Aegon Ltd. · EURONEXT:AGN
Aegon — Investor Presentation (March 2023)
36 slides from Aegon's investor presentation, Mar 9, 2023
Slide 1: Aegon IFRS 9 / 17 Educational Webinar
Aegon IFRS 9 / 17 Educational Webinar Matt Rider Chief Financial Officer Jan Willem Weidema Head Investor Relations March 9, 2023 Helping people live their best lives
Slide 2: Important note and disclaimer
Important note and disclaimer • This presentation is for educational purposes only and is not a disclosure of financial results • Figures shown in this presentation and discussed in the webinar are unaudited and might be subject to change • Methodologies presented here may be further refined and thi
Slide 3: An introduction to IFRS 17 at Aegon
An introduction to IFRS 17 at Aegon Click on the screen to start the video 3
Slide 4: Welcome
Welcome Agenda • Introduction to IFRS 17 at Aegon • Transition balance sheet • Financial results under IFRS 17 • Concluding remarks 4
Slide 5: IFRS 17 is the first international accounting standard for insurance contracts
IFRS 17 is the first international accounting standard for insurance contracts It will have an impact on presenting our aims to financial information, including… provide… Shareholders’ equity at transition Consistent Increased Improved Recognition of earnings through IFRS 17 valuation of transparenc
Slide 6: IFRS 17 changes reporting, not our strategy or capital management approach
IFRS 17 changes reporting, not our strategy or capital management approach No change to Aegon’s corporate and business strategy, capital management 1 approach, financial targets and outlook IFRS shareholders’ equity reduces largely due to liability remeasurement and 2 setting up a Contractual Servic
Slide 7: Agenda
Agenda • Introduction to IFRS 17 at Aegon • Transition balance sheet • Financial results under IFRS 17 • Concluding remarks 7
Slide 8: Generating the transition balance sheet
Generating the transition balance sheet Click on the screen to start the video 8
Slide 9: Summarizing Aegon's IFRS 17 choices
Summarizing Aegon’s IFRS 17 choices Aegon’s choice Implications • Market observable risk-free rate + illiquidity premium (ILP) on a country unit basis • Better alignment between valuation of assets Discount rate • ILP based on the expected return on own assets, less an and liabilities adjustment for
Slide 10: Fundamental changes to balance sheet with both assets and liabilities at fair value
Fundamental changes to balance sheet with both assets and liabilities measured at fair value Assets in transition balance sheet Liabilities and shareholders’ equity in transition balance sheet (January 1, 2022, in EUR billion) (January 1, 2022, in EUR billion) AOCI EUR 6.4 bn Shareholders’ equity 11
Slide 11: Setting up CSM and RA decreases shareholders' equity
Setting up CSM and RA decreases shareholders’ equity Shareholders’ equity (January 1, 2022, in EUR billion) IFRS 4 shareholders’ 17.8 • Overall, shareholders’ equity reduces by about equity excl. AOCI one third under IFRS 17, when compared with shareholders’ equity under IFRS 4 excluding AOCI from i
Slide 12: Better alignment of earnings with the US capital framework with the AOCI choice
Enabling a better alignment of earnings with the US capital framework with the AOCI choice at transition Accumulated Other Comprehensive Income (AOCI) (January 1, 2022, in EUR billion) 7.9 • AOCI from investments increases by Financial implications EUR 1.5 billion to EUR 7.9 billion from moving Dutc
Slide 13: Insurance contracts
Applying different measurement models depending on the specific nature of the various contracts Measurement models Key examples US NL UK International VFA • Variable Annuities • Pensions products • Legacy unit-linked • Traditional life and Direct participating (BEL: • Variable Universal Life with pr
Slide 14: CSM and RA reflect the transition approach and the measurement model
CSM and RA reflect the transition approach and the measurement model CSM by business RA by business US - Individual Life (January 1, 2022) (January 1, 2022) US - Variable Annuities US - Individual Health 3% 3% US - other 17% 13% Netherlands 25% 33% UK International EUR 11.8 EUR 3.9 18% billion billi
Slide 15: Agenda
Agenda • Introduction to IFRS 17 at Aegon • Transition balance sheet • Financial results under IFRS 17 • Concluding remarks 15
Slide 16: Accounting choices allow alignment of earnings with local capital frameworks
Accounting choices allow for alignment of earnings with local capital frameworks and reduce earnings volatility • Align emergence of profits with relevant capital framework (not fully market Guiding consistent RBC versus fully market consistent Solvency II framework) principle • Reduce earnings vola
Slide 17: Choices made to provide a meaningful operating result under IFRS 17
Choices made to provide a meaningful operating result under IFRS 17 Operating result “Below the line” Insurance • Expected insurance service result from release of • Impacts of assumption changes related to onerous service result CSM and Risk Adjustment contracts • Experience adjustments from claims
Slide 18: Increasing transparency with an IFRS 17 source of earnings view
Increasing transparency with an IFRS 17 “source of earnings” view IFRS 9 / 17 operating result – example: Americas (1H 2022, in USD million) Operating result fee business 164 • IFRS 17 provides a “source of earnings” view, increasing the transparency of drivers of the Expected insurance service resu
Slide 19: Improving insight into expected earnings versus volatile experience adjustments
Improving insight into expected earnings versus more volatile experience adjustments Selected IFRS 17 insurance US Individual Life US Individual Health US Variable Annuities results by line of business: (1H 2022, in USD million) Expected insurance service result1 254 106 109 Experience adjustments,
Slide 20: IFRS 17 provides a more differentiated view on claims experience
IFRS 17 provides a more differentiated view on claims experience and non-financial assumption changes IFRS 4 claims experience IFRS 17 experience adjustments Operating result • Current year claims deviating from • Variance between actual and expected claims for the current expectations, and related
Slide 21: Accounting mismatches for US Variable Annuities minimized under IFRS 17
Accounting mismatches for US Variable Annuities minimized under IFRS 17 IFRS 4 IFRS 17 Operating • Sensitivity from base contract fee income movements • Current period impacts (e.g., from claims) will be result in volatile equity and interest rates markets booked in P&L, future period impacts modify
Slide 22: IFRS result increases as a result of release of CSM and becomes less volatile
IFRS result increases as a result of release of CSM and becomes less volatile Income statement – example: Americas (1H 2022, in USD million) IFRS 4 IFRS 9 / 17 Comment Release of CSM through operating result leads to higher earnings; impact of claims Operating result 439 695 experience adjustments o
Slide 23: Limited change of operating result for UK and International
Limited change of operating result for UK and International under IFRS 17 compared with IFRS 4 United Kingdom International (1H 2022, in GBP million) (1H 2022, in EUR million) 104 90 87 Spain & Portugal 38 71 33 TLB 52 39 Other 14 15 IFRS 4 IFRS 9 / 17 IFRS 4 IFRS 9 / 17 operating operating operatin
Slide 24: CSM roll-forward
CSM roll-forward CSM development in 1H22 • CSM balance is steadily released into earnings over the (in EUR billion) lifetime of the policies 12.1 • Profitable new insurance business leads to new CSM. In the UK, new business consists largely of investment contracts accounted for under IFRS 9, so no n
Slide 25: Shareholders' equity roll-forward
Shareholders’ equity roll-forward Shareholders’ equity development in 1H22 (in EUR billion) 11.7 0.1 (0.4) • Shareholders’ equity reduced in 1H22, mainly as the net result was more than offset by negative other comprehensive income (OCI) (0.2) 11.2 • The OCI decline mainly reflects the negative impa
Slide 26: Introducing IFRS 17 based KPIs
Introducing IFRS 17 based KPIs Definition 1H 20223 Implications Return on Equity (RoE) • Higher RoE due to higher operating result and lower 𝑁𝑒𝑡 𝑜𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔 𝑟𝑒𝑠𝑢𝑙𝑡1 (𝑎𝑛𝑛𝑢𝑎𝑙𝑖𝑧𝑒𝑑) 15.4% shareholders’ equity 𝑅𝑜𝐸 = 𝐴𝑣. 𝑐𝑜𝑚𝑚𝑜𝑛 𝑠ℎ𝑎𝑟𝑒ℎ𝑜𝑙𝑑𝑒𝑟𝑠 ′ 𝑒𝑞𝑢𝑖𝑡𝑦…
Slide 27: Agenda
Agenda • Introduction to IFRS 17 at Aegon • Transition balance sheet • Financial results under IFRS 17 • Concluding remarks 27
Slide 28: Business fundamentals remain unchanged under IFRS 17
Business fundamentals remain unchanged under IFRS 17 Key messages Timeline of upcoming events • No change to Aegon’s corporate and business strategy, capital management approach, financial targets and 1Q 2023 trading update May 17, 2023 outlook • IFRS shareholders’ equity reduces largely due to liab
Slide 29: Appendix
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Slide 30: Combination of CSM and equity under IFRS 17 is similar to Solvency II Own Funds
Combination of CSM and equity under IFRS 17 is similar to Solvency II Own Funds January 1, 2022, in EUR billion Americas UK International 11.1 3.4 2.8 3.2 10.0 0.2 2.3 7.5 1.6 2.0 5.6 1.4 2.5 1.8 4.4 IFRS 4 IFRS 17 RBC IFRS 4 IFRS 17 Solvency II IFRS 4 IFRS 17 Solvency II equity1 Available equity1 O
Slide 31: Large share of general account assets in scope for IFRS 9
Large share of general account assets in scope for IFRS 9 Financial assets – example Americas IFRS 9 – expected credit loss (ECL) impairment model (at June 30, 2022, in USD billion, book value1) 12-month ECL Lifetime ECL Financial assets with ECL 71.2 Stage 1 Stage 2 Stage 3 Significant Objective In
Slide 32: Impairments losses become more pro-cyclical, but conservative asset allocation dampens this
Impairments losses become more pro-cyclical, but conservative asset allocation dampens this effect Americas underlying assets per stage Range of US ECL as share (at June 30, 2022, in USD billion, book value1) of underlying assets2 Stage 1 70.4 20 - 30 bps • ECL methodology under IFRS 9 will result i
Slide 33: Selected abbreviations
Selected abbreviations Abbreviation Meaning Abbreviation Meaning Accumulated other comprehensive income, IFRS International financial reporting standards AOCI also referred to as revaluation reserve ILP Illiquidity premium BEL Best estimate liabilities LTC Long-term care CSM Contractual service marg
Slide 34: Aegon Investor Relations
Aegon Investor Relations Stay in touch Upcoming events Contact Investor Relations Morgan Stanley Jan Willem Weidema +31 70 344 8028 March 14/16, 2023 Head of Investor Relations Conference 1Q 2023 Karl-Otto Grosse-Holz +31 70 344 7857 May 17, 2023 trading update Investor Relations Officer Hielke Hiel
Slide 35: Investing in Aegon
Investing in Aegon Aegon ordinary shares Aegon New York Registry Shares (NYRS) • Traded on Euronext Amsterdam • Traded on NYSE since 1991 and since 1969 and quoted in euros quoted in US dollars • One Aegon NYRS equals one Aegon Amsterdam-listed common share • Cost effective way to hold international
Slide 36: Disclaimer
Disclaimer Forward-looking statements • Customer responsiveness to both new products and distribution channels; The statements contained in this document that are not historical facts are forward-looking statements as defined in the US Private • As Aegon’s operations support complex transactions and