Aegon Ltd. · EURONEXT:AGN
Aegon — Q1 2014 Earnings Presentation
33 slides from Aegon's earnings presentation, May 15, 2014
Slide 1: Q1 2014 Results
Q1 2014 Results Strong earnings and sales growth The Hague – May 15, 2014 Alex Wynaendts Darryl Button CEO CFO
Slide 2: Positive momentum continues
Positive momentum continues Underlying earnings up on higher account balances and lower financing costs at the holding ► Continuing strong deposit growth results in higher fee-based earnings Higher sales driven by strong deposit growth and accident & health sales in the US ► MCVNB strong; increa
Slide 3: US pensions, VA and asset management drive 35% deposit growth
US pensions, VA and asset management drive 35% deposit growth Gross deposits higher in all units ► Pension deposits in the Americas 43% higher on plan take-overs and continued focus on retirement readiness by growing employee participation and contributions ► US variable annuity deposits up 26% as
Slide 4: Active capital management
Active capital management Capital management results in lower funding costs, improving cash flows and increasing RoE ► Call of USD 550 million 6.875% capital securities effective March 2014 ► Call of USD 1,050 million 7.25% capital securities effective June 2014 ► EUR 700 million 4% Solvency II Ti
Slide 5: Execution of our strategy
Execution of our strategy Sale of 50% stake in joint venture with Caja de Badajoz in Spain Optimizing Launch of Retiready in UK to address retirement needs of growing non-advised market our portfolio ► Regulatory changes support strategic focus on At Retirement and Workplace savings through plat
Slide 6: Upcoming events
Upcoming events Register now for our annual Analyst & Investor May June Conference Annual General Meeting Analyst & Investor of Shareholders Conference The Hague New York May 21, 2014 June 25, 2014 Retirement Readiness Report 2014 Scan the QR code for May 28, 2014 August more detailed information Q2
Slide 7: Appendix
Appendix Appendix For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands Download IR & Media App in the appstore
Slide 8: Progress towards 2015 targets
Progress towards 2015 targets € 498m 30-35% €€1.3-1.6 498m €7-10% 498m €10-12% 498m billion Fee-based earnings as % of Annual operational Underlying earnings Underlying earningsfree cash Grow underlying Underlying earnings earnings Return on equity Underlying by 2015 earnings underlying earnings by
Slide 9: Continued delivery of strong results
Continued delivery of strong results Underlying earnings Fee-based earnings Sales and MCVNB* before tax (EUR million) (% of UEBT) (EUR million) 473 498 464 37 37 33 1,741 2,086 1,738 232 268 223 Q1 13 Q4 13 Q1 14 Q1 13 Q4 13 Q1 14 Q1 13 Q4 13 Q1 14 Return on equity Operational free cash flows** Oper
Slide 10: Underlying earnings up on business growth, markets and lower leverage costs
Underlying earnings up on business growth, markets and lower leverage costs Underlying earnings increased 7% compared to Q1 2013 driven by business growth and favorable equity markets (EUR 39 million) and impact of deleveraging (EUR 10 million) ► partly offset by investments in technology (EUR 10
Slide 11: Underlying earnings increased to EUR 498 million
Underlying earnings increased to EUR 498 million Higher earnings in the Americas as growth in variable annuity, pension and mutual fund balances more than offset the impact of lower reinvestment yields and unfavorable mortality Higher earnings in the Netherlands due mostly to higher investment i
Slide 12: Strong net income in Q1 2014
Strong net income in Q1 2014 Fair value items mainly reflect hedging programs without accounting match in the US and NL Gains on investments mainly driven by the sale of a stake in a single equity investment in the Netherlands Impairments remained low and mainly consisted of mortgages in CEE;
Slide 13: Fair value items impacted by hedge programs without an accounting match
Fair value items impacted by hedge programs without an accounting match Total fair value items of EUR (116) million FV hedging with FV hedging without accounting match* accounting match FV investments FV other EUR 66 million EUR (152) million EUR (24) million EUR (6) million Derivatives ∆: EUR 784m
Slide 14: Total sales up 20% on strong deposits and accident & health sales
Total sales up 20% on strong deposits and accident & health sales Gross deposits up 35% driven by US pensions and VA as well as asset management flows ► Net deposits down on transfer of Polish pension fund assets to the government for EUR 1.5 billion and replacement of EUR 3 billion asset manageme
Slide 15: Gross deposits higher in all units
Gross deposits higher in all units Gross deposits in the Americas up 26% driven by growth in pensions and variable annuities Gross deposits in the Netherlands up 20% driven by inflows at on-line bank Knab Gross and net inflow on the Platform of GBP 0.3 billion, launch of Retiready is expected
Slide 16: New life sales of EUR 459 million
New life sales of EUR 459 million Higher new life sales in the Americas primarily driven by higher sales of universal life New life sales decreased in the Netherlands driven mostly by the continued shift from life insurance to bank savings products and lower pension sales Lower new life sales
Slide 17: Continued strong MCVNB and reduced investment in new business
Continued strong MCVNB and reduced investment in new business Market consistent VNB (EUR million) Americas strong on improvements in VA and universal life 232 223 MCVNB the Netherlands reflects lower mortgage margins 1.9% 1.6% 125 UK impacted by lower margins and volumes on annuities and 1.0%
Slide 18: Market consistent value of new business of EUR 223 million
Market consistent value of new business of EUR 223 million Strong MCVNB growth in the Americas driven by higher variable annuity sales and margins, and improvement in life insurance sales Lower MCVNB in the Netherlands due mainly to lower margins on new mortgage production MCVNB in the UK decr
Slide 19: Solid operational free cash flows and holding excess capital
Solid operational free cash flows and holding excess capital Normalized operational free cash flows of EUR 305 million ► Market impacts of EUR 48 million driven mostly by interest rates and credit spreads ► One-time items of EUR (22) million due mostly to reserve strain on term and UL business in
Slide 20: Solid group and local capital positions
Solid group and local capital positions Group IGD solvency ratio remained at ~212% as the benefit of earnings and tightening of credit spreads was offset by the redemption of USD 550 million capital securities Excess capital in the United States of USD ~800 million above S&P AA level Stable so
Slide 21: Capital allocated to run-off businesses
Capital allocated to run-off businesses Current capital allocated to run-off businesses of USD 2.1 billion ► Return on capital of run-off businesses of 3.7% year to date Capital intensive run-off businesses negatively impact return on equity ► Capital allocated to run-off businesses included in
Slide 22: Americas
Americas Higher underlying earnings as growth in variable annuity, mutual fund and pension balances more than offset the impact of lower Life & Protection earnings Operating expenses 4% lower due mainly to lower employee benefit and performance related expenses New life sales increased 9% main
Slide 23: The Netherlands
The Netherlands Earnings increased 13% due mostly to higher investment income and lower funding costs Operating expenses increased 4% driven by a reclassification of expenses New life sales decreased due mostly to the continued shift from life insurance to bank savings products and lower pensi
Slide 24: United Kingdom
United Kingdom Earnings higher as improved persistency more than offset investments in technology Operating expenses increased as cost reductions were more than offset by higher investments in technology and business transformation costs Group pensions sales slowed compared with a strong Q1 13
Slide 25: New Markets
New Markets Higher earnings from Aegon Asset Management more than offset lower earnings in Asia and a divestment in Spain in 2013 Lower operating expenses as a result of currencies and timing of expenses New life sales slightly lower as growth in Asia was offset by declines in CEE and Spain
Slide 26: Reconciliation of effective tax rate Q1 2014
Reconciliation of effective tax rate Q1 2014 Reconciliation of effective tax rate Q1 2014 EUR million Americas The Netherlands United Kingdom New Markets/ Holdings Total Income before tax 282 172 37 1 492 Nominal tax rate 35.0% (97) 25.0% (43) 21.5% (8) N/A 3 (145) Actual income tax (63) (29) (9) 0
Slide 27: General account investments roll-forward
General account investments roll-forward General account investment roll-forward EUR billion Americas The Netherlands United Kingdom New Markets & Other Opening balance December 31, 2013 75.8 45.3 10.7 3.5 Net in- and outflow 0.1 0.5 (0.1) 0.2 Unrealized / realized results 1.5 0.8 0.2 0.1 Foreign ex
Slide 28: Sustainability efforts support strategy
Sustainability efforts support strategy Products and services customers can trust A responsible approach to investments Supporting local communities Introducing products that are Decisions guided by Long tradition of working clearer and easier to understand Responsible Investment Policy with a
Slide 29: Investing in Aegon
Investing in Aegon Aegon’s ordinary shares Aegon ordinary shares Ticker symbol AGN NA Underlying ISIN NL0000303709 ► Traded in Amsterdam (NYSE Euronext) since 1969 SEDOL 5927375NL and quoted in Euros Trading Platform Euronext Amsterdam Aegon New York Registry Shares (NYRS) Country Netherlands ►
Slide 30: Main economic assumptions
Main economic assumptions Main US economic assumptions 10-year US Treasury assumed to grade over ten years to 4.25% Credit spreads are assumed to grade over two years to 110 bps Bond funds are assumed to return 4% for 10 years and 6% thereafter Money market rates are assumed to remain flat a
Slide 31: Reporting changes implemented per Q1 2014
Reporting changes implemented per Q1 2014 Amended accounting policies As of January 1, 2014 Aegon voluntarily changed its accounting policies for deferral of acquisition costs across the group and longevity reserving in the Netherlands. For details see http://www.aegon.com/6k and http://www.aegon.
Slide 32: Longevity reserves based on prospective mortality tables
Longevity reserves based on prospective mortality tables IFRS longevity reserves in the Netherlands based on prospective mortality tables as of Q1 2014 ► IFRS capital in the Netherlands reduced by EUR 0.8 billion ► Positive impact on underlying earnings estimated at ~EUR 130 million* in 2014 Val
Slide 33: Disclaimer
Disclaimer Cautionary note regarding non-IFRS measures This document includes the 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 proportionate basis A