin pressure, low interest rates and methodology change • Lower MCVNB in the Americas as a higher contribution from life insurance was more than offset by a lower contribution from Variable Annuities • MCVNB in Europe down due to the exclusion of
Slide 39: Operating expenses
Financials 39 Operating expenses Stable at EUR 926 million Operating expenses • Operating expenses in the Americas decreased, as Americas Europe the benefit of cost savings programs was partly offset (USD million) (EUR million) by the Mercer acquisition and restructuring expenses • Operating expense
Slide 40: Capital generation and capital buffer
Financials 40 Capital generation and capital buffer Impacted by adverse financial markets • Capital generation of EUR 0.3 billion, excluding market impacts of EUR (0.2) billion and one-time items of EUR 0.8 billion • Capital buffer in the holding increased to EUR 1.1 billion driven by net dividends
Slide 41: Capital allocated to run-off businesses
Financials 41 Capital allocated to run-off businesses Further reduced in 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 ear
Slide 42: Main economic assumptions
Financials 42 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 43: Investing in Aegon
Financials 43 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 Country Netherlands • Aegon New York Registry Shares (NYRS) - Trad
Slide 44: Disclaimer
44 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 by consolidating on a proporti