Aegon Ltd. · EURONEXT:AGN
Aegon — Q2 2009 Earnings Presentation
27 slides from Aegon's earnings presentation, Aug 13, 2009
Slide 1: Second quarter 2009 results
Second quarter 2009 results Alex Wynaendts, CEO August 13, 2009
Slide 2: Cautionary note regarding forward-looking statements
Cautionary note regarding forward-looking statements Cautionary note regarding forward-looking statements The statements contained in this presentation that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following ar
Slide 3: Key messages
Key messages o Earnings improved substantially compared to previous quarters o Strong capital position – Aim to repay EUR 1 billion – Started to invest cash in higher yielding quality assets o Credit markets drive strong improvement of revaluation reserves o Continued profitable sales and deposits o
Slide 4: Execution of strategic priorities
Execution of strategic priorities o FY capital release target exceeded, realizing EUR 1.6 billion in 1H09 o Continuation of capital efficiency program Capital o Strong excess capital with EUR 3.5 billion in excess above AA o No interim dividend payment for 2009 – dividend policy unchanged o EUR 150
Slide 5: Improved earnings offset by impairments and sale of Taiwan
Improved earnings offset by impairments and sale of Taiwan o Positive effects strong equity markets in Q2, mainly reflected in fair value items o Losses due to valuation differences between guarantees at fair value and related interest rate hedges in the Netherlands o Impact of lower credit spread o
Slide 6: Substantially improved underlying earnings
Substantially improved underlying earnings o Underlying earnings substantially improved over recent quarters o Excluding exceptional items, underlying earnings of EUR 440 million: – US employee benefit plan accounting mismatch of EUR (15) million – Accelerated amortization of DPAC related to Univers
Slide 7: Additional equity market hedging in place
Additional equity market hedging in place o Macro equity capital hedge executed in early June o Americas product equity exposure reduced by 40% – Delta equity exposure reduced to USD 2.4 billion from USD 4 billion o Combination of one and two sided hedges – Out-of-the-money put option; USD 0.8 billi
Slide 8: Level of impairments reflect economic conditions
Level of impairments reflect economic conditions EUR million IFRS US GAAP ABS 123 CMBS - RMBS 85 Corporate – private 22 Corporate – public 90 Commercial mortgage loans 31 Equity like 3 Recoveries / Other (24) Americas 330 ~255 Netherlands 28 United Kingdom 35 Total impairments before tax 393 Local k
Slide 9: Cost measure initiatives well on track
Cost measure initiatives well on track o Well on track to achieve EUR 150 million cost measure target o Operating expenses on a comparable basis* decreased by 5% o Headcount decreased by 2% Operating expenses* Headcount (EUR million) (Numbers excluding Taiwan) -5% -2% 1,654 1,570 29,933 29,463 H1 08
Slide 10: Excess capital supported by active capital management
Excess capital supported by active capital management o FY capital release target exceeded: EUR 1.6 billion in H1 09 – of which EUR 0.7 billion in Q2 2009 Excess capital development Q2 2009 (EUR billion) 2.7 (0.3) (0.1) 0.4 0.3 0.4 0.2 (0.1) 3.5 Q2 capital release of EUR 0.7 billion Q1 09 Excess Cre
Slide 11: Earnings impact from de-risking largely reversible
Earnings impact from de-risking largely reversible Capital released (EUR billion) o Capital efficiency – Ca. 60% of capital preservation initiatives 3.3 – Generally no material earnings impact 0.3 – High RoC benefit – More efficient use of capital without 0.4 1.3 meaningfully changing risk profile 0
Slide 12: Strong improvement in revaluation reserves
Strong improvement in revaluation reserves o Strong improvement in revaluation reserves driven by narrowing of credit spreads o Unrealized bond losses are not a good proxy for future credit losses o Revaluation reserves improved further in July by approximately EUR 1.6 billion Core capital* developm
Slide 13: Continued profitable sales
Continued profitable sales o New life sales of EUR 469 million, helped by increase in US retail life sales o Net deposits of EUR 0.9 billion, mainly as a result of strong sales of annuities and pensions and improved persistency o VNB declines mainly on lower sales volumes in Americas and UK, only pa
Slide 14: Aim to repay EUR 1 billion
Aim to repay EUR 1 billion o Economic benefits – Repurchase at EUR 1 - 1.13 billion in 2009 versus EUR 1.5 billion thereafter – Avoid future coupon payments of at least 8.5% on repurchased securities o Qualitative reasons – First step to full withdrawal from government support o Final decision not u
Slide 15: Key messages
Key messages o Earnings improved substantially compared to previous quarters o Strong capital position – Aim to repay EUR 1 billion – Started to invest cash in higher yielding quality assets o Credit markets drive strong improvement of revaluation reserves o Continued profitable sales and deposits o
Slide 16: Q&A
Q&A For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands Local knowledge. Global power. 16
Slide 17: Upcoming AEGON events
Upcoming AEGON events November 12, 2009 Q3 2009 results December 2, 2009 Investor day at New York Stock Exchange February 25, 2010 Q4 2009 results Local knowledge. Global power. 17
Slide 18: Appendix
Appendix A break down of the general account investment portfolio can be found in the Financial Supplement Local knowledge. Global power. 18
Slide 19: New life sales
New life sales o New life sales of EUR 469 million – Americas’ retail new life sales improved 7% sequentially, driven by strong performance in distribution channels – Slowdown in the group pension market affects sales in the Netherlands – UK sales impacted by re-pricing of annuities and lower group
Slide 20: Continued strong net deposits
Continued strong net deposits o Gross deposits of EUR 5.6 billion* – Strong increase in variable annuities; fixed annuities sales actively slowed – Pension sales in the US remain very strong o Net deposits of EUR 0.9 billion* – Positive contribution from variable annuities as inflows increased and l
Slide 21: Value of new business
Value of new business o Value of new business of EUR 181 million – Lower sales and changed economic assumptions in the Americas – Margin improvements in Dutch mortgage business – Change in product mix and lower sales affect VNB in the UK – Lower contribution from CEE and inclusion of VA Europe, more
Slide 22: Americas – net deposits of USD 1 billion
Americas – net deposits of USD 1 billion* o Underlying earnings improved substantial on Underlying earnings before tax (USD million) recent quarters 691 o Retail new life sales improved 7% 371 sequentially, driven by strong performance in distribution channels (-88) o VA sales increased due to impro
Slide 23: The Netherlands – underlying earnings increase
The Netherlands – underlying earnings increase o Underlying earnings increased sequentially as Underlying earnings before tax (EUR million) a result of better Pensions and asset management results and a release of 116 129 provisions 72 o Volatility in group pension market resulted in lower new life
Slide 24: United Kingdom – underlying earnings improvement
United Kingdom – underlying earnings improvement o Underlying earnings before tax more than Underlying earnings before tax (GBP million) doubled compared with Q1 09 38 o Lower life sales following re-pricing of annuities 17 7 o VNB decreased to GBP 39 million driven mainly by a decline in annuity vo
Slide 25: Other countries – improved underlying earnings
Other countries – improved underlying earnings o Underlying earnings increased as a result of Underlying earnings before tax (EUR million) improved life earnings in CEE and the sale of the Taiwanese life insurance activities 47 29 30 o New life sales increased* compared with Q1 09 as a result of hig
Slide 26: Sensitivity to equity markets significantly reduced
Sensitivity to equity markets significantly reduced Estimated impact on net income* Estimated impact capital* (12 month period, EUR million) (EUR million) Direct exposure Direct exposure DPAC and guarantees Guarantees 425 Fees Fees 275 225 150 -20% -10% +10% +20% -20% -10% +10% +20% -225
Slide 27: Credit spreads improved, treasury rates higher
Credit spreads improved, treasury rates higher Option-adjusted spreads for generic market indices (in basis points) Barcap Index 12/31/08 03/31/09 06/30/09 Δ Q2 07/31/09 Δ July U.S. Corp IG 555 543 306 (237) 247 (59) U.S. Corp High Yield 1,669 1,514 945 (569) 830 (115) U.S. ABS [Housing] 1,702 2,063