2Q 2017 Results 2Q 2017 Results & Capital update Alex Wynaendts Matt Rider The Hague – August 10, 2017 CEO CFO Helping people achieve a lifetime of financial security
Overview 2 Highlights • Capital injection of EUR 1 billion contributes to pro forma NL solvency ratio of ~175% 1 Strengthening • NL ratio well within new 150 – 190% target range; LAC-DT set at 75% at 2Q 2017 Dutch capital position • Aegon NL to resume dividend payments; expected 2017 dividend of EUR 100 million in 1H 2018 2 • Solvency ratio improved by 28%-points to 185%, well within new target range of 150 – 200% Group solvency • Agreement with regulator to amend conversion methodology for US under Solvency II ratio improved • On comparable basis, ratio up by 13%-points due to divestments and capital generation • Fourth consecutive quarter of year-on-year underlying earnings growth Continued • Strong sales lead to gross deposits of EUR 35 billion and net deposits of EUR 2.3 billion strong results • Interim dividend of EUR 0.13 per share 1 As of 2Q 2017 on pro forma basis, see slide 10 for details 2 Subject to market conditions and regular governance in line with capital management policy
Overview 3 Highlights 2Q 2017 results • Underlying earnings increase significantly driven by improved claims experience and favorable markets • Return on equity improves 160 basis points to 8.4% due to strong net underlying earnings • Group solvency ratio increases significantly to 185% • Strong sales and improved margins • Divested majority of US run-off businesses releases USD 700 million of capital Group solvency ratio Earnings Return on equity Capital generation Sales € 535m € 0.3bn € 3.9bn 8.4% 185% +1.6pp +28pp +42% +23% Excluding one-time items compared with 2Q 2016 compared with 1Q 2017 compared with 2Q 2016 compared with 2Q 2016 and market impacts Note: Earnings = underlying earnings before tax; Group solvency ratio is management’s best estimate and includes 15pp uplift from amended US conversion methodology
Earnings 4 Earnings up due to improved claims and favorable markets • Improved claims experience in Life and Health in the US and Dutch non-life business • Favorable markets drive higher account balances resulting in higher fee-based earnings • Lower negative adjustment to intangible assets as a result of improved reinvestment yields • Other includes the benefits of expense initiatives that are well on track Underlying earnings before tax roll-forward (EUR million) 435 57 19 10 14 535 Underlying earnings Claims Higher account Intangible assets Other Underlying earnings before tax 2Q 2016 experience balances adjustment before tax 2Q 2017
Earnings 5 Expense reductions of EUR 350 million on track for 2018 Declining core operating expenses (EUR million – rolling 4 quarters ) • Successful expense savings program drives 3,900 reduction in core operating expenses 3,750 • Acquisitions in US and UK in key business lines add to scale. Related cost synergies will be fully realized by year-end 2018 3,600 • Restructuring charges to reduce as expense reduction program matures 3,450 2015 1Q 16 2Q 16 3Q 16 2016 1Q 17 2Q 17 Core Acquisitions Restructuring charges Cumulative run-rate savings since year-end 2015 Run-rate Remaining expense ~160 reductions ~190
Earnings 6 Strong net income mainly due to gain on divestment Underlying earnings to net income development in 2Q 2017 (EUR million) UEBT 2Q 2017 535 Loss from fair value items Mainly driven by adverse credit spread movements Fair value items (191) and losses on hedges to protect capital Realized gains 111 Realized gains on investments Mainly related to the sale of corporate bonds in NL Net recoveries 2 Other income 291 Other income Mainly driven by a EUR 231 million pre-tax gain on Run-off businesses 10 the divestment of the US run-off businesses. Whereas the transaction itself resulted in a book loss, the Income tax (228) overall result also includes the release of deferred gains related to the discontinuance of hedge Net income 2Q 2017 529 accounting for certain cash flow hedges
Sales 7 Solid sales and improved margins • Gross deposits of EUR 35 billion mainly driven by strong institutional platform sales in the UK - Asset management and UK platform flows drove net deposits of EUR 2.3 billion • Lower new life sales driven by lower US term life and indexed universal life sales, exit from UK annuities, partly offset by higher sales in Asia • MCVNB margin continues to remain well above 3.5% for new life sales due to strict pricing policy • A&H sales were stable with higher travel sales offsetting lower group voluntary benefit sales Gross and net deposits New life sales & MCVNB A&H and general insurance (EUR billion) (EUR million and margin %) (EUR million) 300 5% 40 5 300 30 200 0 200 20 4% -5 100 100 10 0 0 -10 0 3% 2Q 2016 1Q 2017 2Q 2017 2Q 2016 1Q 2017 2Q 2017 2Q 2016 1Q 2017 2Q 2017 Americas Europe New life sales (lhs) MCVNB margin (rhs) Accident & Health General Asset management Asia Net deposits (rhs)
8 Capital update Helping people achieve a lifetime of financial security Helping people achieve a lifetime of financial security
Overview 9 Highlights of capital update • Capital injection of EUR 1 billion contributes to pro forma NL solvency ratio of ~175% 1 Strengthening • NL ratio well within new 150 – 190% target range; LAC-DT set at 75% at 2Q 2017 Dutch capital • Solid capital position and growing capital generation to enable Aegon NL to resume dividend position payments; expected 2017 dividend of EUR 100 million in first half of 2018 2 Higher group • Solvency ratio improved by 28%-points to 185%, well within new target range of 150 – 200% ratio and • Agreement with regulator to amend conversion methodology for US under Solvency II reaffirming • Target to return EUR 2.1 billion of capital over 2016 – 2018 period reaffirmed capital return 1 As of 2Q 2017 on pro forma basis, see slide 10 for details 2 Subject to market conditions and regular governance in line with capital management policy
Capital update 10 Comprehensive plan to increase NL capitalization level • Comprehensive plan adds ~40%-points and brings NL Solvency II ratio to ~175% on a pro forma basis • Increased ratio well within new target range of 150 – 190% • Closed current methodological discussions with DNB - LAC-DT factor unchanged at 75% 1 at June 30, 2017 following agreement on methodology Aegon NL Solvency ratio development (In %) 190% Comprehensive plan Target zone ~175% ~25% 150% ~5-10% ~(5)-(10)% 6% 144% 2Q17 Illiquid investment Divestment Risk profile Group capital Pro forma strategy UMG enhancements injection 2Q17 1 The LAC-DT factor will be recalibrated on a quarterly basis based on the agreed methodology
Capital update 11 Clear benefits for Aegon NL from increased capital ratio Illiquid investments ~(5)-(10)% • Resuming dividend payments to group; expected 2017 dividend of EUR 100m in 1H18 1 Benefiting from • Regaining focus on execution of strategy; investing in core fee-based solutions higher capital ratio • Executing illiquid investment strategy to maximize value of backbook • EUR 3 – 4 billion investments in illiquid assets in 2017 – 2019 Maximizing value of backbook through - Investments in real estate, direct lending, infrastructure and private equity illiquid strategy • Illiquid investments anticipated to lead to EUR ~50 million capital generation step-up 1 Subject to market conditions and regular governance in line with capital management policy
Capital update 12 Divestment of UMG at attractive price UMG divestment ~6% • Divestment to Aon for EUR 295 million; attractive 21x P/E ratio Monetizing top-3 position • EUR ~225 million uplift in own funds to drive 6%-points solvency ratio uplift for Aegon NL • Sale is in line with strategy to focus on innovation in core insurance, banking and Clear rationale for services businesses divestment of UMG • Divestment of UMG further enhances financial flexibility of Aegon the Netherlands
Capital update 13 On track to execute on risk profile enhancements Risk profile ~5-10% Solvency Action Timing Comment • Derisking actions include selling impact 1 EUR ~1 billion worth of corporate bonds, mostly BBB-rated Completed General account +2% pts 2Q 2017 Completed +2% • Internal model improvements include derisking amending the credit risk shock for non-safe haven sovereigns Internal model + ~5% pts 2 3Q 2017 Approved by DNB improvements • Other includes hedging for part of the In progress ~5-10% credit risk exposure related to the separate account with guarantees Other +0-5% pts 2H 2017 On track for execution 1 Percentage points reflect impact from management action on Aegon the Netherlands’ Solvency II ratio 2 Depends on market circumstances and composition of the EIOPA volatility adjustment reference portfolio
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