THE HAGUE, Netherlands,
August 10, 2017 /PRNewswire/ --
Significant strengthening of
Dutch capital position
- Solvency II ratio of Aegon NL increases from 144% on
June 30, 2017 to ~175% on a pro forma
basis as a result of EUR 1 billion
capital injection from the group, the sale of UMG and risk profile
enhancements
- Dividends from business units and proceeds from divestments
provide financial flexibility to inject capital into Dutch
business. Aegon intends to issue EUR 500
million 1-year senior notes in 3Q 2017 to prefund expected
cash inflows
- Loss absorbing capacity of deferred taxes factor in NL set at
75% at June 30, 2017
- Based on its solid capital position and growing capital
generation Aegon NL is expected to resume dividend payments,
starting with a 2017 dividend of EUR 100
million in 1H 2018
Group solvency ratio increases by
28%-points to 185%
- Agreement with regulator on amendment of conversion methodology
for US business under Solvency II; leads to a 15%-points uplift of
group solvency ratio, increased comparability with peers and
improvement in quality of capital
- Group solvency ratio of 185% as of June
30, 2017 - including benefit from amended conversion
methodology - well within new target range of 150-200%
- On a comparable basis, solvency ratio up by 13%-points, mainly
the result of divestments and capital generation
- Capital generation of EUR 0.6
billion, including EUR 0.3
billion market impacts and one-time items
- Holding excess capital increases by EUR
0.3 billion to EUR 1.7 billion, supported by regular
dividends from US and CEE, and special dividend from Asia
- Interim dividend of EUR 0.13 per
share. Reconfirming target to return EUR 2.1
billion of capital over 2016-2018
Net income of EUR 529
million supported by gain related to divestment
- Underlying earnings up strongly by 23% to EUR 535 million driven by improved claims
experience and higher fee income from favorable equity
markets. As a result, return on equity increases by 160 basis
points to 8.4%
- Fair value items of EUR (191)
million mainly due to adverse credit spread movements
- Gain of EUR 149 million related
to divestment US run-off businesses supports net income;
reinsurance transaction resulted in a book loss, whereas overall
result includes subsequent release of deferred gains on related
derivatives
Strong sales and improved
margins
- Strong institutional platform sales in the UK lead to gross
deposits of EUR 35 billion; net
deposits of EUR 2.3 billion driven by asset management
and UK platform flows
- New life sales decline by 8% to EUR 224
million due to lower sales in US and exit from UK
annuities
- Accident & health and general insurance sales remain stable
at EUR 230 million
- Market consistent value of new business increases by 35% to
EUR 134 million benefiting from
higher interest rates
Statement of Alex Wynaendts, CEO
"Aegon's second quarter results are
strong, and reflect the continued positive momentum in our
businesses and financial markets, as well as the
benefit from expense savings. I'm
pleased that management actions are having the desired effect,
particularly the marked improvement in the profitability of our US
business. This improvement, together with the book gain
related to the divestment of the majority of our US
run-off business and related derivative positions,
supports net income of 529 million
euro for the quarter.
"Today, we are also announcing a range of measures
that significantly increase our solvency ratio, including a capital
injection of 1 billion euro in Aegon
the Netherlands and agreement with our regulator on a number of
outstanding solvency-related topics. These measures, together with
the recently announced strategic divestments, increase our
financial flexibility, strengthen our capital position and
improve the outlook for capital generation
- all of which give us confidence in our ability to
return 2.1 billion euro to
shareholders over the period 2016 to 2018."
Key performance indicators
2Q 2Q 1Q YTD YTD
EUR millions[12] Notes 2017 2016 % 2017 % 2017 2016 %
Underlying earnings
before tax 1 535 435 23 488 10 1,022 897 14
Net income / (loss) 529 (385) n.m. 378 40 907 (242) n.m.
Sales 2 3,937 2,765 42 3,942 - 7,880 6,324 25
Market consistent value
of new business 3 134 100 35 172 (22) 306 232 32
Return on equity 4 8.4% 6.8% 23 7.2% 15 7.8% 7.1% 11
Note: All comparisons in this release are against the second
quarter of 2016, unless stated otherwise.
Details on strengthening of capital
position
Significant increase of Dutch capital
ratio
The Solvency II ratio of Aegon the Netherlands is expected to
increase from 144% on June 30, 2017
to ~175% on a pro forma basis reflecting a EUR 1 billion capital injection from the group in
the third quarter of 2017, the recently announced sale of Unirobe
Meeùs Groep (UMG), and risk profile enhancements. This will enable
the Dutch business to focus on executing its strategy in order to
grow future capital generation.
Strong cash flows to the holding provide Aegon with the
financial flexibility to inject capital into its Dutch business.
These cash flows will come in the form of dividends upstreamed by
the business units and proceeds from divestments in the second half
of 2017 which are subject to customary regulatory approval. The
company plans to issue EUR 500 million 1-year senior
notes in the third quarter of 2017 to prefund the expected cash
inflows in order to inject the full EUR 1
billion into the Dutch business by September 30, 2017.
After extensive discussions with the Dutch Central Bank (DNB),
Aegon has also resolved a number of outstanding methodological
matters with respect to its partial internal model. Following
agreement on the interpretation of DNB's guidance on the loss
absorbing capacity of deferred taxes (LAC-DT), Aegon set the LAC-DT
factor in the Netherlands at 75%
at June 30, 2017. The LAC-DT factor
will be calculated on a quarterly basis using the agreed
methodology.
The Solvency II ratio of Aegon the Netherlands is expected to be
well within the updated target range of 150-190% by year-end 2017.
As a result of the improvement in its capital ratio and the closing
of current methodological discussions with DNB, the Dutch business
is expected to be in a position to resume dividend payments to the
group. Aegon the Netherlands intends to pay a 2017 dividend of
EUR 100 million in the first half of
2018, subject to market conditions and regular governance in line
with its capital management policy. Thereafter, Aegon the
Netherlands will resume a pattern of interim and final
dividends.
Amendment of US conversion methodology
Aegon has also obtained approval from DNB to amend the
conversion methodology for its US business under Solvency II. This
methodology is consistent with EIOPA's guidance on how to calculate
group solvency in the context of equivalence. It includes lowering
of the conversion factor from 250% to 150% RBC and reducing own
funds by 100% RBC requirement to reflect transferability
restrictions. The methodology is subject to annual review. The
change in methodology leads to an increase in Aegon's group
solvency ratio by 15%-points, enhances comparability with European
peers and improves the quality of capital. Under the new
methodology restricted and unrestricted tier-1 capital as a
percentage of the Solvency Capital Requirement increase
significantly.
Updated solvency target ranges
Including the benefit from the amended conversion methodology,
the group solvency ratio amounts to 185% as of June 30, 2017. This is well within the new group
target range of 150-200%. The change compared with the old target
range of 140-170% reflects the amendment of the conversion
methodology for Aegon's US business, and the updated Solvency II
target ranges for both the
Netherlands (150-190%) and the United Kingdom
(145-185%). The increased target ranges for the Netherlands and the United Kingdom are part of the company's new
capital management policy. Aegon decided to update its capital
management policy for its operating entities to protect the
execution of the strategy, capital generation and
dividends.
Strategic highlights
- Aegon divests businesses to increase its financial
flexibility
- Kames Capital named Property Manager of the Year
- Role created to drive new Transamerica workplace service
model
- Aegon launches enhanced 'Mijn
Aegon' app to simplify self-service in
the Netherlands
Aegon's ambition
Aegon's ambition is to be a trusted partner for financial
solutions at every stage of life, and to be recognized by its
customers, business partners and society as a company that puts the
interests of its customers first in everything it does. In
addition, Aegon wants to be regarded by its employees as an
employer of choice, engaging and enabling them to succeed. This
ambition is supported by four strategic objectives embedded in all
Aegon businesses: Optimized portfolio, Operational excellence,
Customer loyalty, and Empowered employees.
Optimized portfolio
Aegon accelerated the execution of its strategy by announcing
three divestments in the past three months. The transactions
increase Aegon's financial flexibility by releasing over
EUR 1 billion of capital and by
enhancing Aegon's group solvency ratio by approximately
10%-points.
In the United States, Aegon
completed the divestment of its two largest US run-off businesses -
the payout annuity business and the Bank Owned / Corporate Owned
Life Insurance (BOLI/COLI) business - to Wilton Re in the second quarter. Through the
transaction Aegon has achieved its objective to reduce the amount
of capital allocated to its run-off businesses by USD 1 billion before the end of 2018. The
divestment and related management actions are expected to result in
a capital release of approximately USD 700
million in 2017. This capital release is expected to raise
Aegon's group solvency ratio by approximately 6%-points, of which
5%-points were realized in the second quarter of 2017.
The divestment of these run-off businesses resulted in a
post-tax book gain of USD 161 million
(EUR 149 million). Whereas the
reinsurance transaction itself resulted in a book loss, the overall
result also includes a USD 493
million (EUR 456 million)
post-tax release of deferred gains related to the discontinuance of
hedge accounting for certain cash flow hedges associated with the
payout annuity block. Subsequent to closing the transaction on
June 28, 2017, as part of its second
quarter 2017 closing process, management concluded to discontinue
the hedge accounting treatment for previously closed forward
starting swaps that were linked to the assets transferred or sold
as part of this divestment. As a consequence of the discontinuance
of hedge accounting treatment, the deferred gains have been
recycled from revaluation reserves to other income.
On August 8, Aegon announced the
sale of UMG to Aon Groep Nederland for EUR
295 million. UMG is a top-3 independent financial advisory
group in the Netherlands, which
provides advice and insurance products to both retail and wholesale
customers. This transaction allows the company to focus on those
businesses that are core to its strategy. The divestment is
expected to result in an increase of Solvency II capital of
approximately EUR 225 million, which
will be retained in Aegon the Netherlands. This will improve the
group solvency ratio by an estimated 2.5%-points. The transaction
will lead to a book gain of approximately EUR 180 million upon closing, which will be
reported in Other income at the time of closing.
On August 10, Aegon announced the
sale of Aegon Ireland plc to AGER Bermuda Holding Ltd., the holding
company of the European operations of Athene Holding Ltd. This
transaction will further optimize Aegon's portfolio of businesses
and increase its financial flexibility. The proceeds from the
divestment of Aegon Ireland, a provider of unit linked guarantee
and offshore bond products predominantly in the United Kingdom, will be 81% of the Own Funds
at the end of 2017. Solvency II Own Funds of Aegon Ireland were
approximately GBP 200 million
(EUR 220 million) per June 30, 2017. Aegon's group solvency ratio is
estimated to improve by approximately 2% as a result of the
transaction. Based on the book value at June
30, 2017, the book loss from this transaction is expected to
amount to approximately GBP 115 million (EUR 125 million), subject to certain closing and
market conditions, and will be reported in Other charges.
Furthermore, on June 30, 2017,
Aegon also completed the Rothesay Part VII transfer related to the
divestment of the UK annuity book as announced last year. The
completion led to a 2%-points uplift of the group solvency ratio.
Aegon expects to complete the Legal & General Part VII transfer
related to the divestment of the annuity book in the second half of
2017.
Operational excellence
Kames Capital, Aegon's asset management business in the UK, was
named Property Manager of the Year at the 2017 UK Pensions Awards.
These prestigious awards recognize the highest levels of
innovation, performance and service to pension schemes and their
members. The judges considered a range of factors, including
organizational strength, investment performance, innovation and
client services. Kames was also short-listed for Fixed Income
Manager of the Year, demonstrating their credentials across a range
of asset classes.
Transamerica, Aegon's US subsidiary, announced the appointment
of Scott Ramey to Head of Workplace
Solutions. In this new role, Mr. Ramey will oversee Transamerica's
comprehensive workplace service model that integrates worksite,
voluntary benefits and retirement plans into one integrated
application. Through Workplace Solutions employers can offer their
employees voluntary opt-in benefits, such as a first-of-its-kind
hospital indemnity insurance policy Transamerica Provider
SelectSM, which provide double cash benefits when
employees' hospital care is received at a treatment center
designated by the employer. In addition, Workplace Solutions
enables employers to offer employees supplemental health policies,
long-term care insurance and retirement plans.
Customer loyalty
Addressing customers' desire for simplicity, flexibility and
cost efficiency in their retirement planning, Transamerica has
enhanced the Transamerica Income EdgeSM living benefit
rider, and launched two new lower cost investment options.
Transamerica Income Edge is a living benefit rider available with
most Transamerica variable annuities, the aim of which is to enable
individuals to effectively plan their retirement. Changes to the
rider include a fee reduction, together with a reduction in the
waiting period from five to three years before which customers are
eligible to start receiving a higher living benefit withdrawal
percentage. In addition, Transamerica launched both an
international and domestic index portfolio available for
Transamerica Income Edge.
In the Netherlands, Aegon
rolled-out a new version of its customer app Mijn Aegon (My Aegon).
The app, which is currently used by more than 150,000 Aegon
customers and responsible for 35% of all self-service transactions
conducted online, has been enhanced to provide an even better
service to its users. Mijn Aegon underwent extensive testing with
customers in Aegon's Customer Experience (CX) center, and now
boasts several key feature updates. These include a new design that
provides a more intuitive navigation experience, reduces
information to only that which is most relevant for the users and
an action button to quickly organize account information.
Furthermore, the new app was designed on a new technical platform
that will allow Aegon to add new self-service functionality faster
and easier in the future, with the aim to provide customers with an
even better service.
Empowered employees
Aegon held the first of two Hackathons for 2017, with the theme
of 'Customer Centricity: customers at the heart of our
decision-making'. Consisting of twelve teams from Aegon's offices
around the world, colleagues worked together to transform their
ideas into functional prototypes within 24 hours. The Hackathons
enabled employees to work across countries, disciplines and
functional lines, and share their creativity and to showcase their
skills and expertise in everything from coding to finance. After 24
hours, each team pitched their idea to an international jury of
Aegon managers. Five ideas in total have been selected for further
exploration by various country units within Aegon.
Financial overview
EUR millions Notes 2Q 2017 2Q 2016 % 1Q 2017 %
Underlying earnings before tax
Americas 341 270 26 313 9
Europe 195 160 21 169 15
Asia 11 1 n.m. 12 (11)
Asset Management 32 37 (14) 37 (14)
Holding and other (43) (33) (31) (44) -
Underlying earnings before tax 535 435 23 488 10
Fair value items (191) (358) 47 (53) n.m.
Realized gains / (losses)
on investments 111 229 (52) 76 46
Net impairments 2 (23) n.m. (11) n.m.
Other income / (charges) 291 (656) n.m. 6 n.m.
Run-off businesses 10 18 (45) 31 (68)
Income before tax 757 (355) n.m. 536 41
Income tax (228) (30) n.m. (159) (44)
Net income / (loss) 529 (385) n.m. 378 40
Net underlying earnings 390 312 25 350 11
Commissions and expenses 1,648 1,589 4 1,666 (1)
of which operating expenses 9 1,001 926 8 983 2
Gross deposits
(on and off balance) 10
Americas 9,288 9,265 - 12,835 (28)
Europe 12,007 3,088 n.m. 10,054 19
Asia 48 94 (49) 73 (34)
Asset Management 13,492 10,506 28 11,006 23
Total gross deposits 34,835 22,953 52 33,969 3
Net deposits (on and off balance) 10
Americas (2,052) (56) n.m. (406) n.m.
Europe 1,901 159 n.m. 774 146
Asia 31 80 (62) 55 (43)
Asset Management 2,491 1,046 138 (6,260) n.m.
Total net deposits excluding
run-off businesses 2,372 1,229 93 (5,837) n.m.
Run-off businesses (75) (103) 28 (166) 55
Total net deposits / (outflows) 2,297 1,125 104 (6,003) n.m.
New life sales
Life single premiums 379 489 (22) 495 (23)
Life recurring premiums annualized 186 195 (5) 196 (5)
Total recurring plus 1/10 single 224 244 (8) 246 (9)
New life sales 10
Americas 125 138 (10) 127 (2)
Europe 65 75 (13) 67 (3)
Asia 34 31 9 52 (35)
Total recurring plus 1/10 single 224 244 (8) 246 (9)
New premium production accident
and health insurance 200 199 1 273 (27)
New premium production
general insurance 30 27 12 27 13
Table continues...
Financial overview
EUR millions YTD 2017 YTD 2016 %
Underlying earnings before tax
Americas 653 554 18
Europe 364 330 10
Asia 23 1 n.m.
Asset Management 69 82 (16)
Holding and other (87) (69) (25)
Underlying earnings before tax 1,022 897 14
Fair value items (244) (716) 66
Realized gains / (losses)
on investments 187 283 (34)
Net impairments (9) (59) 85
Other income / (charges) 297 (662) n.m.
Run-off businesses 41 47 (12)
Income before tax 1,294 (210) n.m.
Income tax (387) (32) n.m.
Net income / (loss) 907 (242) n.m.
Net underlying earnings 739 663 11
Commissions and expenses 3,314 3,333 (1)
of which operating expenses 1,984 1,886 5
Gross deposits (on and off balance)
Americas 22,123 22,737 (3)
Europe 22,061 6,529 n.m.
Asia 121 167 (27)
Asset Management 24,498 23,598 4
Total gross deposits 68,804 53,031 30
Net deposits (on and off balance)
Americas (2,458) 4,769 n.m.
Europe 2,675 890 n.m.
Asia 85 139 (39)
Asset Management (3,769) 3,286 n.m.
Total net deposits excluding
run-off businesses (3,466) 9,084 n.m.
Run-off businesses (240) (343) 30
Total net deposits / (outflows) (3,706) 8,740 n.m.
New life sales
Life single premiums 875 1,099 (20)
Life recurring premiums annualized 382 400 (4)
Total recurring plus 1/10 single 469 510 (8)
New life sales
Americas 251 282 (11)
Europe 132 160 (17)
Asia 86 68 26
Total recurring plus 1/10 single 469 510 (8)
New premium production accident
and health insurance 473 460 3
New premium production
general insurance 57 51 11
Revenue-generating investments
Jun. 30, Mar. 31, Dec. 31,
2017 2017 % 2016 %
Revenue-generating investments (total) 816,915 847,234 (4) 743,200 10
Investments general account 140,544 155,847 (10) 156,813 (10)
Investments for account of policyholders 198,278 206,294 (4) 203,610 (3)
Off balance sheet investments third parties 478,093 485,094 (1) 382,776 25
Operational highlights
Underlying earnings before tax
Aegon's underlying earnings before tax increased by 23% compared
with the second quarter of 2016 to EUR 535 million. The
increase was largely driven by a significant improvement in
underwriting results in all regions, and higher fee income. This
more than offset lower investment income and increased holding
expenses. Adverse claims experience and negative one-time items
totaled EUR 15 million in the second quarter of 2017.
Underlying earnings from the Americas increased by 26% to
EUR 341 million, mainly driven by
higher fee revenue from favorable equity markets and improved
claims experience. The latter reflects the benefit from management
actions as part of the five part plan aimed at improving
profitability in the life & health businesses. Claims
experience improved by EUR 35 million compared with the
same quarter last year, although it remained EUR 11 million below company expectations. The
current quarter also included a EUR 15
million negative adjustment to intangible assets from lower
reinvestment yields.
Underlying earnings from Aegon's operations in Europe increased by 21% to EUR 195 million. Higher fee income due to
favorable equity markets, an improvement in non-life results and
EUR 11 million positive one-time
items more than offset lower investment income in the Netherlands due to prepayments and
interest rate resets on mortgages.
Aegon's underlying earnings in Asia increased from EUR
1 million to EUR 11 million.
This increase was driven by higher earnings from the High Net Worth
(HNW) businesses and China,
primarily as a result of business growth and favorable
persistency.
Underlying earnings from Aegon Asset Management declined by 14%
to EUR 32 million, as lower expenses
were more than offset by lower management fees from lower asset
balances.
The result from the holding declined by EUR 10 million to a loss of EUR 43 million partly driven by higher
project-related expenses and a positive one-time benefit in the
same quarter last year.
Net income
Net income amounted to EUR 529
million in the second quarter compared with a loss of
EUR 385 million last year. The
current quarter results benefited from a gain related to the
divestment of the majority of the US run-off businesses, while last
year's results included a book loss on the annuity divestment in
the United Kingdom.
Fair value items
The loss from fair value items amounted to EUR 191 million, as adverse credit spread
movements in the Netherlands and
the United States, and negative
fair value changes on hedges in place to protect Aegon's capital
position more than offset positive real estate revaluations in
the Netherlands.
Realized gains on investments
Realized gains totaled EUR 111
million, and were mainly related to the sale of corporate
bonds in the Netherlands to
improve the risk profile of the general account investment
portfolio.
Impairment charges
Net recoveries amounted to EUR 2
million and reflect the continued benign credit
environment.
Other income
Other income of EUR 291 million was
mainly driven by a EUR 231 million
pre-tax gain on the transaction with Wilton Re to divest the
majority of the run-off businesses in the
United States, which closed on June
28, 2017. Whereas the reinsurance transaction itself
resulted in a book loss, the overall result also includes a
EUR 706 million pre-tax release of
deferred gains related to the discontinuance of hedge accounting
for certain cash flow hedges associated with the payout annuity
block. Subsequent to closing the transaction on June 28, 2017, as part of its second quarter 2017
closing process, management concluded to discontinue the hedge
accounting treatment for previously closed forward starting swaps
that were linked to the assets transferred or sold as part of this
divestment. As a consequence of the discontinuance of hedge
accounting treatment, the deferred gains have been recycled from
revaluation reserves to other income. In addition, there was a
partial release of the expense reserve of EUR 82 million in the United Kingdom in relation to the divestment
of the UK annuity business, in line with previous guidance.
Run-off businesses
The results from run-off businesses halved to EUR 10 million due to the divestment of the
majority of the run-off businesses, which were derecognized as of
this quarter.
Income tax
Income tax amounted to EUR 228
million, which implies an effective tax rate for the second
quarter of 30%. The effective tax rate on underlying earnings was
27%.
Return on equity
Return on equity increased by 160 basis points compared with the
same quarter last year to 8.4%, as a result of improved underlying
earnings.
Operating expenses
Operating expenses increased by 8% compared with the second
quarter of 2016 to EUR 1.0 billion,
as a result of acquisitions in the United
Kingdom and an increase in integration and restructuring
expenses. Excluding the impact from these acquisitions, and
integration and restructuring charges, operating expenses increased
by 1% on a constant currency basis. Aegon targets to implement
EUR 350 million of expense savings by
year-end 2018 as part of its plans to reach a 10% return on equity
by the end of 2018. Initiatives to reduce expenses have so far led
to annual run-rate expense savings of approximately EUR 160 million.
Sales
Aegon's total sales increased by 42% to EUR 3.9 billion in the second quarter of 2017.
This was mainly the result of an increase in gross deposits by 52%
to EUR 34.8 billion. The increase was
primarily driven by strong institutional platform sales in the
United Kingdom, which can
fluctuate. In addition, asset management gross deposits increased
as a result of higher gross inflows in the Americas and
the Netherlands. Net deposits
amounted to EUR 2.3 billion and were
mainly driven by inflows in asset management and on Aegon's
platform in the United Kingdom.
These more than offset net outflows in the Americas as a result of
contract discontinuances in the business acquired from Mercer.
New life sales declined by 8% to EUR 224
million. Lower term life and indexed universal life sales in
the United States, and lower sales
following the exit from UK annuities were partly offset by strong
sales in Asia as a result of
continued strong critical illness sales in China. New premium production for accident
& health and general insurance increased by 2% to EUR 230
million due to favorable currency movements. On a constant currency
basis the premium production was stable across all segments.
Market consistent value of new business
The market consistent value of new business (MCVNB) increased by
35% to EUR 134 million. The benefit
from higher interest rates and strong sales in China more than offset the exclusion of
mortgage sales from the MCVNB calculation and the exit from UK
annuities.
Revenue-generating investments
Revenue-generating investments were down by 4% during the
quarter to EUR 817 billion. This
decrease was primarily driven by adverse currency movements and the
divestment of the majority of the US run-off business, which more
than offset net inflows and favorable equity market
movements.
Capital management
Shareholders' equity amounted to EUR 20.4
billion on June 30, 2017. The
decrease of EUR 1.1 billion compared
with the first quarter was mainly driven by unfavorable currency
movements and the impact of the reinsurance transaction with
Wilton Re, which more than offset
the positive impact of market movements on revaluation reserves.
Shareholders' equity, excluding revaluation reserves and defined
benefit plan remeasurements, decreased by EUR 0.5 billion
to EUR 17.1 billion - or EUR
8.21 per common share - at the end of the second quarter, as
unfavorable currency movements more than offset by retained
earnings. The gross leverage ratio remained stable at 29.4% as
retained earnings were offset by adverse currency movements.
Holding excess capital increased by EUR
0.3 billion to EUR 1.7
billion, of which EUR 500
million was used on July 18,
2017 to redeem EUR 500 million
senior unsecured notes. The increase was mainly driven by a
EUR 365 million regular interim
dividend from the United States,
EUR 30 million regular dividends from
Central & Eastern Europe
(CEE), and a EUR 176 million special
dividend from Asia, which were
only partly offset by funding and operating expenses as well as the
payment of the cash portion of the final 2016 dividend.
Capital generation
Capital generation of the operating units amounted to EUR 0.6
billion for the quarter. Market impacts and one-time items amounted
to EUR 0.3 billion, and mainly
related to derisking of the general account in the Netherlands and lower capital requirements
for equity risk in the United
Kingdom as a result of hedges put in place to protect fee
income. Capital generation of the operating units excluding market
impacts and one-time items amounted to EUR 0.3 billion in
the second quarter of 2017.
Solvency II ratio
Aegon has obtained approval from DNB to amend the conversion
methodology for its US business under Solvency II. It includes
lowering of the conversion factor from 250% to 150% RBC and
reducing own funds by 100% RBC requirement to reflect
transferability restrictions. The methodology is subject to annual
review. The change in methodology enhances comparability with
European peers, leads to an increase in Aegon's group solvency
ratio by 15%-points, and improves the quality of capital.
On a comparable basis, the group solvency ratio increased by
13%-points this quarter mainly as a result of the divestment of the
majority of the US run-off businesses (+5%), the completion of the
Rothesay Part VII transfer related to the divestment of the UK
annuity book (+2%), and capital generation including market impacts
and one-time items (+6%). Including the change in conversion
methodology for the US, this brings Aegon's group solvency ratio to
185% per the end of the second quarter.
The estimated local solvency ratios of Aegon's main units as of
June 30, 2017 were:
- 464% RBC ratio in the United
States
- 144% Solvency II ratio in the
Netherlands
- 169% Solvency II ratio in the United
Kingdom
Interim dividend
Aegon aims to pay out a sustainable dividend to allow equity
investors to share in Aegon's performance, which can grow over time
if Aegon's performance so allows. The 2017 interim dividend amounts
to EUR 0.13 per common share. The
interim dividend will be paid in cash or stock at the election of
the shareholder. The value of the stock dividend will be
approximately equal to the cash dividend. Aegon intends to
neutralize the dilutive effect of the final 2016 and interim 2017
stock dividend on earnings per share in the fourth quarter of this
year, barring unforeseen circumstances.
Aegon's Euronext-listed shares will be quoted ex-dividend on
August 18, 2017, and its NYSE-listed
shares will be quoted ex-dividend on August
17, 2017. The record date is August
21, 2017. The election period for shareholders will run from
August 23 up to and including
September 8, 2017. The stock fraction
will be based on the average share price on Euronext Amsterdam,
using the high and low of each of the five trading days from
September 4 through September 8,
2017. The stock dividend ratio will be announced on
September 13, 2017 and the dividend
will be payable as of September 15,
2017.
Financial overview, 2Q 2017 geographically
Holding,
other
Asset activities &
EUR millions Americas Europe Asia Management eliminations Total
Underlying earnings before
tax by line of business
Life 105 104 15 - - 224
Individual savings and
retirement products 142 - (3) - - 139
Pensions 93 63 - - - 156
Non-life - 23 - - - 23
Asset Management - - - 32 - 32
Other - 4 (1) - (43) (40)
Underlying earnings before
tax 341 195 11 32 (43) 535
Fair value items (33) (165) (1) - 8 (191)
Realized gains / (losses)
on investments 19 89 2 0 - 111
Net impairments 5 (3) 0 - - 2
Other income / (charges) 228 64 - (1) 0 291
Run-off businesses 10 - - - - 10
Income before tax 570 180 12 32 (36) 757
Income tax (171) (45) (13) (10) 9 (228)
Net income / (loss) 399 135 (1) 22 (26) 529
Net underlying earnings 250 152 (2) 22 (32) 390
Employee numbers
Jun. 30, Mar. 31, Dec. 31,
2017 2017 2016
Employees 29,657 29,544 29,380
of which Aegon's
share of employees
in joint ventures
and associates 6,146 5,898 5,944
Full version press release
Use this link for the version of the press release
Additional information
Presentation
The conference call presentation is available on aegon.com as of
7.30 a.m. CET.
Supplements
Aegon's 2Q 2017 Financial Supplement and Condensed Consolidated
Interim Financial Statements
are available on aegon.com.
Conference call including Q&A
9:00 a.m. CET
Audio webcast on aegon.com
Dial-in numbers
United States: +1 719 325
4756
United Kingdom: +44 330 336
9105
The Netherlands: +31 20 721
9251
Passcode: 557222
Two hours after the conference call, a replay will be available
on aegon.com.
DISCLAIMERS
Cautionary note regarding non-IFRS measures
This document includes the following non-IFRS-EU financial
measures: underlying earnings before tax, income tax, income before
tax, market consistent value of new business and return on equity.
These non-IFRS-EU measures are calculated by consolidating on a
proportionate basis Aegon's joint ventures and associated
companies. The reconciliation of these measures, except for market
consistent value of new business, to the most comparable IFRS-EU
measure is provided in note 3 'Segment information' of Aegon's
Condensed Consolidated Interim Financial Statements. Market
consistent value of new business is not based on IFRS-EU, which are
used to report Aegon's primary financial statements and should not
be viewed as a substitute for IFRS-EU financial measures. Aegon may
define and calculate market consistent value of new business
differently than other companies. Return on equity is a ratio using
a non-IFRS-EU measure and is calculated by dividing the net
underlying earnings after cost of leverage by the average
shareholders' equity, the revaluation reserve and the reserves
related to defined benefit plans. Aegon believes that these
non-IFRS-EU measures, together with the IFRS-EU information,
provide meaningful information about the underlying operating
results of Aegon's business including insight into the financial
measures that senior management uses in managing the business.
Local currencies and constant currency exchange
rates
This document contains certain information about Aegon's
results, financial condition and revenue generating investments
presented in USD for the Americas and Asia, and in GBP for the United Kingdom, because those businesses
operate and are managed primarily in those currencies. Certain
comparative information presented on a constant currency basis
eliminates the effects of changes in currency exchange rates. None
of this information is a substitute for or superior to financial
information about Aegon presented in EUR, which is the currency of
Aegon's primary financial statements.
Forward-looking statements
The statements contained in this document 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: aim,
believe, estimate, target, intend, may, expect, anticipate,
predict, project, counting on, plan, continue, want, forecast,
goal, should, would, is confident, will, and similar expressions as
they relate to Aegon. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that
are difficult to predict. Aegon undertakes 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
Aegon's fixed income investment portfolios;
- 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 Aegon holds; and
- The effects of declining creditworthiness of certain
private sector securities and the resulting decline in the value of
government exposure that Aegon holds;
- Changes in the performance of Aegon's investment portfolio and
decline in ratings of Aegon's counterparties;
- Consequences of a potential (partial) break-up of the
euro;
- Consequences of the anticipated exit of the United Kingdom from the European Union;
- The frequency and severity of insured loss events;
- Changes affecting longevity, mortality, morbidity, persistence
and other factors that may impact the profitability of Aegon's
insurance products;
- Reinsurers to whom Aegon has ceded significant underwriting
risks may fail to meet their obligations;
- 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;
- Changes in the availability of, and costs associated with,
liquidity sources such as bank and capital markets funding, as well
as conditions in the credit markets in general such as changes in
borrower and counterparty creditworthiness;
- Increasing levels of competition in the United States, the Netherlands, the United Kingdom and emerging markets;
- Changes in laws and regulations, particularly those affecting
Aegon's operations' ability to hire and retain key personnel,
taxation of Aegon companies, the products Aegon sells, and the
attractiveness of certain products to its consumers;
- Regulatory changes relating to the pensions, investment, and
insurance industries in the jurisdictions in which Aegon
operates;
- Standard setting initiatives of supranational standard setting
bodies such as the Financial Stability Board and the International
Association of Insurance Supervisors or changes to such standards
that may have an impact on regional (such as EU), national or US
federal or state level financial regulation or the application
thereof to Aegon, including the designation of Aegon by the
Financial Stability Board as a Global Systemically Important
Insurer (G-SII);
- Changes in customer behavior and public opinion in general
related to, among other things, the type of products Aegon sells,
including legal, regulatory or commercial necessity to meet
changing customer expectations;
- Acts of God, acts of terrorism, acts of war and pandemics;
- Changes in the policies of central banks and/or
governments;
- Lowering of one or more of Aegon's debt ratings issued by
recognized rating organizations and the adverse impact such action
may have on Aegon's ability to raise capital and on its liquidity
and financial condition;
- Lowering of one or more of insurer financial strength ratings
of Aegon's insurance subsidiaries and the adverse impact such
action may have on the premium writings, policy retention,
profitability and liquidity of its insurance subsidiaries;
- The effect of the European Union's Solvency II requirements and
other regulations in other jurisdictions affecting the capital
Aegon is required to maintain;
- Litigation or regulatory action that could require Aegon to pay
significant damages or change the way Aegon does business;
- As Aegon's operations support complex transactions and are
highly dependent on the proper functioning of information
technology, a computer system failure or security breach may
disrupt Aegon's business, damage its reputation and adversely
affect its results of operations, financial condition and cash
flows;
- Customer responsiveness to both new products and distribution
channels;
- Competitive, legal, regulatory, or tax changes that affect
profitability, the distribution cost of or demand for Aegon's
products;
- Changes in accounting regulations and policies or a change by
Aegon in applying such regulations and policies, voluntarily or
otherwise, which may affect Aegon's reported results and
shareholders' equity;
- Aegon's projected results are highly sensitive to complex
mathematical models of financial markets, mortality, longevity, and
other dynamic systems subject to shocks and unpredictable
volatility. Should assumptions to these models later prove
incorrect, or should errors in those models escape the controls in
place to detect them, future performance will vary from projected
results;
- The impact of acquisitions and divestitures, restructurings,
product withdrawals and other unusual items, including Aegon's
ability to integrate acquisitions and to obtain the anticipated
results and synergies from acquisitions;
- Catastrophic events, either manmade or by nature, could result
in material losses and significantly interrupt Aegon's
business;
- Aegon's failure to achieve anticipated levels of earnings or
operational efficiencies as well as other cost saving and excess
capital and leverage ratio management initiatives; and
- This press release contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
of the EU Market Abuse Regulation.
Further details of potential risks and uncertainties affecting
Aegon are described in its filings with the Netherlands Authority
for the Financial Markets and the US Securities and Exchange
Commission, including the Annual Report. These forward-looking
statements speak only as of the date of this document. Except as
required by any applicable law or regulation, Aegon 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 Aegon's expectations with regard
thereto or any change in events, conditions or circumstances on
which any such statement is based.