Aegon Ltd. · EURONEXT:AGN
Aegon — ABN AMRO Insurance meets Capital Amsterdam 2018
52 slides from Aegon's conference presentation, Mar 22, 2018
Slide 1: Accelerate, connect, deliver
Accelerate, connect, deliver ABN AMRO Insurance meets Capital Amsterdam – March 22, 2018 Conference Helping people achieve a lifetime of financial security
Slide 2: Aegon at a glance
Aegon at a glance 2 Aegon at a glance Focus Sales Asia Life insurance, pensions & Total sales of asset management for over € 16bn 2% 26 million customers (FY 2017) Europe Americas 31% 61% History Employees Our roots date back to the Over 28,000 employees 6% first half of the 19th century (December 3
Slide 3: Successful execution on strategy
Aegon at a glance 3 Successful execution on strategy Significant improvement in Solvency II ratio and strong capital generation Administration of US life & annuity businesses outsourced Exceeded target to reduce capital allocated to run-off businesses Transformation continues with increased focus on
Slide 4: Key trends are shaping our industry
Aegon at a glance 4 Key trends are shaping our industry Shift away from • Low interest rates combined with changing demographics guaranteed • New prudential regulation and increased capital requirements life products • Rising demand for transparent products Focus on • Reduced social benefits and fis
Slide 5: Serving customers throughout their lives
Aegon at a glance 5 Serving customers throughout their lives …to trusted provider of …through guidance retail solutions and advice… From worksite relationship… At & after retirement Situation Retirees looking for income and wealth transfer Wealth accumulation Situation Increasingly focusing on retir
Slide 6: Transformation continues with increased focus on digitization
Aegon at a glance 6 Transformation continues with increased focus on digitization • Established Center of Excellence to accelerate digitization Accelerate innovation • Roll-out of digital training programs to targeted groups of employees • Organized internal Hackathons resulting in potential new con
Slide 7: Aegon’s strategic priorities
Aegon at a glance 7 Aegon’s strategic priorities • Offer solutions throughout the lifecycle • EUR 350 million expense reduction program in US, NL and holding • Provide omni-channel distribution • Simplifying our business by digitizing • Expand guidance and advice processes and increasing capabilitie
Slide 8: Clear focus for each unit
Aegon at a glance 8 Clear focus for each unit Complete transformation Optimize Transamerica UK EU Capture synergies US EM Achieve scale or divest LA Continue to grow AAM Accelerate growth Creating a balanced portfolio of businesses with predictable cash flows
Slide 9: Achievements and priorities
Achievements and priorities 9 Achievements and priorities Helping people achieve a lifetime of financial security
Slide 10: Changed company profile as a result of execution of strategy
Achievements and priorities 10 Changed company profile as a result of execution of strategy While growing our fee business Optimized value Generated average annual of backbook sales growth of 15% from Addressed Realized material cost 2010 to 2017 legacy issues savings in established Invested i
Slide 11: On track for delivery on Optimized Portfolio commitments
Achievements and priorities 11 On track for delivery on Optimized Portfolio commitments Optimized Portfolio Divest non-core business Enhance backbook value Optimize capital allocation ✔ • Divested UK annuity book ✔ • Continued run-off of closed ✔ • Reduced capital allocated Completed • Divested NL c
Slide 12: Exceeded target to reduce capital allocated to run-off businesses
Achievements and priorities 12 Exceeded target to reduce capital allocated to run-off businesses • Reduced IFRS capital allocated to run-off businesses by nearly USD 5 billion since 2009 • Exceeded USD 1 billion 2018 target to reduce IFRS capital allocated to run-off a year early • Effectively elimi
Slide 13: Administration of US life & annuity businesses outsourced
Achievements and priorities 13 Administration of US life & annuity businesses outsourced • Retirement plans • Life • IRAs Service & • Annuity • >10 million policies to be serviced & • Advice center administration • Supplemental health administered by TCS and new business • Mutual funds going forward
Slide 14: Significant shift to fee businesses
Achievements and priorities 14 Significant shift to fee businesses Development of fee-based balances and earnings (Balances in EUR billion; underlying earnings in %) 900 817 60% • Strong growth in fee-based earnings; percentage tripled since 2010 to 45% 750 45% • Organic growth supplemented with 600
Slide 15: Clear 5 part plan to improve US performance
Achievements and priorities 15 Clear 5 part plan to improve US performance In-force management Maximizing the value of our business Starting with Life & Health • Monthly deduction rate increases on Universal Life in progress New business & revenue • Good progress on approvals of LTC rate increases S
Slide 16: Opportunities in US market
Achievements and priorities 16 Opportunities in US market Market leading positions* Positioned to capture growth #6 Retirement plans 4% market share • Retirement plan offering enhanced by 2015 acquisition of Mercer’s DC business, which expanded competitive position into mega plans #10 Variable 3% •
Slide 17: Dutch portfolio geared towards growth
Achievements and priorities 17 Dutch portfolio geared towards growth New business Balances Fix / Reduce • Defined benefit solutions • Traditional DC Focusing on optimizing • Life annuities • Commercial line non-life (sold) ~5% ~65% capital while managing risks • Service book (unit-linked & • Onna-On
Slide 18: Leading positions in Dutch market
Achievements and priorities 18 Leading positions in Dutch market • Increased efficiency and product innovation enabling Aegon to maintain top positions in key markets • Largest insurance company in terms of mortgage origination, pension administration and PPI participants • Leveraging number 2 posit
Slide 19: Creating the leading investment platform in the UK
Achievements and priorities 19 Creating the leading investment platform in the UK Market leadership • #1 retail platform • #3 in workplace savings market • >20% market share in platform market GBP 117bn 2017 AuM Growing platform market • Market growth YOY is expected to be ~20% through 2021 • Market
Slide 20: On track to deliver on 2018 financial targets
Achievements and priorities 20 On track to deliver on 2018 financial targets Run-rate annualized expense savings Strong sales momentum (EUR million) (EUR billion) 20 CAGR 300 +23% EUR 10 CAGR 200 350m* of 100 >10% 0 0 2015 2016 2017 2018 2016 2017 2018 Target TCS agreement Target Cumulative capital
Slide 21: Capital update
Capital update 21 Capital update Helping people achieve a lifetime of financial security
Slide 22: Robust financial profile
Capital update 22 Robust financial profile Significantly improved Solvency II ratio in 2017 Strongly enhanced quality of capital Financial leverage ratio well within target range Fixed charges well covered by diversified and growing capital generation Limited near term maturities and ample liquidity
Slide 23: Managing capital across multiple frameworks
Capital update 23 Managing capital across multiple frameworks Group level Local regulatory framework Solvency II Asset The United States United Kingdom Other Management Netherlands Group Solvency II Standard formula Partial internal Partial internal RBC* ICAAP** & local regulatory model model Rating
Slide 24: Capital management focused on protecting capital generation
Capital update 24 Capital management focused on protecting capital generation Group capital management zones • Policy based on philosophy of enabling Trigger to discuss additional strategy execution and protecting capital Opportunity opportunities for capital deployment generation 200% - Buffers ena
Slide 25: Significant improvement in Solvency II ratio in 2017
Capital update 25 Significant improvement in Solvency II ratio in 2017 Group Solvency II improvement • Strong capital generation of EUR 2 billion in 2017* 200% • Successfully recapitalized Dutch unit back to Target remittance status; EUR 100 million expected in 1H zone 2018** 150% • Divested EUR ~1.
Slide 26: Group and unit Solvency II sensitivities
Capital update 26 Group and unit Solvency II sensitivities Solvency II sensitivities (in percentage points) Scenario Group US NL UK • Group Solvency II ratio of 201% exceeds target zone of capital Equity markets +20% +10% +17% +5% -10% management policy Equity markets -20% -5% -10% -5% +12% • Sensit
Slide 27: Conversion methodology for US operations
Capital update 27 Conversion methodology for US operations • Conversion methodology for US operations has been agreed with DNB, to be reviewed annually • Calibration of US insurance entities followed by subsequent adjustment for other entities - Calibration of US insurance entities is consistent wit
Slide 28: Strongly improved quality of capital
Capital update 28 Strongly improved quality of capital • Tier 1 capital represents 166% of SCR, an improvement of 34%-points year-on-year - Per year-end 2017, EUR 1.1 billion Restricted Tier 1 overflow to Tier 2 due to tiering limits - Remaining Tier 2 capacity of EUR 0.8 billion; Deduction & Aggreg
Slide 29: Leverage mainly consists of grandfathered securities
Capital update 29 Leverage mainly consists of grandfathered securities • Approximately half of the financial leverage consists grandfathered Tier 1 securities - Vast majority of Tier 1 securities is callable on a quarterly basis, with over 50% having a fixed rate coupon • Tier 2 capital consists of
Slide 30: Flexibility in replacing grandfathered securities
Capital update 30 Flexibility in replacing grandfathered securities • Grandfathered securities to be replaced before the end of the grandfathering period in 2025* - Securities would be treated as liability in 2026 if not replaced • Significant flexibility in replacing securities due to limited short
Slide 31: Insurance Solvency II Tier 1 and Tier 2 capital
Capital update 31 Insurance Solvency II Tier 1 and Tier 2 capital Metrics Solvency II Tier 1 Solvency II Tier 2 Subordination • Should rank after all other claims in a winding-up and senior to equity • Should rank after the claims of all policy holders and non-subordinated creditors Acceleration • D
Slide 32: Leverage and fixed charge coverage are improving
Capital update 32 Leverage and fixed charge coverage are improving • 4Q 2017 gross financial leverage of 28.6% approaching the middle of 26-30% target range - Improvement of 120 basis points versus 4Q 2016 - Redemption of EUR 500 million senior debt in August 2018 to reduce leverage by ~150 basis po
Slide 33: US tax reform is a net positive
Capital update 33 US tax reform is a net positive • Significant increase in recurring earnings and capital generation - Group return on equity to increase by 55 bps, as recurring earnings benefit outweighs one-time increase in equity from DTL reduction • US operations expected to remain above mid-po
Slide 34: Significant growth in free cash flows; increased diversification
Capital update 34 Significant growth in free cash flows; increased diversification Management actions drive free cash flow growth (EUR million) Region Old1 20182 Americas3 ~900 ~875 • US capital generation at USD 1.1 billion Netherlands4 ~225 ~300 after divestment of run-off businesses United Kingdo
Slide 35: Excess capital increased to EUR 1.4 billion in 4Q 2017
Capital update 35 Excess capital increased to EUR 1.4 billion in 4Q 2017 • Excess capital well within target range of EUR 1.0 – 1.5 billion - Redemption of EUR 500 million senior debt in August 2018; EUR 0.2 billion proceeds from sale of Aegon Ireland in 1Q 2018e • Net remittances from units in 4Q 2
Slide 36: Ratings reflective of strong capitalization and risk management
Capital update 36 Ratings reflective of strong capitalization and risk management Aegon NV Issuer Credit ratings Ratings Long-term Short-term Standard & Poor’s A-, Negative A-2 Moody’s A3, Stable P-2 Fitch A-, Stable F2 Aegon Insurance Financial Strength ratings Ratings Aegon USA Aegon NL Aegon UK S
Slide 37: Ample access to money markets and capital markets
Capital update 37 Ample access to money markets and capital markets Aegon NV & Aegon Funding Corp (debt) Asset backed financing • EUR 2.5 billion Euro and US commercial paper • EUR 5.0 billion Covered Bond Program programs - Aegon Bank • USD 6.0 billion Euro MTN program • SAECURE • European registra
Slide 38: 4Q 2017 results
4Q 2017 results 38 4Q 2017 results Helping people achieve a lifetime of financial security
Slide 39: Underlying earnings benefit from expense savings & favorable markets
4Q 2017 results 39 Underlying earnings benefit from expense savings & favorable markets • Underlying earnings stable at constant currencies • Improved claims experience in US mainly driven by better mortality experience • Continued progress on expense savings program in 2017, offset by one-time expe
Slide 40: Expense savings of EUR 350 million on track for 2018
4Q 2017 results 40 Expense savings of EUR 350 million on track for 2018 Declining core operating expenses (EUR million – rolling 4 quarters ) • Continued execution of expense savings program drives 3,800 reduction in core operating expenses 3,650 • Annualized run-rate savings of approximately EUR 28
Slide 41: Strong net income
4Q 2017 results 41 Strong net income Underlying earnings to net income development in 4Q 2017 (EUR million) Gain from fair value items UEBT 4Q 2017 525 Mainly from positive revaluations on investments and hedging gains in NL and the US Fair value items 85 Realized gains 91 Realized gains Net impairm
Slide 42: Six consecutive quarters of positive below the line items
4Q 2017 results 42 Six consecutive quarters of positive below the line items • Net income averages to 111% of net underlying earnings over previous six quarters • Net impairments remain well below long term average of 25 bps • Fair value items have on balance been positive, partly driven by hedging
Slide 43: Strong gross deposits of EUR 35 billion
4Q 2017 results 43 Strong gross deposits of EUR 35 billion • Gross deposits increased 54% to EUR 35 billion, primarily driven by Aegon Asset Management and UK platform sales - AAM recorded external third-party net inflows for the sixth consecutive year • Net outflows of EUR 13 billion primarily the
Slide 44: Sales of insurance products impacted by strategic choices
4Q 2017 results 44 Sales of insurance products impacted by strategic choices • New life sales declined by 6% to EUR 225 million, driven by weakening of USD, and lower term and indexed universal life sales in the US • New premium production for accident & health and general insurance decreased by 22%
Slide 45: Group solvency ratio increased to 201% in 4Q 2017
4Q 2017 results 45 Group solvency ratio increased to 201% in 4Q 2017 OF and SCR development (EUR billion) • Expected return (+4%) reflects strong business SII 195% 4% -4% -3% +8% 201% performance • Market variances (-4%) driven by the unfavorable impact from equity market movements in the UK and adv
Slide 46: Appendix
Appendix 46 Appendix For questions please contact Investor Relations +31 70 344 8305 [email protected] P.O. Box 85 2501 CB The Hague The Netherlands
Slide 47: General account investments
Appendix 47 General account investments December 31, 2017 amounts in EUR millions, except for the impairment data Americas Europe Asia Holding & other Total Cash/Treasuries/Agencies 17,044 16,739 445 164 34,393 Investment grade corporates 31,277 4,133 3,560 - 38,971 High yield (and other ) corporate
Slide 48: US macro hedge earnings sensitivity
Appendix 48 US macro hedge earnings sensitivity Macro hedge sensitivity estimates (Fair value result, in USD million) • Protection of capital position main purpose of macro hedging program Total equity return in quarter Fair value items impact • Run-rate hedging expenses have been lowered in base ca
Slide 49: Main economic assumptions
Appendix 49 Main economic assumptions Overall assumptions US NL UK Exchange rate against euro 1.10 n.a. 0.85 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 curves
Slide 50: Investing in Aegon
50 Investing in Aegon Aegon’s ordinary shares Ticker symbol AGN NA • Aegon ordinary shares ISIN NL0000303709 - Traded on Euronext Amsterdam since 1969 SEDOL 5927375NL and quoted in euros Trading Platform Euronext Amsterdam Country Netherlands • Aegon New York Registry Shares (NYRS) - Traded on NYSE
Slide 51: Disclaimer and forward-looking statements (1/2)
51 Disclaimer and forward-looking statements (1/2) This presentation is a compilation of information that has previously been disclosed by Aegon N.V. (“Aegon”) in various filings with the U.S. Securities and Exchange Commission (the “SEC”) and Company press releases (a “Public Disclosure”). The fina
Slide 52: Disclaimer and forward-looking statements (2/2)
52 Disclaimer and forward-looking statements (2/2) 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 are words that identify such f
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