Third quarter 2011 results Third quarter 2011 results Jan - PowerPoint PPT Presentation

Third quarter 2011 results Third quarter 2011 results Jan Nooitgedagt CFO Media resentation Media presentation p The Hague, November 10, 2011

Withstanding market turmoil with continued capital strength and resilient franchise zyxwvutsrqponmlkihgfedcbaYWVUTSRQPONMLKJIHGFEDCBA ƒ Capital position remains strong ƒ Lower underlying earnings due to market impact, currencies and longevity y g g g y ƒ Interest rate assumptions updated, reflecting current environment ƒ Restr t ing f the b iness Restructuring of the business on track, targeting lower cost base c r o s on track targeting l o er c ost base ƒ Record net deposits, driven by pensions and asset management 2 2

Focus on delivering on targets Achieve return on equity of Grow underlying earnings Double fee-based earnings to Increase annual before tax by operational free cash flow to €1.3-1.6 30-35% 10-12% 7-10% billion on average per annum g p by 2015 y of underlying earnings by 2015 by 2015 between 2010 and 2015 Return on equity Underlying earnings Fee-based earnings Operational free cash flow before tax €944 7.4% -15% 29% ( (8.7% excluding g million* million* run-off capital) YTD 2011 of underlying earnings YTD 2011 YTD 2011 YTD 2011 * Excluding market impact of EUR 1,075 million in Q3 2011 3 Main economic assumptions embedded in targets: annual gross equity market return of 9%, 10 year US interest rate of 5.25% in 2015 and EUR/USD rate of 1.35

Underlying earnings impacted by adverse markets and assumptions update zyxwvutsrqponmlkihgfedcbaYWVUTSRQPONMLKJIHGFEDCBA ƒ Market impact on underlying earnings in line with sensitivities given in Q2 2011 ƒ Assumption changes include the positive impact of updated mortality in US Life & Protection offset by charges related to policyholder behaviour in US variable annuities offset by charges related to policyholder behaviour in US variable annuities ƒ Lower result in CEE mainly related to higher claims in non-life due to seasonality, lower balances of de-emphasized US fixed annuities and lower margins in the Dutch life portfolio Underlying earnings before tax (EUR million) 401 (33) 35 (14) (7) (6) (15) 361 Underlying y g Market impact Assumption p p CEE US fixed The Other Underlying y g earnings Q2 changes annuities Netherlands earnings Q3 2011 2011 4

Year on year earnings impacted by adverse markets and charges in NL and UK ƒ Compared to Q3 2010, Americas’ earnings decreased due to lower fixed annuities spreads and balances as the product is de-emphasized, partly offset by higher fee-based earnings ƒ In the Netherlands earnings were imp pacted by y lower investment income in Life & Saving gs and higher provisioning for longevity in Pensions ƒ UK earnings decreased due to lower fee income and higher anticipated exceptional charges ƒ New markets were lower driven by Central & Eastern Europe and Variable Annuities Europe New markets were lower driven by Central & Eastern Europe and Variable Annuities Europe Underlying earnings before tax Americas Americas The Netherlands The Netherlands United Kingdom United Kingdom New Markets New Markets (USD million) (EUR million) (GBP million) (EUR million) 97 24 59 74 469 55 458 68 437 43 9 8 Q3 10 Q2 11 Q3 11 Q3 10 Q2 11 Q3 11 Q3 10 Q2 11 Q3 11 Q3 10 Q2 11 Q3 11 5

Net income affected by fair value items ƒ Fair value items impacted by interest rate assumption changes (EUR168m), in addition to lower interest rate and equity markets, increased volatility and spread widening (EUR120m) zyxwvutsrqponmlkihgfedcbaYWVUTSRQPONMLKJIHGFEDCBA ƒ Impairments were mainly linked to US residential mortgage-backed securities, financial holdings of Portuguese and Greek banks and new mortgage legislation in Hungary f P t d G k b k d t l i l ti i H ƒ Other charges mainly related to restructuring charges in the Netherlands and UK ƒ Tax benefits related to utilization of losses for which no deferred tax asset was recognized in the US US and a tax rate reduction in the UK d t t d ti i th UK Underlying earnings to net income development in Q3 2011 (EUR million) 361 361 (288) (288) 102 102 (132) (132) (5) (5) (54) (54) 76 76 60 60 Underlying Fair value items Realized gains Impairment Run-off Other charges Income tax Net income Q3 11 earnings before on investments charges businesses tax Q3 11 tax Q3 11 6

Update of assumptions ƒ In the US, annual review of all assumptions relative to current experience and zyxwvutsrqponmlkihgfedcbaYWVUTSRQPONMLKJIHGFEDCBA management expectations typically performed in third quarter: Assumption changes related to market movements reflected in fair value items g ► Other assumption changes reflected in underlying earnings ► ƒ Update of interest rate assumptions reflecting current market circumstances ƒ ƒ Limited impact from policyholder behaviour and expense level updates Limited impact from policyholder behaviour and expense-level updates - Assumption change Assumption change Line Line Result impact in USD million Result impact in USD million Long term interest, fixed income fund Fair value items (237) return, money market rates Mortality Mortality Life & Protection Life & Protection 65 65 Policyholder behaviour Variable Annuities (12) Expenses Fixed Annuities (4) Total Total (188) (188) 7

Update of interest rate assumptions to reflect current environment ƒ 10-year US Treasury assumption lowered to Assumed 10-year US Treasury rate (Percentage) 4.75% from 5.25% Grading from current yield to 4.75% in five years g y y 6.0% ► ƒ Five year average rate lowered by 90 bps 5.0% Old assumption 4.3% ► New assumption 3 4% in line with 10-year New assumption 3.4% in line with 10 year 4.0% ► ► forward rate zyxwvutsrqponmlkihgfedcbaYWVUTSRQPONMLKJIHGFEDCBA 3.0% ƒ Bond fund return lowered to 4% from 6% for Old assumption New assumption coming 5 years and 6% thereafter g y 2 0% 2.0% ƒ Money market rates flat at 0.2% for coming two years followed by a 3-year grading to 3% 1.0% ƒ No change to long term credit spread (graded No change to long term credit spread (graded 0.0% over two years) or default assumptions 2011 2012 2013 2014 2015 2016 8

Cost reduction programs in established markets delivering results ƒ Cost savings in Americas and UK in line with strategic focus ƒ Development of new propositions to be better positioned to respond to changing conditions and opportunities in the market in the UK and the Netherlands ƒ Restructuring charges in Q3 related to the Netherlands (EUR 60 million) and UK (EUR 15 million) ƒ Expense level of growth businesses higher while improving efficiencies Operating expenses (EUR million) 2,488 (86) (64) 31 2,368 79 25 19 78 2,570 zyxwvutsrqponmlkihgfedcbaVUTSRQPONMIHFEDCB YTD Q3 2010 Currency effects Cost savings Development Operating Restructuring Restructuring Restructuring Other* YTD Q3 2011 established established new new expenses excl. expenses excl charges NL charges NL charges UK charges UK charges other charges other markets propositions restructuring countries and other 9 * Other includes exceptional expenses related to the divestment of Transamerica Reinsurance of EUR 32 million

UK on track to deliver GBP 80 million cost savings by year-end 2011 Enacted costs savings ƒ Targeted savings almost achieved UK Life and Pension (GBP million) ƒ Operating expenses Q3 of GBP 104 million include: Operating expenses Q3 of GBP 104 million include: 100 Restructuring charge of GBP 13 million ► GBP 71 million Development of new propositions of GBP 3 million ► 75 Customer redress program exp p g penses of GBP 7 million ► 13 ƒ Complete the majority of customer redress program 50 21 80 and restructuring program by g g y end 2011 4 Charge GBP 5 million in Q3 25 ► 33 Exceptional expenses and charges may continue ► until end 2011 0 2010 Q1 11 Q2 11 Q3 11 Q4 11E Targeted savings On track to deliver 25% cost reduction * Exceptional costs include restructuring costs, customer redress program costs, proposition development and regulatory developments 10

Reducing costs in Dutch insurance and banking businesses Operating expenses ƒ Cost reduction of EUR 100 million from 2010 level (EUR million) ƒ Majority of savings to be achieved in 2012 ƒ ƒ Restructuring charge of EUR 60 million in Q3 2011 Restructuring charge of EUR 60 million in Q3 2011 250 ƒ Initiatives enacted: Closing AEGON Bank’s office in Nieuwegein ► 100 Reduced project portfolio and external staffing ► Transferred systems to European Data Center ► 498 ƒ Further reduction through: Reduction of 300 FTE, mainly support functions ► Reduce external staffing and sourcing ► 2010 2013 IT cost cutting ► ƒ ƒ Life & Savings, Pensions, Non-life Life & Savings Pensions Non life ƒ Lean thinking and process efficiencies Distribution and other ► ƒ Acceleration of cost reduction program and repositioning for the future p g p g 11