Aegon Ltd. · EURONEXT:AGN
Aegon — Q4 2009 Earnings Presentation
33 slides from Aegon's earnings presentation, Feb 25, 2010
Slide 1: Fourth quarter 2009 results
Fourth quarter 2009 results Alex Wynaendts, CEO Eric Goodman, Head of General Account Analyst & Investor presentation London – February 25, 2010
Slide 2: Disclaimer
Disclaimer 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 forward-looking statements: aim, believe,
Slide 3: Key messages
Key messages o Increased profitability o Continued execution of strategy o Robust sales demonstrating solid franchise o Strong increase in underlying earnings and net income o Continued strong capital position Local knowledge. Global power. 3
Slide 4: Execution of strategy demonstrated by increased results
Execution of strategy demonstrated by increased results Underlying earnings before tax Value of new business (EUR million) (EUR million) 233 404 427 216 351 201 181 169 -22 -181 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Revenue-generating investments New life sales (EUR billion) (E
Slide 5: Continued focus on execution of strategy
Continued focus on execution of strategy Full repayment to the Dutch State o Repaid one-third of the EUR 3 billion Reallocate capital towards businesses with higher growth and return prospects o Freed-up EUR 0.8 billion in Q4 2009 – 60% capital efficiency and 40% de-risking o Running off institution
Slide 6: Robust life sales demonstrating solid franchise
Robust life sales demonstrating solid franchise o Strong increase in new life sales driven by all country units o Gross deposits* continue to be resilient as a result of strong pensions, saving and variable annuities deposits o Fixed annuities managed lower o Value of new business rises in all count
Slide 7: Strong increase in underlying earnings and net income
Strong increase in underlying earnings and net income o Solid underlying earnings in all country units o Net income driven by – Solid underlying earnings development – Continued decrease of impairments – Investment gains resulting from trading in bond portfolio Underlying earnings before tax Net inc
Slide 8: Net income driven by solid underlying earnings
Net income driven by solid underlying earnings o Solid underlying earnings in all country units o Fair value items impacted by hedges, interest rates, credit spreads o Investment gains resulting from bond trading o Impairments at lowest level in six quarters Underlying earnings to net income develop
Slide 9: Successful cost reduction measures
Successful cost reduction measures o Cost reduction measures of EUR 250 million in 2009 o Exceeding target for 2009 of EUR 150 million o Decrease of 5% (EUR 150 million) on a comparable basis* mainly as a result of – Reduction of headcount – More efficient distribution o Cost reduction measures are
Slide 10: Impairments at lowest level in six quarters
Impairments at lowest level in six quarters o Impairments are trending down, but continue at elevated levels o Full year US net credit impairments of 120 bps, above the long-term average Impairments (EUR million) 501 407 393 146 386 82 63 102 285 93 209 355 330 64 284 325 192 145 Q3 08 Q4 08 Q1 09 Q
Slide 11: Continued strong capital position
Continued strong capital position o Repayment of one-third of the EUR 3 billion to the Dutch State o Capital preservations of EUR 0.8 billion in Q4, totalling EUR 3.3 billion in 2009 o Other is mainly related to higher regulatory and rating agency capital requirements o No material impact from ratin
Slide 12: Net income most important contributor to improved equity
Net income most important contributor to improved equity o Shareholders' equity doubled in 2009 due to strong improvement in revaluation reserve o As a result of the contribution of net income, shareholders’ equity increased 4% sequentially o Shareholders’ equity per common share of EUR 5.88 Shareho
Slide 13: AEGON increases profitability during Q4 2009
AEGON increases profitability during Q4 2009 o Successful execution of strategy and restructuring continues o Robust sales demonstrating solid franchise o Strong increase in underlying earnings and net income o Continued strong capital position Local knowledge. Global power. 13
Slide 14: General account assets mainly in Americas
General account assets mainly in Americas Total investments General account EUR 361 billion* EUR 134 billion* 2% 1% 28% 27% 37% 64% 6% 35% General account Americas Policyholder account United Kingdom Off- balance sheet The Netherlands Other Countries Holding * As of December 31, 2009 on a carrying v
Slide 15: Total general account portfolio composition
Total general account portfolio composition December 31, 2009 EUR billions United Total Americas Netherlands Kingdom Other Cash / Treasuries / Agencies 28.4 13.8 11.6 0.6 2.4 Investment Grade (IG) corporates 47.2 35.2 5.8 5.5 0.7 High yield corporate 3.9 3.2 0.4 0.3 0.0 Corporate other 0.7 - - - 0.7
Slide 16: Limited exposure to peripheral European sovereigns
Limited exposure to peripheral European sovereigns EUR million Portugal 58 Greece 92 Ireland 138 Italy Italy 143 Spain 1,784 Local knowledge. Global power. 16
Slide 17: US mortgage loan-to-value trends
US mortgage loan-to-value trends Weighted average loan-to-value by property type (%) 80 70 60 50 40 30 20 10 0 Apartment Industrial Office Retail Other Commercial Agricultural USD 2.5 billion USD 2.5 billion USD 5.2 billion USD 2.7 billion USD 0.5 billion USD 0.7 billion ■ 12/31/2004 ■ 12/31/2005 ■
Slide 18: Recent experience with maturing mortgages in US
Recent experience with maturing mortgages in US Disposition of USD 1 billion matured US mortgage loans in 2009 (%) Negotiated extensions 19.4% Rate increase USD 364m Principal pay-down USD 62m Lock box USD 36m 0.5% Escrows established USD 73m 41% 7.3% No change in term USD 39m 31.8% Negotiated exten
Slide 19: Alternative investment returns
Alternative investment returns o Alternative investment returns were mixed, as real estate incurred losses, while hedge funds and private equity showed good results Asset class (USD million) Asset balances Expected earnings Actual earnings Dec 31, 2009 Q4 2009 Q4 2009 Hedge funds 765 17 37 Private e
Slide 20: Net impairments by asset class
Net impairments by asset class AEGON general account investments (consolidated in EUR millions) Q4 2009 impairments / recoveries by country unit - IFRS basis (pre-DAC, pre-tax) US NL UK Others * Total ABS – Housing 59 - - - 59 ABS – Non-housing 1 - - - 1 CMBS 4 - - - 4 RMBS 33 - - - 33 Subtotal stru
Slide 21: Impairments have declined from peak levels
Impairments have declined from peak levels Total net credit impairments, pre-tax, pre-DAC (EUR million) 450 300 150 Q3 2008 Q4 2008 Q1 2009 Q2 2009 Q3 2009 Q4 2009 ■ AFS other ■ Mortgages ■ AFS bonds - corporate ■ AFS bonds – ABS/MBS Local knowledge. Global power. 21
Slide 22: Q&A
Q&A Alex Wynaendts, CEO Jan Nooitgedagt, CFO Eric Goodman, Head of General Account Local knowledge. Global power. 22
Slide 23: Upcoming AEGON events in 2010
Upcoming AEGON events in 2010 March 10 Citigroup Conference, New York City (CEO) 25 Morgan Stanley Financials Conference, London (CFO) April 12 Press release new reporting structure 13 New disclosure presentation, London (CFO) 29 Annual General Meeting of Shareholders, the Hague May 12 Q1 2010 resul
Slide 24: Appendix
Appendix A break down of the general account investment portfolio can be found in the Financial Supplement Local knowledge. Global power. 24
Slide 25: Robust new life sales demonstrates solid franchise
Robust new life sales demonstrates solid franchise o New life sales of EUR 549 million – Americas’ new life sales improved 3% sequentially – The Netherlands benefits from new pension contracts – UK sales were up as a result of increased pensions – Other countries: single premium production rise in C
Slide 26: Continued strong deposits
Continued strong deposits o Gross deposits of EUR 5.9 billion* – Pensions, saving and variable annuities deposits were all strong – Fixed annuities were managed lower o Net deposits of EUR 1.5 billion* Gross deposits* Q4 2009 (EUR millions) 387 699 1,017 855 2,973 5,932 Fixed annuities Variable annu
Slide 27: Value of new business
Value of new business o Value of new business of EUR 216 million – Strong improvement in VNB across almost all countries – Main contributors to sequential rise in VNB are the Americas, the Netherlands and Spain o Internal rate of return of 17.6% Americas The Netherlands United Kingdom Other countrie
Slide 28: Americas
Americas o Underlying earnings continued to improve as financial markets recovered o New life sales were up 3% from the previous quarter o Net deposits* of USD 1.4 billion mainly driven by pensions, evidence of strong franchise o Restructuring efforts reflected in 5% annual decrease of operating exp
Slide 29: The Netherlands
The Netherlands o Underlying earnings were strong due to higher technical results o Restructuring efforts reflected in 8% annual decline of operating expenses** o New life sales were up, driven by pensions, evidence of customer satisfaction o Net deposits continued to be strong o Intermediary channe
Slide 30: United Kingdom
United Kingdom o Underlying earnings increased as a result of a recovery in financial markets o Operating expenses decreased 1% annually due to cost savings o New life sales were up sequentially, driven by pensions o Net deposits were lower compared with a very strong Q3 2009 o Improved brand recogn
Slide 31: Other Countries
Other Countries o CEE reported the highest profit in its history in 2009 o Strong results in Other Countries mainly driven by CEE and Spain o New life sales benefitted from new products and successful sales’ campaigns in Spain whereas China showed strong recurring premiums production in Q4 2009 o Ne
Slide 32: Successful capital release program
Successful capital release program Capital released (EUR billion) o Capital efficiency 4.9 – Ca. 60% of capital preservation initiatives 0.3 – Generally no material earnings impact 0.5 0.3 1.9 – High RoC benefit 0.6 0.3 – More efficient use of capital without 0.4 meaningfully changing risk profile 0
Slide 33: Credit spreads tighter, treasury rates higher
Credit spreads tighter, treasury rates higher Option-adjusted spreads for generic market indices Barcap Index 12/31/07 12/31/08 03/31/09 06/30/09 09/30/09 12/31/09 U.S. Corp IG 198 555 543 306 218 172 U.S. Corp High Yield 569 1,669 1,514 945 764 617 ML U.S. ABS [Housing] 426 1,558 1,657 1,642 1,116