Aegon Ltd. · EURONEXT:AGN
Aegon — Q4 2012 Earnings Presentation
42 slides from Aegon's earnings presentation, Feb 15, 2013
Slide 1: Aegon grows earnings and sales in Q4 2012
Aegon grows earnings and sales in Q4 2012 Aegon to cancel all preferred shares The Hague – February 15, 2013 Alex Wynaendts CEO
Slide 2: Today's announcements
Today’s announcements Strong growth in earnings and sales Continued strong capital position and cash flows – final dividend of EUR 0.11 Aegon and Vereniging Aegon reach agreement to cancel all preferred shares 2012: a year of strategic transformation and capturing growth 2
Slide 3: Aegon to cancel all preferred shares
Aegon to cancel all preferred shares Agreement with Vereniging Aegon to cancel all preferred shares ► Simplified capital structure and improved quality of capital ► High-quality capital base under new European regulatory solvency requirements ► Vereniging Aegon to substantially reduce its debt A
Slide 4: Balanced outcome for all stakeholders
Balanced outcome for all stakeholders Exchange of preferred shares leads to simplified and improved capital structure Common Improved interest cover for Aegon as payment of preferred dividend will end shareholders Limited dilutive effect for common shareholders & No economic preferential sta
Slide 5: Next steps until Annual General Meeting of Shareholders
Next steps until Annual General Meeting (AGM) of Shareholders Start of calculating End of calculating period for share period for share Execution of price used in price used in Agenda AGM Record date Aegon NV conversion following conversion conversion available AGM AGM shareholder approval February
Slide 6: Aegon grows earnings and sales in Q4 2012
For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands Aegon grows earnings and sales in Q4 2012
Slide 7: Continued delivery of strong results
Continued delivery of strong results Underlying earnings before tax Fee-based earnings Sales (EUR million) (% of UEBT) (EUR billion) 1,808 1,787 30 33 6.7 1,522 6.0 5.7 16 2010* 2011 2012 2010 2011 2012 2010 2011 2012 Return on equity Operational free cash flows Operating expenses (%) (EUR billion)
Slide 8: Earnings up 29% on growth, cost reductions and favorable markets
Earnings up 29% on growth, cost reductions and favorable markets Americas’ earnings up on business growth and a stronger dollar UK earnings up on the cost reduction program and the non-recurrence of exceptional charges New markets earnings lower, strong results from Aegon Asset Management were
Slide 9: Net income benefits from investment gains and divestments
Net income benefits from investment gains and divestments Fair value items loss mainly due to impact of lower credit spreads on Aegon bonds and impact of unfavorable interest rates movements on the fair value of swaps Gains on investments are the result of normal trading and asset liability mana
Slide 10: Operating expenses reduced by 6% while investing in new propositions
Operating expenses reduced by 6% while investing in new propositions Cost savings in established markets reflect cost reductions in the Americas and successful restructuring programs in the UK and the Netherlands Enacted cost savings in Dutch business of EUR 89 million, on track to meet target o
Slide 11: Sales increase demonstrates strength of franchise
Sales increase demonstrates strength of franchise New life sales increase 36% to EUR 677 million Sales* (EUR million) ► Higher US new life sales driven by indexed UL and anticipation of UL secondary guarantee product withdrawal ► Dutch pension sales increased strongly on new contract wins ► UK pen
Slide 12: Focus on adding distribution – driver of sales
Focus on adding distribution – driver of sales Expansion of Indexed Universal Life products into the brokerage channel Americas Expansion into alternative channels adds scale and diversity to variable annuity distribution Enhanced distribution strategy contributes to pension production NL No
Slide 13: Successful repositioning of Spanish business
Successful repositioning of Spanish business Strategic partnership with Banco Santander, Spain’s largest financial group, offering life and non-life products through Santander’s extensive branch network ► Access to over 4,600 branches ► Potential client base of over 12 million customers Aegon ac
Slide 14: Further improved capital position
Further improved capital position Capital base ratio of 76.7%, well above year-end 2012 target of at least 75% Strong IGD ratio of 230% NAIC RBC ratio of ~495%; NL IGD ratio of ~250%; UK Pillar 1 ratio of ~140% ► RBC benefited from strong net income offset by dividends to the holding Holding
Slide 15: 2012 a strong basis for the future
2012 a strong basis for the future Strong growth in earnings and profitable sales Maintained strong capital position Operating expenses reduced while investing in new propositions Distribution expanded – new partners, platforms and on-line propositions Well positioned for the future 15
Slide 16: Appendix
For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands Appendix
Slide 17: All preferred shares exchanged for cash and common shares
All preferred shares exchanged for cash and common shares Preferred shares with book value of EUR 2.1 billion to be exchanged at fair value of EUR 1.1 billion ► After deduction of cash payment from Aegon of EUR 400 million and preferred dividend of EUR 83 million (over 2012 and 1H2013), the remain
Slide 18: High-quality regulatory capital under new regulatory solvency requirements
High-quality regulatory capital under new regulatory solvency requirements New structure allows junior perpetual capital securities to be classified as Tier 1 capital, instead of Tier 2 Solvency II capital structure Before exchange After exchange 16% 5% Tier 1 capital Tier 1 capital 76% 80% Comm
Slide 19: Impact on Aegon's financial metrics
Impact on Aegon’s financial metrics 2012 key metrics Before exchange After exchange Driver pro forma 2012 Holding excess capital EUR 2.0 billion EUR 1.6 billion Capital base ratio 76.7% 75.1% EUR 400 million cash payment IGD solvency ratio 230% 224% Higher interest cover driven by ending payment Int
Slide 20: Substantial debt reduction for Vereniging Aegon
Substantial debt reduction for Vereniging Aegon Debt reduction of ~EUR 500 million leads to improved financial position ► EUR 400 million cash payment from Aegon ► EUR 83 million preferred dividend over 2012 and 1H2013 and EUR 19 million final 2012 common share dividend, partly offset by financing
Slide 21: Vereniging Aegon agreed to give up its economic preferential status
Vereniging Aegon agreed to give up its economic preferential status Voting rights in ordinary course reduced from 22.1% to ~14.9%, aligned with economic interest Vereniging Aegon will maintain its voting rights of 32.6% in special cause Vereniging Aegon voting rights Current situation # of share
Slide 22: Strong operational free cash flows
Strong operational free cash flows Operational free cash flows of EUR 619 million excluding market impact Market impacts of EUR (89) million due to interest rates movements Earnings on the in-force and release of required surplus particularly strong due to reserve releases and proceeds from di
Slide 23: Focus on delivering on targets
Focus on delivering on targets Achieve return on equity of Grow underlying earnings Double fee-based earnings to Increase annual normalized before tax by operational free cash flow to 10-12% 7-10% 30-35% € 1.3-1.6 by 2015 on average per annum billion between 2010 and 2015 of underlying earnings by 2
Slide 24: Main economic assumptions
Main economic assumptions Main US economic assumptions* 10-year US Treasury assumption of 4.75% by 2017 ► Grading to 4.75% in five years Credit spreads are assumed to grade over two years to 110 bps Bond funds are assumed to return 4% for 5 years and 6% thereafter Money market rates are assu
Slide 25: Limited exposure in general account to peripheral European countries
Limited exposure in general account to peripheral European countries Total exposure to peripheral European sovereigns only 0.6% of general account Corporate debt mainly related to defensive sectors, for example utilities Exit of Unnim and CAM will reduce peripheral exposure by EUR 920 million,
Slide 26: New life sales of EUR 677 million
New life sales of EUR 677 million US sales up on increased indexed universal life sales and higher sales in anticipation of UL secondary guarantee product withdrawal Individual life sales declined in the Netherlands but were more than offset by a strong increase in pension sales as a result of n
Slide 27: Gross deposits increases in asset management and variable annuities
Gross deposits increases in asset management and variable annuities Higher retirement plan deposits were driven mainly by successful efforts to increase inflows from the existing client base through higher contributions and larger participant count Asset management inflows as a result of strong
Slide 28: Market consistent value of new business of EUR 204 million
Market consistent value of new business of EUR 204 million MCVNB for the Americas remains strong as underperforming products are actively re-priced or withdrawn from the market MCVNB in the Netherlands up on higher contribution from mortgages as funding costs declined and due to a strong increas
Slide 29: Higher underlying earnings
Higher underlying earnings Americas’ earnings supported by strong business growth, partly offset by higher performance related expenses Higher Life and Savings earnings in the Netherlands more than offset lower earnings in Pensions and Non-life Earnings in the UK increase as pension earnings i
Slide 30: Americas
Americas Underlying earnings before tax increased on strong business performance, partly offset by higher performance related expenses Operating expenses increased 4% as cost savings were more than offset by higher performance related expenses and costs to support growth New life sales increas
Slide 31: The Netherlands
The Netherlands Underlying earnings increased as higher earnings from Life & Savings more than offset lower earnings in Pensions and Non-Life Operating expenses increased as realized cost savings were more than offset by higher employee benefit expenses and investments in new distribution capabi
Slide 32: United Kingdom
United Kingdom Underlying earnings before tax remained stable with Q3 but improved strongly compared with last year driven by the non-recurrence of exceptional charges recorded last year Operating expenses continued to decline following the successful implementation of cost reduction programs in
Slide 33: New Markets
New Markets Underlying earnings before tax decline mainly driven by divestments in Spain Operating expenses increased 1% as the result of higher costs in Asia and VA Europe driven by investments to support future growth, recurring charges for corporate center expenses were partly offset by the d
Slide 34: Capital base ratio of 76.7%
Capital base ratio of 76.7% Capital base ratio increases to 76.7%, above target of at least 75% by year-end 2012 Improvement of capital base ratio up on retained earnings, dividends from operating units and divestitures Holding and other reflects mainly operating and interest expenses Common
Slide 35: Capital allocated to run-off businesses
Capital allocated to run-off businesses Current capital allocated to run-off businesses of EUR 2.1 billion ► Return on capital of run-off businesses of 2.5% year to date Capital intensive run-off businesses negatively impact return on equity ► Capital allocated to run-off businesses is included
Slide 36: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets Opening balance October 1, 2012 90.0 40.9 11.2 5.1 Net in- and outflow (1.4) 1.6 0.2 (0.3) Unrealized / realized results 0.1 0.4 0.1 0.1 Foreign exchange (
Slide 37: Investments general account
Investments general account Aegon UNAUDITED December 31, 2012 INVESTMENTS GENERAL ACCOUNT The United New Holdings amounts in EUR millions, except for the impairment data Americas Netherlands Kingdom Markets and other TOTAL Cash / Treasuries / Agencies 17,069 11,861 3,122 1,484 759 34,295 Investment
Slide 38: Impairments by asset class
Impairments by asset class Aegon general account investments Q4 12 impairments / (recoveries) by country unit - IFRS basis (pre-DAC, pre-tax) EUR millions Americas NL UK New Markets Total ABS – Housing - - - - - ABS – Non-housing (1) - - - (1) CMBS 5 - - - 5 RMBS 1 - - (0) 1 Subtotal structured asse
Slide 39: Credit losses in the US trending down
Credit losses in the US trending down Q4 2012 US credit impairments amount to 4 bps US credit losses in bps of fixed income assets 120 91 82 average of 32 bps 64 48 52 44 44 since 1990 37 33 27 25 17 17 17 9 8 1 2 4 2 -2 -6 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004
Slide 40: Reconciliation of effective tax rate Q4 2012
Reconciliation of effective tax rate Q4 2012 Reconciliation of effective tax rate Q4 12 EUR million Americas The Netherlands United Kingdom New Markets/ Holdings Total Income before tax 299 142 50 60 551 Nominal tax rate 35.0% (105) 25.0% (36) 24.5% (12) NM (23) (176) Actual income tax (60) (26) (13
Slide 41: For questions please contact Investor Relations
For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands For questions please contact Group Corporate Communications +31 70 344 8956 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands
Slide 42: Disclaimer
Disclaimer Cautionary note regarding non-GAAP measures This document includes certain non-GAAP financial measures: underlying earnings before tax and market consistent value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note