jos streppel – cfo
TRANSCRIPT
Unlocking the global potential 1
Unlocking the global potential
Jos Streppel – CFO
Sanford Bernstein Conference, London, 24 September 2008
Unlocking the global potential 2
Key messages
AEGON well positioned to weather the storm
o Strong balance sheet
o Substantial financial flexibility
o Ample liquidity
Implementing new growth strategy
o Ambitious targets to increase value of new business, underlying earnings
and return on equity
Unlocking the global potential 3
o Improvements and diversification in US investment portfolio
o AEGON first in market to announce subprime exposure;
transparency to all stakeholders
o Maintained focus on capital management, cash flow and
excess capital to improve capital productivity
o Active risk and asset management:- Average 20% reduction of stakes in financials in 1H08
- 20% -22% reduction of stake in Lehman and AIG
o Despite market conditions, ambitious strategy with clear
targets set
o Weathering financial turmoil, combined with focus on
sustainable and profitable growth
2006
2007
2008
2009
AEGON well positioned for downturn in financial markets
Unlocking the global potential 4
o Risk reductions across the group implemented over last 5 years
- Insignificant direct equity exposure
- Interest rate risks lowered
- Guarantees on products lowered
- Hedging of guarantees
- Asset and liability matching
- Liquidity risk management
o Global risk management organization
- Economic capital model being implemented
AEGON well positioned for downturn in financial markets
Unlocking the global potential 5
Policyholder
account
36%
Off balance
sheet
27%
General
account
37%
Equities
15%
Canadian
Universal
Life
19%
Private
equity&
hedge funds
26%
Other
40%
Insignificant direct equity exposure
Total investments
EUR 344 billion
General account
EUR 127 billion
Shares
EUR 3.5 billion
Direct equity exposure limited to EUR 0.5 billion
Bonds
70%
Loans
18%
Shares
3%
Real estate
2%
Other
7%
As of 30 June 2008
Unlocking the global potential 6
Improvement of quality in US investment portfolio
� AAA � BIG� BBB� A� AA
Subprime investments
CMBS investments
2002 2003 2004 2005 2006 2007 1H08
86%82%79%76%61%53%45%
2001 2002 2003 2004 2005 2006 2007 1H08
70% 49%70%74%73%65%40%27%
o Shift to lower risk asset classes
o Allocating more to higher rated
assets
o Stress tests of various MBS
exposures show manageable
losses, assuming a 30% decline in
the US housing market
Unlocking the global potential 7
AEGON USA credit losses are low
Credit losses in bps of assets (includes only bonds and mortgages)
o US credit impairments of EUR 57 million before tax in Q2 2008,
reflecting the high quality of AEGON’s investment portfolio
o Products are priced for expected losses of 25 – 30 basispoints
44 4437
27
9
25
1 2 48
17
64
82
48
17
-6-2
2 18
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Q1
2008
Q2
2008
average of 22 bps since 1990
Unlocking the global potential 8
20%10%
Assumed equity market decline of20%10%
Assumed equity market decline of
Equity market impact on earnings and capital
o Lower fees
o Reserve strengthening for guarantees
o DAC unlocking** (only for 20% decline)
-200
-450
-200
-500
* Based on equity markets as of June 30, 2008
** Acceleration of amortization of deferred acquisition costs
o Direct exposure
o Reserve strengthening for guarantees
Impact on earnings*
(12 month period, EUR million)
Impact on capital*
(EUR million)
Unlocking the global potential 9
-780
-1,200
-550
420
Losses DAC offset
Deferred
taxes
Impact on
available
capital
Impact on
available
capital
Impact on available capital
-624
-1,200
-445
240
336
Losses DAC offset
Deferred
taxes
IFRS net
income
IFRS net
income
Manageable impact of potential credit impairments
Impact on IFRS net income
No DAC
offset
(USD million) (EUR million)
(USD million) (EUR million)
Assumption:
• 100 bps of losses on
USD 120 billion of assets*
* includes bonds and mortgages of US fixed
• 20% DAC offset
(possible range 0% – 60%,
depending on business line)
• 35% tax offset
(depending on geography)
income portfolio
Unlocking the global potential 10
Strong capital position
84214102(78)
(432)661571,015
1Q08
Excess
Capital
Statutory
earnings
Investments
in country
units
Impact of
dividend
paid to
holding
Other
capital
movements
Change in
target
capital
Net
currency
effects
2Q08
Excess
Capital
Excess capital in operating units (EUR million)
982279
(66)606(514)
(66)51118
574
1Q08
Leverage
Capacity
and Cash
IFRS
Earnings
Currency
translation
changes
Coupons
perpetuals
External
dividends
Dividends
from units
Capital
injections
in units
Other 2Q08
Leverage
Capacity
and Cash
Additional leverage capacity and cash at holding (EUR million)
31 Mar 08 30 Jun 08
Financial flexibility (EUR billion)
1.6
1.8
� Excess capital in country units:
available capital -/- required capital
� Additional leverage capacity and cash
Unlocking the global potential 11
Liquidity risk management is key
o Extreme possibility of ‘frozen’
markets for years anticipated
o Impaired capital markets liquidity
test assumes an extended period
and normal liquidity only resuming
in 2 years
o Our liquidity position remains
impressive even ignoring
contingent liquidity sources
o Under a conservative best estimate
basis, AEGON has positive net
inflows into 2010
Even under a prolonged stress environment AEGON will not be a “forced
seller” of securities into distressed markets
0
20
40
60
80
7day 1mo 3mo 6mo 1yr 18mo 2yr
0
2
4
6
8
Liquidity management
(EUR billion) (Ratio)
� Available liquidity� Required liquidity
Ratio 30 June 2008Limit
Unlocking the global potential 12
3 strategic priorities to improve performance
Improve growth and returns from existing businesses
1
2
3
Reallocate capital towards businesses with higher growth and
return prospects
Manage AEGON as an international group
Unlocking the global potential 13
Ambitious targets
* Net underlying earnings / average shareholder’s equity excluding revaluation reserves
Grow value of new business to EUR 1.25 billion by 2010
o Delivering on increased 2010 target
Earnings growth of at least 10% p.a. to 2012
o Average net underlying earnings growth target in excess of
10% p.a. to 2012 from 2007 base of EUR 2,033 million (at 2007
constant currency)
Return on equity* in excess of 15% by 2012
o Return on equity* to improve to at least 14% by 2010 and
in excess of 15% by 2012 from 12% in 2007
Unlocking the global potential 14
Optimize capital allocation
Geographic mix
2007 Target allocation
2012
New markets*
Western Europe
US
15-25%
40-50%
25-35%
10%
60%
30%
Global businesses5-10%
* New markets = Central & Eastern Europe, Asia and Latin America
Capital allocationo Continuous assessment of
group portfolio
o Strict strategic and financial
criteria
- Core business:
fits life cycle need
- Growth
- Returns / risk
- Cash generation
Business mix
Unlocking the global potential 15
� AEGON’s current footprint
6th largest life insurer in Spain
Caixa Terrassa2008
Caja Cantabria 2007
Caja Navarra 2006
Caja Badajoz 2005
Caja Mediterráneo2004
JV’s with regional savings banks
EUR 128 millionValue of new business**
EUR 33 millionUnderlying earnings pre-tax***
EUR 765 millionEmbedded value**
EUR 1.2 billionGross written premiums*
Key financials 2007
Strong position in Spain
o Focus on life, pensions & health products
o Track record in deals with growth potential
o Back offices and product development centralized
o Pursuing further growth opportunities
* On a pro forma basis and JV’s 100% consolidated
** JV’s 100% consolidated
*** AEGON’s share in earnings
Unlocking the global potential 16
Key player in Central & Eastern Europe
o High real wage growth and low insurance penetration across region
o Additional growth by broadening product and distribution range
o Regional synergies lead to cost-efficiencies
o Committed EUR 1 billion to the region for further expansion
Ambition to achieve market leadership (top 5) in all our markets
EUR 72 millionValue of new business
EUR 94 millionUnderlying earnings pre-tax
EUR 933 millionEmbedded value
EUR 1.1 billionGross written premiums
Key financials 2007
●●Czech Rep.
PensionsLife
●●●#3
#2
#10Turkey
#5Poland
#7Romania
#3Slovakia
#2Hungary
●Greenfield
Unlocking the global potential 17
Thailand
Successful execution of growth strategy in Asia
China
India
Singapore
Hong
Kong
Taiwan
Japan
China
AEGON-CNOOC JV
AEGON Industrial JV
Taiwan
AEGON Taiwan
AEGON Taishin JV
Japan
AEGONSony Life JV
India
AEGONReligareAsset Mngt. JV
AEGONReligare Life JV
Regional presence with global businesses
AEGON Direct Marketing Services
Transamerica Life Insurance
Life Reinsurance
AEGON Asia Regional HQHong Kong
Established in 2007
o Businesses are early stage – focus on execution and build scale
o Multi-channel distribution strategy – focus on bancassurance
o Selective entry into new markets
o 10% to 15% of total value of new business targeted from Asia in 2010
Unlocking the global potential 18
Executing on capital efficiency
o Release of EUR 315 million through innovative securitization
o Monetizing future profits from books of unit-linked business in the UK
o Enhancing the Group’s financial flexibility
o Execution underlines continued trust in AEGON’s capital position
o Further opportunities – such as securitizations – are explored to:
1. Improve capital efficiency
2. Optimize capital allocation
3. Improve returns
Unlocking the global potential 19
Changing fundamentals creating attractive prospects
Fundamental demographic and economic changes…
o increasing longevity and ageing populations
o global wealth creation, extending into new markets
o financial market volatility
o reduced safety net from government, employers and family
…generating new customers and new needs…
o shift to dis-savings in developed markets
o new middle class in emerging markets
…driving more demand for our solutions
o need for long-term protection
o need for accumulation products
o need for financial guarantees
Unlocking the global potential 20
AEGON: an attractive investment case
o Strong balance sheet, substantial financial flexibility and ample liquidity
o Strategic capital management, focused on maximizing returns on capital
o Updated strategy to enhance value creation by unlocking global potential
o Pure life and pensions company with well diversified business lines
o Well positioned for growth in existing and new markets
o Ambitious management team, committed to clear targets:
- Strong profitable growth with value of new business target of
EUR 1.25 billion by 2010
- Average underlying earnings growth of at least 10% p.a. to 2012
- Return on equity to improve to at least 14% by 2010 and in excess of
15% by 2012
Unlocking the global potential 21
Q&A
Unlocking the global potential
Unlocking the global potential
Unlocking the global potential 22
For questions please contact Investor Relations+31 70 344 8305
P.O. Box 852501 CB The HagueThe Netherlands
Unlocking the global potential
Unlocking the global potential 23
Alex WynaendtsSociété Générale Conference, Paris4 December 2008
AEGON Analyst and Investor Day, London24 November 2008
Jos StreppelCheuvreux Conference, New York13 November 2008
AEGON Q3 2008 Results6 November 2008
Alex WynaendtsMerrill Lynch Conference, London8-9 October 2008
Upcoming events
Unlocking the global potential 24
Cautionary note regarding 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: believe, estimate, target, intend, may, expect, anticipate, predict,
project, counting on, plan, continue, want, forecast, 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;
� Changes in the policies of central banks and/or governments;
� 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;
� 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.
Cautionary note regarding Regulation G (non-GAAP measure)
This presentation includes non-GAAP financial measures: net underlying earnings, operating earnings before tax, value of new business and embedded
value. Value of new business and embedded value are not based on IFRS, which are used to prepare and report AEGON’s financial statements and should
not be viewed as a substitute for IFRS financial measures. AEGON believes the non-GAAP measures shown herein, together with GAAP information,
provides a meaningful measure for the investment community to evaluate AEGON’s business relative to the businesses of our peers.
Cautionary note regarding forward-looking statements