First quarter 2009 results Embedded Value 2008 Alex Wynaendts, CEO - - PowerPoint PPT Presentation

First quarter 2009 results Embedded Value 2008

Alex Wynaendts, CEO

May 14, 2009

Key messages

• Executing on long term strategy and short term priorities
• Earnings improved significantly in Q1
• Resilient profitable sales and deposits
• Strong capital position
• Embedded value per share of EUR 11.35

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Execution of strategic priorities

Capital

• Capital release of EUR 0.9 billion in Q1 2009
• Target capital release of EUR 1.5 billion in 2009

Costs

• EUR 150 million cost measures in 2009
• Approximately 1/3 realized in Q1

Contingency

• Majority of additional EUR 3 billion core capital not used

Portfolio review

• Downsizing Institutional Markets Division (IMD)
• Sale of life insurance activities in Taiwan

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Net loss due to capital market effects and impairments

• Net income mainly impacted by financial markets

– Underlying earnings affected by lower capital markets – Impairments on bonds (EUR 320 million) and shares (EUR 66 million) – Under US GAAP, impairments would have been ~EUR 160 million lower – Tax benefits related to operating losses and tax exempt income Underlying earnings to net income development in Q1 2009 (EUR million)

~450 ~(470) (22) (197) 173 (386) (23) 282 (173)

Underlying Capital Underlying Fair value Gains on Impairment Other charges Income tax Net income earnings markets earnings items investments charges before capital impact before tax performance markets impact

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Equity market decline in Q1 has been reversed quarter-to-date

• Accelerated amortization of DPAC and reserve strengthening take quarter-

end equity market levels into account

– S&P index down 12% from 903 at year-end 2008 to 798 at March 31, 2009 – Fully reserved for S&P index level of 798 – Index rose quarter-to-date by 14% S&P 500 index (January 1 – May 12, 2009)

600 650 700 750 800 850 900 950

April – May 12 + 14% Q1 2009 – 12% 908

12/31/2008 1/31/2009 2/28/2009 3/31/2009 4/30/2009

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Relatively stable new life sales

• New life sales of EUR 543 million

– Americas sales lower due to retail life and BOLI/COLI – Group pension sales in the Netherlands held up well, decline in retail life – Increased annuities sales in the UK, more than offset by drop in pensions – Strong new life sales in other countries

• New life sales relatively stable compared to Q4 2008

New life sales New life sales New life sales New life sales Americas The Netherlands United Kingdom Other countries (USD million) (EUR million) (GBP million) (EUR million)

205 182 262

Q1 08 Q4 08 Q1 09

289 265 291 41 62 71 58 50 56

Q1 08 Q4 08 Q1 09

Q1 08 Q4 08 Q1 09*

Q1 08 Q4 08 Q1 09

* Excluding VA Europe

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Strong net deposits

• Net deposits of EUR 1.1 billion*

– Growth driven by fixed and variable annuities

• Gross deposits of EUR 6.4 billion*

– Continued strong fixed annuities sales – Other countries higher due to inclusion of asset management JV in China and European variable annuities

Fixed (FA) and Variable Pensions & Asset Total gross deposits annuities (VA) Americas management Americas Other countries (USD million) (USD million) (EUR million)

2,771 3,169 4,252 394 706 234 Q1 08 Q4 08 Q1 09 747 780 974

VA FA

2,328 2,120 459 Q1 08 Q4 08 Q1 09 Q1 08 Q4 08 Q1 09

* Excluding Institutional Guaranteed Products

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Resilient value of new business

• Value of new business of EUR 201 million, up 8%

– VNB in Americas flat* – VNB in the Netherlands driven by margin improvement in mortgage business – Higher VNB in the UK driven by higher annuity sales and higher margins – Lower VNB in Other countries mainly driven by lower sales in Taiwan and CEE

• Internal rate of return of 17.8%

Value of new business* Value of new business Value of new business Value of new business Americas The Netherlands United Kingdom Other countries (USD million) (EUR million) (GBP million) (EUR million)

154 98 97 50 52 40 13 31 12 36 33 42

Q1 08 Q4 08 Q1 09 Q1 08 Q4 08 Q1 09

Q1 08 Q4 08 Q1 09

Q1 08 Q4 08 Q1 09

* Excluding Institutional Guaranteed Products

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Solid progress on cost reduction

Americas Netherlands United Kingdom

• No wage increases
• Reductions of contract
• Restructuring IT,
• Staff reductions

services marketing, customer

• Deferred hiring
• Process re-engineering

services

• Reorganization
• General cost savings
• Cost containment
• Savings in distribution
• Agency distribution

1/3 realized in Q1

2009 cost savings target of EUR 150 million

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Capital position remains strong

December 31, 2008 March 31, 2009

~EUR 4.6 billion (~170%) Insurance Group Directive (IGD) surplus capital EUR 5.6 billion (183%) EUR 2.7 billion S&P risk-based insurance capital model excess capital above AA level EUR 2.9 billion

• Decline in IGD surplus capital mainly due to

– Revaluation of bond portfolio in the Netherlands

• Risk free interest rates increased during Q1

– Rating migration in US bond portfolio

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Excess capital supported by pro-active capital management

Excess capital development Q1 2009 (EUR billion)

2.9 (0.2) (0.6) (0.6) 0.3 0.6 0.3 2.7

Impact from capital markets : EUR 1.4 billion Q4 08 Excess Credit Rating Interest rates Capital De-risking Other Q4 Q1 09 Excess capital impairments migration US & equity preservation impacts capital market impact

• Impact on earnings from capital preservation and de-risking in Q1 2009 of

EUR 85 million per annum due to:

– Temporary investments in cash and treasuries – Lower alternative investment balances

• Earnings impact is not permanent as most de-risking measures are reversible

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US impairments Q1 2009

328

• 2

5 325 27 93 91 2 205 72

• 133

IFRS US GAAP

EUR million

Common equity impairments ~170 Total net impairments Total recoveries Subtotal net credit impairments Commercial mortgage loans Subtotal corporate Corporate – public Corporate – private Subtotal structured assets RMBS CMBS ABS

Under IFRS, assets are impaired to market value. Under new US GAAP rules – as applied by US peers – impairments reflect expected economic losses

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Active portfolio management

• Increased allocation to cash, treasuries and short term paper in US portfolio
• Prudent to invest in low risk investments in periods of widening credit spreads
• Run-off of institutional spread-based balances accelerates in 2H09
• Begin reinvestment in credit risk in select market segments

Investments general account

December 31, 2008 – EUR 130 billion March 31, 2009 – EUR 133 billion

2%2% 2% 3% 2% 2% 4% 3% 23% 25% „ Cash / Treasuries / Agencies „ Credits „ Structures assets 15% 16% „ Mortgages „ Equity like „ Real estate „ Policy loans „ Other 14% 13% 38% 36%

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Embedded value EUR 11.35 per share

(2)% (14)% (13)% (10)% Δ constant currency (10)% (16)% (15)% (11)% Δ 0.9 13.44 21.7 25.9 2007 18.5 Total embedded value (TEV) 0.8 Value of new business 22.9 Embedded value life insurance TEV per common share*

EUR billion, except per share data

11.35 2008

Embedded Value Life Value of New Business Insurance 2008 2008

45%

ƒ

Americas

ƒ

Netherlands

ƒ

United Kingdom

ƒ

Asia

ƒ

Central & Eastern Europe

ƒ

Other European Countries

ƒ

Americas International

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* Adjusted for estimated theoretical value of the preferred shares 5%

14

57% 25% 11% 3% 4% >1% 28% 2% 9% 6% 5%

Capital markets impact Embedded Value Life Insurance

Embedded value life insurance movement (EUR billion) 25.9 0.8 0.9 (3.2) (2.0) (0.3) 0.4 0.5 22.9

Capital markets impact EV operating return EUR 1.7 billion

2007 Value of new Inforce Long term Change in Currency Other Capital 2008 business performance investment economic movements return assumptions variance

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Key messages

• Executing on long term strategy and short term priorities
• Earnings improved significantly in Q1
• Resilient profitable sales and deposits
• Strong capital position
• Total embedded value of EUR 18.5 billion
• Fundamentals of our business remain strong

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Q&A

For questions please contact: Greg Tucker Dick Schiethart +31 70 344 8956 gcc-ir@aegon.com

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Cautionary note regarding forward-looking statements

Cautionary note regarding forward-looking statements The statements contained in this presentation that are not historical facts are forward-looking statements as defined in the US Private Securities Litigation Reform Act of 1995. The following are words that identify such forward-looking statements: believe, estimate, target, intend, may, expect, anticipate, predict, project, counting on, plan, continue, want, forecast, should, would, is confident, will, and similar expressions as they relate to our company. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. We undertake no obligation to publicly update or revise any forward-looking statements. Readers are cautioned not to place undue reliance on these forward-looking statements, which merely reflect company expectations at the time of writing. Actual results may differ materially from expectations conveyed in forward-looking statements due to changes caused by various risks and uncertainties. Such risks and uncertainties include but are not limited to the following:

• Changes in general economic conditions, particularly in the United States, the Netherlands and the United Kingdom;
• Changes in the performance of financial markets, including emerging markets, such as with regard to:

–

The frequency and severity of defaults by issuers in our fixed income investment portfolios; and

–

The effects of corporate bankruptcies and/or accounting restatements on the financial markets and the resulting decline in the value of equity and debt securities we hold;

• The frequency and severity of insured loss events;
• Changes affecting mortality, morbidity and other factors that may impact the profitability of our insurance products;
• Changes affecting interest rate levels and continuing low or rapidly changing interest rate levels;
• Changes affecting currency exchange rates, in particular the EUR/USD and EUR/GBP exchange rates;
• Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets;
• Changes in laws and regulations, particularly those affecting our operations, the products we sell, and the attractiveness of certain products to our consumers;
• Regulatory changes relating to the insurance industry in the jurisdictions in which we operate;
• Acts of God, acts of terrorism, acts of war and pandemics;
• Changes in the policies of central banks and/or governments;
• Litigation or regulatory action that could require us to pay significant damages or change the way we do business;
• Customer responsiveness to both new products and distribution channels;
• Competitive, legal, regulatory, or tax changes that affect the distribution cost of or demand for our products;
• Our failure to achieve anticipated levels of earnings or operational efficiencies as well as other cost saving initiatives; and
• The impact our adoption of the International Financial Reporting Standards may have on our reported financial results and financial condition.

Further details of potential risks and uncertainties affecting the company are described in the company’s filings with Euronext Amsterdam and the US Securities and Exchange Commission, including the Annual Report on Form 20-F. These forward-looking statements speak only as of the date of this document. Except as required by any applicable law

• r regulation, the company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained herein to

reflect any change in the company’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Cautionary note regarding Regulation G (non-GAAP measure) This presentation includes certain non-GAAP financial measures: net operating earnings, operating earnings before tax, (net) underlying earnings, value of new business and embedded value. Value of new business and embedded value are not based on IFRS, which are used to prepare and report AEGON’s financial statements and should not be viewed as a substitute for IFRS financial measures. AEGON believes the non-GAAP measures shown herein, together with GAAP information, provides a meaningful measure for the investment community to evaluate AEGON’s business relative to the businesses of our peers.

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