Q4 2016 Results Alex Wynaendts The Hague – February 17, 2017 CEO Helping people achieve a lifetime of financial security
Overview 2 Strong increase in earnings Solvency II ratio increased to 159% as a result of favorable markets • Underlying earnings up as a result of expense reductions, improved claims experience and higher interest rates • Increased Solvency II ratio well within target range; capital generation of EUR 0.3 billion • Final 2016 dividend of EUR 0.13 per share; full year dividend up to EUR 0.26 Earnings Solvency II Capital generation Return on Equity Sales EUR 554m 159% EUR 0.3 bn 10.5% EUR 2.7bn +27% +3pp +2.8pp -6% excluding one-time items compared with Q3 2016 compared with Q4 2015 compared with Q4 2015 compared with Q4 2015 and market impacts Note: Earnings = underlying earnings before tax; Solvency II ratio is management’s best estimate
Earnings 3 Underlying earnings increased 27% Due to expense reductions, claims experience and favorable markets • Management actions lead to strong start of expense savings program • Positive adjustments to intangible assets in the US and Asia driven by higher interest rates • Higher account balances in US and UK resulted in increased fee based earnings • Favorable claims experience in Accident & Health in the US Underlying earnings before tax roll-forward (EUR million) 435 28 25 33 29 3 554 Underlying Expense Higher interest Higher average Improved US Other Underlying earnings before reductions rates balances claims experience earnings before tax Q4 15 tax Q4 16 Note: Numbers do not add up due to rounding
Earnings 4 Expense reductions ahead of 2016 target Doubled US expense savings target following strong start • Expense savings annual run-rate of USD 90 million achieved in the Americas in 2016 - Annual run-rate savings significantly exceed the USD 60 million target for 2016 - Initial USD 150 million reductions to be achieved one year early; 2018 target doubled to USD 300 million • The Netherlands achieved an expense savings annual run-rate of EUR 25 million in 2016 - Strong progress on expense reductions offset by project-related expenses and investments in new business initiatives Significant progress towards EUR 350 million expense savings program Cumulative run- 2016 run-rate Remaining expense savings rate savings ~110 ~240 (EUR million) Expense savings Holding & Other Netherlands Americas targets EUR 10 million EUR 50 million USD 300 million by 2018
Earnings 5 Improved net income As a result of earnings growth and one-time tax benefits Underlying earnings to net income development in Q4 2016 (EUR million) UEBT Q4 16 554 Fair value items Fair value items (13) Americas (EUR -226 million): • Realized gains Macro hedge (-) 36 • Low rate protection program (-) Net impairments (1) Europe (EUR 171 million): • Credit spread widening (+) Other charges (38) • Gain from interest rate mismatch on IFRS (+) • Real estate valuation (+) Run-off businesses (1) Other (EUR 42 million): Income tax (66) • Swaps on hybrid securities (+) Net income Q4 16 470 Note: Numbers do not add up due to rounding
Sales 6 Record 2016 deposits of EUR 100 billion Growth mainly driven by Americas and Aegon Asset Management • Higher gross deposits in the Americas mainly resulting from an increase in Retirement Plans • Inflows on the UK platform and Aegon’s online bank Knab drive deposit growth in Europe • Asset management gross inflows increased due to Strategic partnerships • Revenue-generating investments up, as a result of market movements and third-party inflows - Full year net deposits impacted by outflows in low margin businesses in the second half of 2016 Gross deposits by unit Revenue-generating investments (EUR billion) (EUR billion) 750 100 75 500 50 250 25 0 0 2013 2014 2015 2016 2013 2014 2015 2016 Americas Europe Asset management Asia General account Account for policy holders Third-party
Sales 7 Life sales reflect focus on profitability Accident & Health sales lower primarily due to product exits in the US • Lower life sales due to continued shift towards fee-based solutions in NL and universal life sales in the US being impacted by agent recruiting • Higher interest rates and product repricing lead to increased MCVNB compared with Q3 2016 • Product exits adversely impacted A&H sales throughout 2016, expect further reduction in sales in 2017 following announcement to strategically exit Direct and Affinity business in US New life sales vs Life MCVNB margin A&H and general insurance (EUR million and %) (EUR million) 300 300 4% 3% 200 200 2% 100 100 1% 0 0% 0 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 New life sales (lhs) MCVNB (rhs) Accident & Health General
Capital 8 Increased Solvency II ratio Market impacts and capital generation drive Solvency II ratio up • Favorable development of credit spreads and interest rates are the main drivers of the increased ratio • One-time items mainly consisted of higher capital requirements as a result of a repositioning of Aegon the Netherlands’ investment portfolio and additional interest rate hedges Group Solvency II ratio ~156% +2% +4% (1%) (1%) ~159% Local solvency ratio by unit OF OF 18.4 US NL UK 17.2 ~440% ~141% ~156% SCR SCR RBC SII SII 11.5 11.0 Q3 Capital Market One-time Other Q4 2016 generation impacts items 2016 Note: OF = Own funds; SCR = Solvency capital requirement; Numbers do not add up due to rounding
Capital 9 Holding excess capital of EUR 1.5 billion Remittances in line with capital generation • Remittances from the Americas, asset management, CEE and Spain & Portugal exceeded the dividends paid to shareholders and funding & operating expenses at the Holding in 2016 • Excluding share buyback and senior debt issuance, Holding excess capital remained stable • The proceeds of the senior debt issuance have been earmarked for the redemption of EUR 500 million senior notes due July of 2017 Excess capital development (EUR million) 1.4 1.1 (0.5) (0.3) (0.4) (0.2) 0.5 1.5 Remittances exceed dividends and Holdco costs Year-end Remittances Dividends Funding & Share Capital injections Senior debt Full year 2015 from units operating buyback to units issuance 2016 expenses Note: Numbers do not add up due to rounding
Capital 10 Full year 2016 dividend of EUR 0.26 Fifth consecutive year of dividend growth • Proposed final dividend for 2016 of EUR 0.13 per common share* • Paid a sustainable growing dividend for five consecutive years • Remittances support growing dividends and investments in strategic priorities Increasing dividends (EUR per share) 0.26 0.25 0.23 0.22 0.21 0.13 0.13 Final dividend 0.12 0.11 0.11 Interim dividend 0.13 0.12 0.11 0.11 0.10 2012 2013 2014 2015 2016 * Subject to shareholder approval at the AGM of May 19, 2017
Strategy 11 Executing on strategy Continue transformation of US and UK businesses 2017 – 2018 Priorities 2016 Achievements • • • Divested annuity Expense savings Align to functional portfolio of EUR 350 million organization in US by end of 2018 • • Acquired Cofunds 5-part plan to and BlackRock’s • EUR 2.1 bn capital improve returns return 2016-2018 DC platforms • • Completed SBB of Capitalize on • Expense savings EUR 400 million synergies in • • Increase RoE to Platform assets run-rate of Europe 10% by 2018 GBP ~100 billion* USD 90 million • 2016 dividends of • UK transformation Achieve scale in Achieve targets EUR ~530 million One Transamerica Asia or divest • Total shareholder • return of ~9% for Accelerate release full year 2016 of run-off capital Shareholder value Optimize portfolio * Platform assets pro forma to include Aegon’s own platform, Cofunds and BlackRock’s DC administration business
Strategy 12 Progress on financial targets Improved RoE and increased expense savings target Year-end Full year Commitment 2018 target 2016 results Strong sales growth CAGR of 10% >10% Reduce operating expenses EUR 350 million EUR 110 million Increase RoE 10% 8.0% EUR 1.0 – 1.5 billion Excess capital at Holding EUR 1.5 billion Return capital to shareholders EUR 2.1 billion EUR ~930 million Note: Increased 2018 expense savings target due to doubling of US target to USD 300 million at the December 2016 Investor day; Capital return for 2016 includes interim & full year dividend and share buyback; Excess capital increase due to issuance of EUR 500 million of senior notes, which have been earmarked for the redemption of EUR 500 million senior notes due July of 2017
13 13 Appendix For questions please contact Investor Relations +31 70 344 8305 ir@aegon.com P.O. Box 85 2501 CB The Hague The Netherlands
Appendix 14 Index Click subject to go directly to the section Q4 2016 Strategy Q4 2016 Capital and support Financials Assumptions Slide 15-17 Slide 18-23 Slide 24-29
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