Americas Mark Mullin Michiel van Katwijk CEO CFO Analyst & Investor Conference - London - January 13, 2016
Today’s storyline • Divested USD 3 billion of capital related to non-core businesses Achievements • Transformed the profile of the company by increasing focus on fee business since 2010 • Distributed USD 8 billion to the Holding • Reduce complexity, eliminate duplication and lower costs to improve returns • Steadfast focus on capital optimization, deepening to the product level Priorities • going forward Improving value through profitable sustainable growth of core businesses • Create ONE customer experience enabling stronger relationships • Reduce capital allocated to run-off businesses by USD 1 billion • Generate stable operational free cash flows of ~USD 1 billion per annum Financial • targets Deliver expense savings of USD 150 million by 2018 • Achieve a return on capital of 9% by 2018 2 2 Note: operational free cash flows excluding market impacts and one-time items
Transforming US business to align with strategic objectives 2016 2009 2011 Execute functional Wind down Institutional 2014 organization alignment Repositioned and Spread business Consolidated into strengthened 2010 2 primary market- Transamerica brand De-emphasized facing divisions fixed annuities Exited or de-emphasized Rebased and Optimize to deliver part of earnings base positioned for growth ONE Transamerica 2010 2015 2011 Exited BOLI/COLI Sold Transamerica Canada; 2010 Completed divested Clark Consulting; TARe divestiture Restructured 14 announced sale of broker/dealer business units into operations deemed non-core 2012 three core businesses Formed a new shared services organization (Transamerica Business 3 3 Services)
Transforming the risk profile of the US business Management actions: Capital allocation – Americas • (USD billion) Divesting businesses no longer deemed a 9M 2015 2010 L&P strategic fit 11% 7% Variable Annuities • 27% Retirement Plans & SVS 14% Driving sales of lower capital intensive 24% 42% 15B Other (MF & Latin America) 1% 20B products 11% Fixed Annuities 21% 14% 21% Runoff 6% • De-emphasizing or withdrawing products Canada 1% due to strong pricing discipline for profitability Earnings shift to fee-based business • (USD billion) Increasing fee-based earnings to improve risk-adjusted returns 2010 9M 2015 15% 44% Fee-based earnings 1.2B* 1.9B Non fee-based earnings 56% 85% 4 4 * IFRS underlying earnings adjusted for assumption updates and one-time items
Not all targets have been met despite management actions 2015 Target Delivery Key drivers • Impact of low rates on reinvestment Earnings growth rates and policyholder behavior of 3-5% per year • Results from assumption changes Return on capital 8.2% and model updates (excludes leverage benefit at holding) • Operational free Accelerated divestment non-core business cash flows +25% • De-emphasized spread products Double fee-based • Successful shift to capital-light sales earnings to 30-35% 5 5
Executing on strategic priorities • Offer solutions throughout the lifecycle • Reduce complexity, eliminate duplication and decrease costs • Provide omni-channel distribution • Deliver expense savings • Engage directly and connect digitally of USD 150 million by 2018 with our customers • Restructure into functionally organized • Create ONE customer experience business to get closer to our customers enabling stronger relationships • Allocate capital to businesses that • Invest in digital capabilities and create value and cash flow growth expertise to support growth • Optimize value of backbooks • Focus leadership on advocating ownership, agility and customer- • Divest businesses no longer deemed a centricity strategic fit, such as run-off businesses • Achieve a return on capital of 9% by 2018 6 6
Transforming the organization to best position for the future 7
Primary drivers for change Shifting consumer preferences • Different values and buying behaviors of digital-native Millennials • Product evolution (i.e. personalized insurance, data from wearable devices) Changing regulatory landscape • Multiple regulatory regimes and Economic factors Evolving to meet supervisors compete for share • Lower interest rates for new challenges • DOL fiduciary proposal longer than anticipated Competition from new sources • Non-traditional competitors, including technology firms and private equity 8 8
Positioning to better serve our customers …to better meet our customers’ needs Provide relevant customer solutions that are simple, rewarding, convenient, and reassuring Simplifying our Deliver a consistently positive customer experience at every touch point with Transamerica organization... Utilize Transamerica’s brand strength, expertise and capabilities to serve customers across their lifetimes 9 9
Creating ONE Transamerica Management actions Life & • Restructure into functionally organized business to get closer Protection to our customers Transamerica Business Services • Reduce complexity, eliminate duplication and decrease costs • Invest in technology and talent to drive profitable growth Investments • Deliver on ‘Mobile -first, Multi-product, Omni-channel and & Retirement Advice-ready ’ strategy Corporate Delivering results • Reduce capital allocated to run-off businesses by USD 1 billion • Generate stable operational free cash flows of ~USD 1 billion ONE per annum • Deliver expense savings of USD 150 million by 2018 • Achieve a return on capital of 9% by 2018 Helping our customers achieve a lifetime of financial security 10 10 Note: operational free cash flows excluding market impacts and one-time items
Designing ONE Customer eXperience Customer Promise CX Design Principles CX Vision “ ONE Transamerica” A compelling experience for our target customers Simple Delivers financial security to and then through retirement Delivers the best customer solution ONE Reassuring Rewarding (simple, rewarding, convenient and reassuring) Enables lifetime consolidation of assets and/or insurance policies Convenient Enables a direct-to-customer relationship including advice Available where and when our customers want to shop, buy, transact or seek our ‘Mobile -first, Multi-product, ‘Helping Our Customers To help Omni-channel, Advice-ready, Achieve A Lifetime Of Ability to upgrade features products, funds and services, on demand with On Track Analytics’ Financial Security’ 11 11
Monetizing ONE Customer eXperience Revenue strategies “ ONE Transamerica” Roll-out the CX to all existing customers, Maximize existing customer revenue enabling consolidation with Transamerica Analytics Advice Center Roll-out the CX to all new business channels, Get On Track enabling consolidation with Mobile Products Maximize new customer revenue with Transamerica at point of sale Pricing Rewards Productivity strategies Organize around the CX; drive out synergies; stop Improve asset utilization ‘Mobile -first, Multi-product, duplication; stop investing in silos Omni-channel, Advice- ready’ ‘On Track’ customer experience Digitize the company in built around customer support of the CX to Reduce operating expenses engagement, convenience reduce expenses in marketing, sales, admin and ease of use and IT 12 12
Improving value through profitable sustainable growth of core businesses 13
Constructing an integrated worksite strategy as ONE Transamerica • The worksite provides a strategic access point to working America - Connecting with customers early in their careers and introducing them to the Transamerica brand experience - Highly-valued channel: low acquisition costs, high persistency - Attractive product mix: capital light, fee plus risk businesses • Among the fastest-growing providers at the worksite - Transamerica Retirement Services’ annual growth in participants over the last five years is 13%, nearly four times that of the industry 1 - During the same period, new annualized premium for Transamerica Employee Benefits increased 21% annually on average, more than three times the industry rate 2 • Serving 6 million Americans at the worksite, through >40,000 employer group relationships - 5 million retirement participants (proforma for the Mercer acquisition) - 1 million policyholders of supplemental life and health insurance • Transformation into ONE Transamerica facilitates integrated worksite strategy Leverage unique position of leading businesses in both employee benefits and retirement plans to create the most powerful worksite provider in the country 14 14
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