moving forward in the americasmoving forward in the americas · 2010-09-29 · local knowledge....

1Local knowledge. Global power.

Moving forward in the AmericasMoving forward in the Americas

Mark Mullin Member of the Management Board, CEO Americas

Darryl Button CFO Americas

Analyst & Investor Conference, London – June 22-23, 2010

Key messages

o Significant progress made in executing strategic priorities

o Renewed focus on customers and distributors

o Improve quality and efficiencies through operational excellence and

technology

o Continue to maintain a balanced risk profile

oo Invest in growth opportunities Invest in growth opportunities

– Retirement and At-retirement

– Worksite

– Latin America

Local knowledge. Global power. 2

Focused in the US life and retirement market

o The US is the largest life insurance and pension market in the world

o Aging population and middle market needs continue to create significant

opportunities

o We have restructured the organization to better serve the life cycle needs

of our customers

Life

and

Protection

Employer

Solutions

and

Pensions

Individual

Savings and

Retirement


28% retirement depositsVariable annuity sales 12th

Rankings reflect continued customer confidence

Rankings by product Sales and production by distribution channel As of 12/31/2009 2010 Q1 sales and production data

Category Rank 81%

4% Life production � Agency

15% 4th � Bank Individual term life sales

� Direct

6th Individual universal life sales

Variable life sales 13th

Individual savings & 3% 3% Variable annuity sales 12th 28% retirement deposits

� Agency 3rd Ordinary life reinsurance assumed � Bank

4% � Direct

401(k) plans under management 15th � Fee planner / wirehouse

65% broker-dealer 8th Statutory admitted assets

Pension deposits

7% � Retirement advisor

� Bank

� Direct

� Wirehouse 19% � Consultant

� Other 19% 8%

45%

2%


1 09 2 09 3 09 4 09 1 10

Results reflect resilience of the franchise

Underlying earnings before tax New life sales (USD million) (USD million)

185 187

208

216

202

-189

381 448

510 524

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10

5Local knowledge. Global power.

Q Q Q Q Q

Revenue-generating investments (USD billion)

279

295

310 307 306

Gross deposits* (USD billion)

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10

Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q1 09 Q2 09 Q3 09 Q4 09 Q1 10

* Excluding run-off businesses

7.7

6.5 6.1

6.7 7.5

Significant progress in executing strategic priorities

Reallocate capital towards businesses with higher growth and return prospects

Improve growth and return from existing business

Reduce financial markets risks

o Exited automotive credit market

o Run off institutional spread based business by USD 12 billion

o Executed embedded value securitization

o Restructured the organization

o Merged US broker/dealer operations

o Exceeded expense savings target of USD 140 million in 2009

o Redesigned US variable annuity product

o Implemented macro equity hedge

o Reduced credit risk

Manage AEGON as an international company

o Completed Mongeral joint venture in Brazil

o Support joint venture with Sony Life in Japan


Implementing the strategy

Reallocate capital o Optimize portfolio

– Explore strategic options Life reinsurance unit

o Shift focus to fee-based from spread-based products

o Invest in growth opportunities

o Improve risk profile

– Increase hedging on VA back book

Increase returns o Streamlined organization


o Improve quality and efficiency with operational excellence

o Empower employees

o Additional opportunities for legal entity mergers

Optimize ONE AEGON o One balance sheet

o Leverage and standardize best practices

o Performance management

o New organization to deliver more than the sum of the parts


av ngs an o u ons an – from 104 to 26 in LPLife and

New structure has effected positive change

Mon LTC Work EM SVS

Life site

AFP TCM DIA ADMS TAM TRS

WFG TRM Clark

Life and

Protection

Individual S i dSavings and Retirement

Employer S l ti dSolutions and

Pensions

Delivering more than the sum of the parts

o Over USD 200 million

in expense savings in 2009

o Permanent headcount reduction

of almost 800 in 2009

o Reduced number of ALM

investment portfolios

– from 18 to 6 in ESP

– from 104 to 26 in LP

o Centralized production and

distribution of marketing

materials

o Alignment of middle and back

office functions

o Leveraging distribution partners

across business units

o More direct accountability and

streamlined decision making


Taking the organization to the next level

Liquidity management

Attention focused on regulators and rating agencies

Renewed focus on

customers and

distributors

Operational excellence

Crisis Future

Capital preservation

Balanced risk profile

De-risking

Invest in

growth opportunities

Shifting our focus from reactive

crisis measures to proactive growth measures


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

Dublin Seoul Madrid Paris Tokyo Charlotte, NC

Taipei Bermuda

Hong Kong Mexico City

Santiago

Rio de Janeiro

Sao Paulo


expertise with strong management team

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


o Identify and add new

Transamerica

Renewed focus on customers and distributors

Customers and distributors o Differentiate on quality of

service and breadth of products

Expand distribution o Electronic statements and web based licensing

Product innovation / speed to market o Cross-selling across all business units

Higher service and quality levels Higher service and quality levels o Identify and add new

distribution relationships

o Deeper penetration in existing channels

Promote the brand

Making it easier to do business with AEGON


Promoting the Transamerica brand

- the second most recognized name in the US insurance industry

53

41 35 35 34

26

17 16 13 13 13 11

8 2

Transamerica Transamerica

Historical Transamerica brand recognition directly correlated to investment in brand

44 40 40

37 36 36 35 35 33 32 32 30 29 28 28 28 27 27 23

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09

Brand Power Index is a score based on independent survey results that measure brand familiarity and favorability


41

opera ng p a orms

Improve quality and efficiency with operational excellence

Operational excellence o Achieve additional USD 100

million of cost savings to be reinvested in the business

Organizational synergies o Increase scalability within L&P and IS&R to leverage expense base and margin growth

Leverage technology o Simplify administrative

processing functions and Scale Scale ti l tf operating platforms

o Merge additional statutory

Talent management legal entities

o Empower employees across the organization

It’s all about balance and execution


Merrill L nch Life

Transamerica Life Monumental Life Transamerica Financial Life

Merrill Lynch Life Western Reserve Stonebridge Life Merrill Lynch Life NY

Additional opportunities for legal entity mergers

Statutory assets as of December 31, 2009 (USD billion)

4. Merrill Lynch Life 101.5

15 Local knowledge. Global power.

4.

5.

6.

7.

y Insurance Company

ML Life Insurance Company of NY

34.7

20.9

11.1 8.8 2 0.9

More focused branding and more efficient administration

1.

2.

3.

Continue to maintain a balanced risk profile

Balanced risk profile o Introduce new, more capital

efficient products

o Reduce dependence on Balanced mix of business reserve financing

o Shifting growth towards fee Hedging based business

o De-emphasize fixed annuities Capital efficiencies Capital efficiencies

o Increase hedging on VA back book

o Further improvement of back book risk profile

Improve risk profile


Invest in growth opportunities

Growth opportunities o Continue to expand in the

pension market; 401(k), 403(b) and total retirement outsourcing

Retirement and At-Retirement o Dominate worksite

distribution market Worksite

o Enter high net worth market in Brazil

Latin America Latin America

o Expand tied agent force in Mexico

o Add distribution to the At-retirement business Transamerica Retirement Management

Reallocating capital to higher return, higher growth businesses


Conclusions

o Significant progress made in executing strategic priorities


o Improve quality and efficiencies through operational excellence and

technology

o Continue to maintain a balanced risk profile

oo Invest in growth opportunities Invest in growth opportunities

– Retirement and At-retirement

– Worksite

– Latin America


Q&A


Appendix


-189

-

Americas earnings

Underlying earnings before tax (USD million)

510 524

173

372 266 217

448 381

232

-189

Q1 2009 Q2 2009 Q3 2009 Q4 2009 Q1 2010

Underlying earnings before tax Net Income

Underlying earnings by line of business Net income 2010 Q1

194

190

86

42

11

1

524

� Life and Protection

� Individual Savings and Retirement

� Employer Solutions and Pensions

� Life Reinsurance

� Canada

� Latin America

Underlying earnings before tax

2009 Q1

198

(421)

47

(30)

21

(4)

(189)

2010 Q1

(83)

(120)

33

(191)

-

54

217

Run-off businesses

Over/under performance on fair value items

Realized gains / (losses) on investments

Impairment charges

Other income / (charges)

Income tax

Net income

2009 Q1

100

(1)

(4)

(370)

1

290

(173)


--

Americas total gross deposits of USD 7.5 billion

o New life sales increased 9% New life sales overview

compared with Q1 09 because of (in USD million) 2010 Q1 2009 Q1 Δ

growth across most distribution

channels

o Gross deposits of USD 7.5 billion

as higher pension and retail mutual

fund deposits were offset by lower

variable annuities deposits in

Life and Protection 121 107 13%

Employer Solutions and Pensions 9 10 (10)%

Life Reinsurance 47 52 (10)%

Canada 15 12 25%

Latin America 10 4 150%

Total recurring plus 1/10 single 202 185 9%

Gross deposit overview

Canada and lower fixed annuities Canada and lower fixed annuities Life and Protection Life and Protection 33 33 -

deposits in the US Individual Savings and Retirement 1,970 3,128 (37)%

Employer Solutions and Pensions 5,217 4,514 16%

Life Reinsurance 1 - -

Canada 286 85 -

Total gross deposits excl. run-off 7,477 7,730 (3)%

Revenue generating investments

03/31/10 12/31/09

Revenue generating investments (total) 305,832 307,431 (1)%

Investments general account 125,186 123,560 1%

Investments for account of policyholders 73,214 71,915 2%

Off balance sheet investments third parties 107,432 111,956 (4)%


-

Americas 2009 embedded value

Americas embedded value 2009 by new reporting segments

(in USD million)

Adjusted

net worth

Value of

in force

life

business

Life and protection 2,883 4,453

Individual savings and retirement

4,106 765

Fixed annuities 2,680 268

Variable annuities 1,426 406

Mutual funds - 91

Employer solutions and pensions

1,378 1,771

Canada 850 64

Associates 7 10

Life reinsurance 1,337 1,319

Run-off business 1,722 (1,339)

Total 2009 = 19,326 12,283 7,043

25%

38%

Fixed

annuities

Variable

annuities

16%

5% <1%

14%

Mutual 2% funds

Life and protection Individual savings and retirement Employer solutions and pensions Canada Associates Life reinsurance Run-off business


Americas embedded value life insurance movement analysis

USD million

EVLI operating return = 1.2% 19,326

17,924 412 (188)

(93) 167 175 289

639

2009 Embedded Value Life Insurance increased by USD 1.4 billion

EVLI 2008 Value of New Inforce Long Term Change in Currency Modeling Life Capital EVLI 2009

Business Performance Investment Economic Adjustments & Movements

Return Assumptions Other

Variance


Americas general account investments

(in USD million) March 31, 2010


Residential mortgages loans 92

Commercial mortgages and Agricultural loans 13,984

Total mortgages 14,076

Preferred stock & Convertibles 326

Common equity & bond funds 1,806

Private equity & hedge funds 1,938

Real estate & real estate LPs 1,418

Other 969

Investments general account (excluding policy loans) 122,284

Policyholder loans 2,902

Investments general account 125,186

Impairments as bps (quarterly) 18

Cash / Treasuries / Agencies

Investment Grade Corporates

High Yield Corporates

Emerging Markets Debt

Commercial MBS

Residential MBS

Non-housing related ABS

Subtotal

19,710

51,831

4,645

2,129

8,880

7,203

7,353

101,751

For questions please contact Investor Relations

T: +31 70 344 8305

E: [email protected]

P.O. Box 85

2501 CB The Hague

The Netherlands


Local knowledge. Global power.

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 1995. 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. 27

moving forward in the americasmoving forward in the americas · 2010-09-29 · local knowledge....

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