Implementing the strategy Alex Wynaendts CEO Analyst & Investor Conference, London June 22-23, 2010

Transcription

1 Implementing the strategy Alex Wynaendts CEO Analyst & Investor Conference, London June 22-23, 2010

2 AEGON s ambition To be a leader in all of our chosen markets by 2015 o Reallocate capital o Increase returns o Optimize ONE AEGON resulting in sustainable profitable growth Local knowledge. Global power. 2

3 Execution of strategy H Reallocate capital to the most attractive businesses Improve growth and returns in existing businesses Short-term focus Capital Costs Contingency Reallocate capital Increase returns Manage AEGON as an international Group Optimize ONE AEGON Local knowledge. Global power. 3

4 Delivering on strategy Reallocate capital towards business with higher growth and return prospects o Freed up EUR 5 billion of capital since June 2008 o Running off institutional spread-based business in the US o Sold Taiwanese life and Dutch funeral insurance businesses o Entered new markets: Brazil, Turkey, India and Japan Improve growth and returns from existing businesses o Cost savings EUR 250 million in 2009 reduction of opex 5% o Streamlined US organization oproduct innovation osignificant changes in senior management Reduce financial markets risk o Lowered equity exposure by additional hedging in Americas and NL o Reduced interest rate risk o Reduction of spread-based balances lowered credit risk Manage AEGON as an international Group o AEGON Asset Management operational o Broadened role of Management Board o Introduced variable annuities in UK, NL, France and Japan Local knowledge. Global power. 4

5 Strategy generated strong results Underlying earnings before tax (EUR million) New life sales (EUR million) Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Revenue-generating investments (EUR billion) Gross deposits* (EUR billion) Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Local knowledge. Global power. * Excluding run-off businesses 5

6 Impairments are trending down o Impairments are trending down, but remain above AEGON s long-term average expectations Impairments (EUR million) Q3 08 Q4 08 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Americas Rest of the World Local knowledge. Global power. 6

7 Implementing the strategy Reallocate capital o Continued review business portfolio Increase returns o Explore strategic options for life reinsurance unit o Continue to shift focus from spread to fee-based products in US o Rebalance capital across geographies o Invest in CEE, Asia, Spain and Latin America Improve risk profile Increase hedging on VA back book in the US Restructure UK o Deliver operational excellence o Enhance customer loyalty o Product innovation o Empower employees Optimize ONE AEGON o One balance sheet o Leverage and standardize best practices o Consistent performance management Priority to repay remaining EUR 2 billion of core capital to Dutch State Local knowledge. Global power. 7

8 Strategic priorities Reallocate capital Reallocate capital Local knowledge. Global power. 8

9 Portfolio review exploring strategic options for life reinsurance o Limited long-term strategic fit of AEGON s life reinsurance unit, Transamerica Reinsurance, with core business of life insurance, pensions and asset management o Exploring strategic options, including identifying a suitable buyer Madrid Charlotte, NC Dublin Paris Seoul Tokyo Bermuda Taipei Mexico City Hong Kong Santiago Rio de Janeiro Sao Paulo Local knowledge. Global power. 9

10 Franchise value of Transamerica Reinsurance o Leading position among life reinsurers: #3 in US and #7 globally o Strong in US traditional life reinsurance 20% new business market share Top 3 facultative reinsurer o #1 in product consulting & development in US o Recognized internationally for quality service and outstanding professional expertise with strong management team o Attractive operations in emerging markets o Aim to maximize value process is independent of repayment Dutch State Book value of EUR 1.6 billion* Embedded value of EUR 1.6 billion** Required capital (S&P) of EUR 0.8 billion * IFRS book value excluding excess capital, December 31, 2009 ** Embedded value life insurance excluding excess capital, December 31, 2009 Local knowledge. Global power. 10

11 Reallocate capital to higher growth and return businesses o Shift focus in US to fee-based from spread-based products Grow pension business Run-off institutional spread-based business De-emphasize fixed annuities o Rebalance capital across geographies by investing in Central & Eastern Europe Asia Spain Latin-America o Improve risk profile Increase hedging on VA back book * Total capital employed on IFRS basis, excluding revaluation reserve (EoY) Rebalance capital across geographies 9% 28% 20-25% 10% 25-30% 5-10% 53% 2009 EUR 21.7 billion* 40-45% 2015 North America (US, Canada) Western Europe (Netherlands, United Kingdom) New Markets (Spain, Central & Eastern Europe, Asia, Latin America) Global (Asset management, VA Europe, Life reinsurance) Local knowledge. Global power. 11

12 Strategic priorities Reallocate capital Increase returns Local knowledge. Global power. 12

13 Strategic review of UK business Divest Run-off Restructure One-off sale proceeds No more acquisition costs Focus on growth market segments Back book run-off Target 25% cost reduction by end 2011 Focus on capital light model Increase RoC from 2.7% in 2009 to 8-10% by 2014 Explore strategic options back books Improve cash flows Large discount to embedded value Increased lapses destroy value High one-off costs to implement Destroy franchise value Restructuring costs Maximize shareholder value Local knowledge. Global power. 13

14 Leverage leading market positions in the UK o Focus on growth market segments where AEGON has a leading position At Retirement Growing market with GBP 16 billion of funds maturing annually Workplace savings Attractive market with GBP 800 billion of assets Positive impact from Pension Reform expected Continue to invest in Self Invested Pension Plan (SIPP) Exit bulk annuities market o Target 25% cost reduction by end of 2011 o Operating cash flows of GBP million (cumulative 2010 to 2014) o Achieve RoC on new business of >12%; overall RoC of 8 10% by 2014 Management team committed to deliver Local knowledge. Global power. 14

15 Continued focus on increasing Group returns Return on Equity (RoE) 10% 5% 0% Q o Strategic focus supports increase in RoE Shift to fee-based from spread-based business Reallocate capital geographically Reduce costs o Improve annual cash flows from current normalized* level of EUR billion o Empower employees Install global talent management Roll-out strategy engagement plan Management compensation aligned with strategic priorities Local knowledge. Global power. * Assuming normalized impairments of basis points annually on US AFS Fixed Income portfolio 15

16 Adapting operating model to changing environment Changing environment requires change in industry cost structure Deliver operational excellence o Continue to be cost efficient operator Enhance web capabilities Reduce number of administration platforms Decrease costs per policy o Effective and efficient distribution o Achieve significant improvement in customer service levels Invest in improving operational capabilities Enhance customer loyalty o Improve insight in customer needs to be central in innovation o Improve customer satisfaction by competing on customer service o Build on strong brand names AEGON and Transamerica Local knowledge. Global power. 16

17 Strategic priorities Reallocate capital Capital Local knowledge. Global power. 17

18 Continue to maintain substantial capital buffer o Excess capital of EUR 3.7 billion EUR 2.4 billion in operating units EUR 1.3 billion at the holding company o Core capital* at 74% of total capital base above threshold of 70%; managing toward higher level of 75% Shareholders equity** (EUR million) Total capital base 100% % 80% 70% % 50% 40% % 20% 10% - 0% 1Q09 2Q09 3Q09 4Q09 1Q10 1Q09 2Q09 3Q09 4Q09 1Q10 Senior debt Perpetual securities Convertible core capital securities Shareholders' equity (excluding revaluation reserves) Priority to repay remaining EUR 2 billion of core capital to Dutch State * Core capital consists of convertible core capital securities and shareholders equity excluding revaluation reserves ** Including revaluation reserves Local knowledge. Global power. 18

19 Strategic priorities Reallocate capital Optimize ONE AEGON Local knowledge. Global power. 19

20 Optimize ONE AEGON o One balance sheet capture diversification benefits o Leverage and standardize best practices Product innovation, distribution knowledge and brand management Underwriting and risk management IT infrastructure o Consistent performance management Delivering more than the sum of the parts Local knowledge. Global power. 20

21 Conclusion o Reallocate capital Explore strategic options for life reinsurance business Invest in attractive market segments Improve risk profile o Increase returns Restructure UK business Focus on enhancing ng return on equity and cash flows fl o Optimize ONE AEGON o Repayment to Dutch State remains priority Local knowledge. Global power. 21

22 Q&A

23 Appendix

24 AEGON is well prepared for Solvency II o AEGON supports the principles of Solvency II o Outcome QIS 5 still uncertain, latest specifications have eased o AEGON has been preparing since 2005 Internal economic capital model more conservative than QIS 4 Economic pricing embedded in product pricing o Confident final outcome to be satisfactory for both industry y and AEGON Product type Spread products Fee products Protection products Variable annuities Current assessment Investment spread not recognized upfront Low risk; positive impact Attractive risk; high diversification benefits Significant positive impact Market risk hedged and priced in Local knowledge. Global power. 24

25 Effective and efficient distribution to support return improvements o Multi-distribution strategy with local partners to identify and serve evolving needs of customers o Diversify distribution within each channel o Reduce costs of traditional channels structurally o Invest in direct distribution o Seamless integration of distribution channels Local knowledge. Global power. 25

26 For questions please contact Investor Relations T: E: P.O. Box CB The Hague The Netherlands

27 Disclaimer Cautionary note regarding non-gaap measures This presentation includes certain non-gaap financial measures: underlying earnings before tax and value of new business. The reconciliation of underlying earnings before tax to the most comparable IFRS measure is provided in Note 3 "Segment information" of our Condensed consolidated interim financial statements. Value of new business is not based on IFRS, which are used to report AEGON's quarterly statements and should not viewed as a substitute for IFRS financial measures. AEGON believes that these non-gaap measures, together with the IFRS information, provide a meaningful measure for the investment community to evaluate AEGON s business relative to the businesses of our peers. Local currencies and constant currency exchange rates This presentation contains certain information about our results and financial condition in USD for the Americas and GBP for the United Kingdom, because those businesses operate and are managed primarily in those currencies. Certain comparative information presented on a constant currency basis eliminates the effects of changes in currency exchange rates. None of this information is a substitute for or superior to financial information about us presented in EUR, which is the currency of our primary financial statements. 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 The following are words that identify such forward-looking statements: aim, believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, goal, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following: Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom; Changes in the performance of financial markets, including emerging markets, such as with regard to: The frequency and severity of defaults by issuers in our fixed income investment portfolios; and The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold; The frequency and severity of insured loss events; Changes affecting mortality, morbidity and other factors that may impact the profitability of our insurance products; Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels; Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates; Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets; Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our consumers; Regulatory changes relating to the insurance industry in the jurisdictions in which we operate; Acts of God, acts of terrorism, acts of war and pandemics; Effects of deliberations of the European Commission regarding the aid we received from the Dutch State in December 2008; Changes in the policies of central banks and/or governments; Lowering of one or more of our debt ratings issued by recognized rating organizations and the adverse impact such action may have on our ability to raise capital and on our liquidity and financial condition; Lowering of one or more of insurer financial strength ratings of our insurance subsidiaries and the adverse impact such action may have on the premium writings, policy retention, profitability of its insurance subsidiaries and liquidity; The effect of the European Union s Solvency II requirements and other regulations in other jurisdictions affecting the capital we are required to maintain; Litigation or regulatory action that could require us to pay significant damages or change the way we do business; Customer responsiveness to both new products and distribution channels; Competitive, legal, regulatory, or tax changes that affect the distribution cost of or demand for our products; The impact of acquisitions and divestitures, restructurings, product withdrawals and other unusual items, including our ability to integrate acquisitions and to obtain the anticipated results and synergies from acquisitions; Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives; and The impact our adoption of the International Financial Reporting Standards may have on our reported financial results and financial condition. Further details of potential risks and uncertainties affecting the company are described in the company s filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law or regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to reflect any change in the company s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Local knowledge. Global power. 27