Accelerate, connect, deliver Alex Wynaendts CEO Analyst & Investor Conference - London - January 13, 2016
Today’s storyline • Transformed the profile of the company by focusing on fee business Achievements • Substantially improved the strength of our balance sheet since 2010 • Doubled free cash flows after holding expenses • Broaden relationships with our customers throughout their financial lifecycles • Expand in asset management, administration and guidance & advice Priorities • going forward Improve our performance by growing our business and reducing expenses • Allocate capital to businesses that create value and cash flow growth • Achieve a return on equity of 10% by 2018 • Financial Reduce annual operating expenses by EUR 200 million by 2018 targets • Increase capital return to shareholders: EUR 400 million share buyback and growing dividends 2
Achievements since 2010 3
Changed profile of the company by executing on our strategy While growing our fee business Optimized value Generated average annual of backbook sales growth of 12% since Addressed 2010 Realized material cost legacy issues savings in established Invested in digital business markets models Divested EUR 3.4bn Significantly reduced size of non-core activities at >0.8x Created highly successful run-off portfolio P/B on average asset manager Freed up capital from legacy Improved quality of our Secured distribution deals annuity businesses financial modeling and JVs with strong partners Optimized hedging of Addressed several Grew our pension customer financial market and long-dated disputes base from 6 to 11 million underwriting risks 4
Maintained a strong capital position and returned capital Solid group Solvency II ratio ~160% end-2015 Robust balance sheet Strong ratings S&P AA- financial strength rating Operational free cash flow growth Growing Doubled free cash flows since 2010 cash flows Reduced holding expenses Growing cash dividends EUR 1.4 billion cash dividends since 2010 Return of capital Significant deleveraging Over EUR 2 billion debt reduction 5
Not all targets have been met despite management actions 2015 Target Delivery Key drivers • Impact of low rates, including on policyholder behavior and old-age mortality Return on equity >10% • Significant adverse impact from Earnings growth - Regulatory changes in the UK of 7-10% - Portfolio changes in Spain and CEE • Operational free Successful shift to capital-light products cash flows +30% • EUR 200 million cost savings in NL and UK Double fee-based • Capital release from spread-based portfolios earnings 6
Priorities going forward 7
Aegon’s strategic priorities • Offer solutions throughout the lifecycle • EUR 200 million expense reduction program in US, NL and holding • Provide omni-channel distribution • Simplifying our business by digitizing • Expand guidance and advice processes and increasing capabilities self-service • Engage directly and connect digitally • Grow scale in asset management, with our customers administration and advisory services • Allocate capital to businesses that • Increase digital capabilities and create value and cash flow growth expertise to support growth • Enhance value of backbooks • Focus leadership on advocating ownership, agility and customer-centricity • Achieve scale in New Markets • Additions to management board reflect • Divest non-core businesses key strategic priorities 8
Well positioned to benefit from global trends Persistently low interest rates Shift from state and corporate benefits to individual responsibility for financial security Increased competition as a result of blurring boundaries in the financial services industry Reduced accessibility to traditional advice for mass customer segments Consumer demand shifting towards digital first, multi-channel access and personalized offerings Customers expect transparent, simple, superior service and fair products A tightened regulatory environment that increases complexity and reduces returns 9
Living up to our purpose ‘to help people achieve a lifetime of financial security’ Develop longer-term relationships Offer more simple, convenient solutions Provide more Getting closer to relevant information, our customers guidance and advice 10
Opportunity to serve along customer lifecycles … to trusted provider of retail solutions …through guidance and advice… From worksite relationship… At & after retirement Retirees looking for Situation income and wealth transfer Wealth accumulation Situation Increasingly focusing Advice and asset Primary on retirement Working life management relationships Developing career and Situation Asset management Primary starting a family Aegon’s focus Offer guaranteed income and advice relationships and solutions to manage wealth Pension administration Primary Aegon’s focus Increase customer and protection relationships engagement and provide investment solutions Aegon’s focus Grow scale in administration and selectively offer protection products 11
Capturing more of the value chain to fulfill customer promise Protection Product administration Asset Advice and and guarantees and platforms management customer experience • Selectively provide protection and guaranteed solutions • Further digitize product administration and drive scale on platforms to offset margin erosion • Expand asset management capabilities - Provide investment solutions to our customers - Leverage capabilities to third-party customers - Expand distribution • Increase engagement with customers via direct guidance and advice 12
Connecting with our customers digitally IT systems Digital platforms Digital services • Modular IT architecture • Customer portals • Customer guidance and advice, combining • Modernize and merge • Direct-to-consumer technology and remote existing infrastructure propositions human interaction • Source new IT systems • Digital sales tools • Retirement outlook tools and self-service • One client view with • Built new UK platform • Single US retirement plan administration system 13
Reducing expenses by simplifying the business …by simplifying Strong expense track Additional cost savings in 2016- 2018… record 2010-2015 the business • Reduce complexity Expenses up only 1% per USD 150 million savings year while growing sales by • Taking out management layers 8% per year * • Straight-through processing Reduced expense base of EUR 50 million savings • Customer self-service insurance activities by ~20% or EUR 100 million • Product simplification Stabilize cost at low level Expense base reduced by • Outsourcing ~35% or GBP 100 million since 2010 Note: Cost savings based on adjusted operating expenses. Total cost savings target of EUR 200 million includes cost savings at the holding 14 * Percentages shown are compounded average growth rates for 2010 to 2015 year-to-date
Increasing amount of capital allocated to core businesses Optimized Portfolio Divest non-core business Enhance backbook value Optimize capital allocation • Exploring options for UK • Operationally separate UK • Grow asset management annuity book backbook from platform earnings by another 20% by business 2018 • Considering options for • Rationalize US • Achieve scale in emerging commercial line non-life business in the Netherlands Accident & Health portfolios markets and mortgage book in • Optimize longevity hedging in • Transition from DB to DC in Hungary the Netherlands the Netherlands • Further reduce capital • Continue variable annuity • Grow UK platform assets to allocated to US run-off lump sum offering GBP 30 billion by 2018 businesses 15
Improving performance through business growth and cost savings • RoE of 10% by 2018 through organic growth, cost savings and capital return - Achieve growth in asset management, administration and guidance & advice Increasing profitability - EUR 200 million expense reduction program in US, the Netherlands and holding - EUR 400 million share buyback to be launched today • EUR 1.7 billion dividends in 2016-2018 • Dividend pay-out ratio of 50% of free cash flows after holding costs Growing returns to • Raise final dividend to EUR 0.13 – full year 2015 dividend increases by 9% shareholders • Execution on share buyback to neutralize preferred share transaction 16 See slide 29 for main economic assumptions
Cultural transformation program to improve delivery Key themes Actions • Structure Clear accountability Ownership Additions to management board • Balancing new initiatives and execution on inforce reflect key strategic priorities • More experimentation and ‘fast fails’ Agility Leadership • Fact-based decision making Strengthen management capabilities US management organized by function • Being digital and human Customer centricity • Pursuing customer engagement and real-time feedback Digital New Chief Technology Officer • Creating positive impact for all our stakeholders Responsible Digital academy business • Extending our responsible investment approach 17
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