Sustainable earning Sustainable earnin gs growth with s growth with an improved risk-re r eturn profile turn profile Mark Mullin Mark Mullin Member of the Management Board and CEO of AEGON Americas Goldman Sachs European Financials Conference Paris, June 8, 2011
AEGON at a glance � Life insurance, pensions and asset mana Life insurance, pensions and asset manag gement ement � Over 40 million customers across the glob Over 40 million customers across the glo be e � Presence in markets throughout the Amer Presence in markets throughout the Ameri icas, Europe and Asia cas, Europe and Asia � Approximately 27,000 employees worldwid Approximately 27,000 employees worldwi de e � Revenues of EUR 32 billion (2010) Underlying earnings before tax 9% 3% ■ Americas 17% ■ The Netherlands ■ United Kingdom 71% ■ New markets 2
Building on leading market positions Americas Europe Asia USA # 3 Term life UK # 3 Group pension pensio ns s NL # 3 Group pensions CHN # 9 of foreign-owned life insurers in # 4 Universal life # 3 Individual pensi pen sions ons # 5 Individual life China # 6 Annuities # 5 Accident & health # 10 Variable annuities # 8 Individual prote prot ection ction # 7 Property & casualty # 13 Pensions Start-ups: CEE # 2 Life in Hungary in Hungar y SP # 7 Life insurance India and Japan CAN # 5 Universal life # 4 Non-life in # 4 Non-life in # 6 Term life # 6 Term life FR # 10 Lif i # 10 Life insurance e nsurance FR Hungary # 6 Segregated funds # 5 Unit-linked in BZL # 13 Life insurance Poland MEX # 9 Life insurance Start-ups: Romania and Tur Romania and Turke key y 3 Rankings are based on various external sources a Rankings are based on various external sources an nd company best estimates d company best estimates
AEGON aims for sustainable earnings AEGON aims for sustainable earnings growth with improved risk-return profile growth with improved risk � Sustainable cash flows and dividends � � Strong capital position Strong capital position transformed � significantly Improved risk-return profile � Sustainable earnings growth 4
AEGON aims to deliver � Sustainable cash flows Improve operational free cash flow of current level of EUR 1.0-1.2 billion by 30% by 2015 and dividends � Pay a sustainable dividend based on free cash flow and capital position Strong capital position � Maintain strong capital buffer � Core capital of at least 75% of total capital by end of 2012 � Generate return on equity of 10-12% medium term Improved risk-return profile � Increase fee businesses to 30-35% of annual underlying earnings before tax by 2015 � Execute on credit and interest rate risk reduction � Growing in our chosen markets - underlying earnings before Sustainable earnings growth tax on average 7-10% p.a.* from rebased level � New base of underlying earnings in 2011, mainly as a result of strategic management actions � Further improve cost efficiency in established markets � Improve the geographical balance of capital allocation * Underlying earnings in 2011 will be affected by str Underlying earnings in 2011 will be affected by st rategic management actions. From this new base ategic management actions. From this new base 5 AEGON expects to grow underlying earnings befo AEGON expects to grow underlying earnings bef ore tax on average 7 to 10% per annum. re tax on average 7 to 10% per annum.
Sustainable cash flows and dividends � Improve operational free cash flow of current level Improve operational free cash flow of current level of EUR 1.0 1.2 billion by 30% by 2015 of EUR 1.0 - � Pay a sustainable dividend based on free cash flo Pay a sustainable dividend based on free cash flow w and capital position and capital position Execution � Free cash flow generation: 2010 free cash flow EUR billion Operational cash flow O pera ona ca ti l sh fl ow 2.6 2 6 . Investments in new business (1.3) Operational free cash flow 1.3 Holding expenses (0.6) Free cash flow 0.7 � Aim to resume dividend payments on common sh Aim to resume dividend payments on common s hares after full repurchase of core capital securities ares after full repurchase of core capital securities � Intent to pay a dividend over H2 2011 of EUR 0.1 Intent to pay a dividend over H2 2011 of EUR 0. 10 in May 2012 0 in May 2012 � Dividends may be paid in cash or stock at the ele Dividends may be paid in cash or stock at the el ection of the shareholder ction of the shareholder 6
Strong capital position � Fully repurchase 375m core capital securi Fully repurchase 375m core capital securit ties (EUR 1.5bn + EUR 750m premium), funded by: ies (EUR 1.5bn + EUR 750m premium), funded by: Completed equity raising of EUR 903 million Completed equity raising of EUR 903 millio n on February 24, 2011 on February 24, 2011 ► Internal sources, including proceeds from di Internal sources, including proceeds from d ivestments, which include Transamerica Reinsurance vestments, which include Transamerica Reinsurance ► � Aim to achieve core capital of at least 75 Aim to achieve core capital of at least 75% % of total capital by end 2012 of total capital by end 2012 � Maintain strong capital position, both at op Maintain strong capital position, both at o perating units as at holding level erating units as at holding level � Target a buffer at holding level of 1.5x ann Target a buffer at holding level of 1.5x an nual holding expenses* in current environment ual holding expenses* in current environment Movement core capital ratio ≥ 6 ≥ 6% ≥ 75% 75% (10%) % 4% Dec 31, 2010 Full repurchase Dutch Internal re Internal r esources sources Equity issuance Dec 31, 2012 State * Holding expenses include interest expenses, coup Holding expenses include interest expenses, cou pons on perpetual capital securities, dividends ons on perpetual capital securities, dividends 7 on preferred shares and holding costs of in total on preferred shares and holding costs of in total a approximately EUR 600 million per annum pproximately EUR 600 million per annum
The Americas is delivering results � Executing on our str Executing on our st rategy ategy � Focus on our core Focus on our core b business usiness � Growing in our cho Growing in our chose sen markets n markets � � Delivering high qual Delivering high quality, sustainable Delivering high quality, sustainable earnings Delivering high qua lity, sustainable earnings ity, sustainable 8
Improved risk return profile and quality Improved risk return profile and qualit y of earnings of earnings Execution � Growing fee based businesses � De-emphasize sales of capital intensive products emphasize sales of capital intensive product s � Divestment of Transamerica Reinsurance � Run off of institutional spread based and small b Run off of institutional spread based and small bank BOLI/COLI businesses ank BOLI/COLI businesses � Delta equity exposure of VA GMIB back-book no book n ow fully hedged w fully hedged � � Discontinued single premium universal life sales Discontinued single premium universal life sale Discontinued single premium universal life sale Discontinued single premium universal life sales s in the bank channel s in the bank channel in the bank channel in the bank channel � Product redesign and shortened implementatio Product redesign and shortened implementation n timeframes timeframes Pre-crisis underlying earnings Underlying earnings Future underlying earnings 20 ~15 ~25 29% 30% � Spread 40 � Fees 2007 2010 2015 � Technical � Interest on Surplus 25 ~35 16% ~25 25% 15 9 Sources of earnings exclude new business strain
Sustainable earnings growth in our ch Sustainable earnings growth in our c hosen markets osen markets Markets we plan to maintain or reduce Markets we plan to grow ▬ � Maintain synthetic GIC Life and Protection � � Spread business Variable annuities � � Life Reinsurance Retail mutual funds � � Small bank BOLI / COLI Pensions � Latin America Shifting to higher grow Shifting to higher gro wth, higher return business th, higher return business 10
Sustainable earnings growth in our ch Sustainable earnings growth in our c hosen markets osen markets New life sales up 4% Variable annuity deposits up 14% 831 796 3,830 3,372 2009 2010 2009 2010 Mutual fund deposits up 45% Pension deposits up 42% 3,486 16,285 2,408 11,436 2009 2010 2009 2010 11
Sustainable earnings growth Aggressively managing expenses � Restructured business units � Shutting down Louisville and consolidating Shutting down Louisville and consolidatin g operations to other locations operations to other locations � Consolidating locations in Baltimore � Operational excellence Operating expenses down while continuing Operating expenses down while continuing to grow the business to grow the business ► Significant headcount reduction ► Operating expenses Headcount* (USD million) 2,249 11,703 11,358 1,971 2009 2010 2009 2010 12 * Excludes Latin America and agents
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