Net income increases to EUR 618 million reflecting realized
gains and lower other charges
● Underlying earnings decrease by 5% to EUR 1,010 million,
reflecting lower fee income as a result of lower average asset
balances in the US, and investments in the business to support
growth
● Fair value losses of EUR 394 million, driven by a
strengthening of insurance provisions in the Netherlands as a
result of adverse credit spread movements
● Realized gains on investments of EUR 275 million, driven by
the sale of bonds to optimize the investment portfolio in the
Netherlands
● Other charges of EUR 93 million include EUR 64 million model
& assumption changes, mainly in the US
● Return on equity declines to 9.6% due to lower net underlying
earnings
Net outflows of EUR 2.7 billion despite higher gross
deposits
● Net outflows of EUR 2.7 billion driven by contract
discontinuances in US Retirement Plans as well as outflows in the
US annuities businesses and on the UK institutional platform. These
are partly offset by net inflows in Asset Management and the
Netherlands
● New life sales decline by 4% to EUR 405 million
● Accident & health insurance sales down by 45% to EUR 117
million, as a result of the previously announced exit of certain
product lines and lower voluntary benefits sales in the United
States
● Property & casualty new premium production up by 7% to EUR
65 million
Increased interim dividend supported by strong capital
position and normalized capital generation
● Interim 2019 dividend increases by 7% to EUR 0.15 per
share
● Solvency II ratio of 197% at the top of the target zone; ratio
decreases due to adverse market impacts
● Normalized capital generation after holding expenses of EUR
714 million. Capital generation of EUR (788) million, including
adverse market impacts of EUR 1.4 billion and one-time items of EUR
(114) million
● Market impacts are driven by adverse credit spread movements
in the Netherlands, notably mortgage spreads, which increased to
levels significantly above the long term average
● Holding excess cash increases to EUR 1.6 billion, reflecting
EUR 765 million gross remittances from subsidiaries. Aegon the
Netherlands retained its planned remittance over the first half of
the year
● Gross financial leverage ratio amounts to 29.3% and remains in
the 26 to 30% target range
Statement of Alex Wynaendts, CEO
"In a turbulent first half of 2019, market movements had a
negative impact on the capital position in the Netherlands. We
have, however, maintained a strong Group Solvency II ratio. Our
hedging programs have effectively protected us against falling
interest rates. In addition, we increased normalized capital
generation and maintained a solid cash buffer. This allows us to
raise our interim dividend by 7% to 15 eurocents per share.
Underlying earnings before tax were slightly lower as a result
of outflows in our fee businesses in the United States and
increased investments to support growth and improve customer
experience. We are focused on expanding our customer base and
strengthening customer retention. It is encouraging that new plan
written sales in the US retirement business increased significantly
and that gross deposits were up in most of our businesses.
We have made good progress in the execution of our strategy by
driving efficiencies in those businesses we manage for value and
allocating capital to those activities with the best growth
prospects. We announced the sale of our joint ventures in Japan and
completed the integration of Cofunds in the UK. Furthermore, we
took the first steps in transferring the administration of back
books in the UK and the Netherlands to modern platforms.”
Note: All comparisons in this release are against 1H 2018,
unless stated otherwise
Financial overview EUR millions 13 Notes First
half 2019 First half 2018
%
Second half2018
%
Underlying earnings before tax
1
Americas
576
602
(4)
614
(6)
Europe
439
435
1
404
9
Asia
32
31
2
23
38
Asset Management
60
83
(27)
69
(12)
Holding and other
(98)
(87)
(12)
(100)
3
Underlying earnings before tax
1,010
1,064
(5)
1,010
-
Fair value items
(394)
(3)
n.m.
(257)
(54)
Realized gains / (losses) on investments
275
(67)
n.m.
(10)
n.m. Net impairments
(39)
(0)
n.m.
(19)
(106)
Other income / (charges)
(93)
(294)
68
(581)
84
Run-off businesses
8
(7)
n.m.
(7)
n.m.
Income before tax
767
692
11
136
n.m. Income tax
(149)
(201)
26
117
n.m.
Net income / (loss)
618
491
26
253
144
Net income / (loss) attributable to: Owners of Aegon
N.V.
618
491
26
253
144
Non-controlling interests
-
-
-
1
n.m.
Net underlying earnings
833
863
(4)
891
(6)
Return on equity
4
9.6%
10.1%
(5)
10.2%
(6)
Commissions and expenses
3,180
3,269
(3)
3,404
(7)
of which operating expenses
9
1,918
1,863
3
1,923
-
Gross deposits (on and off balance)*
10
Americas
21,619
19,892
9
18,387
18
Europe
9,898
11,813
(16)
11,985
(17)
Asia
7
76
(91)
51
(86)
Asset Management
33,481
32,167
4
27,328
23
Total gross deposits
65,005
63,949
2
57,751
13
Net deposits (on and off balance)*
10
Americas
(3,471)
(7,139)
51
(7,594)
54
Europe
(1,961)
2,879
n.m.
(100)
n.m. Asia
7
5
28
2
n.m. Asset Management
3,241
8,254
(61)
(729)
n.m.
Total net deposits excluding run-off businesses
(2,184)
4,000
n.m.
(8,421)
74
Run-off businesses
(467)
(109)
n.m.
(126)
n.m.
Total net deposits / (outflows)
(2,651)
3,891
n.m.
(8,547)
69
New life sales
2, 10
Life single premiums
705
693
2
687
3
Life recurring premiums annualized
334
353
(5)
329
2
Total recurring plus 1/10 single
405
422
(4)
398
2
New life sales
2,10
Americas
200
212
(6)
208
(4)
Europe
137
140
(2)
138
(1)
Asia
67
70
(4)
52
30
Total recurring plus 1/10 single
405
422
(4)
398
2
New premium production accident and health insurance
117
213
(45)
95
23
New premium production property & casualty insurance
65
61
7
60
8
Market consistent value of new business
3
270
304
(11)
236
14
*Due to the announced divestment of Aegon’s 50% stake in the joint
ventures with Sony Life, Net & Gross Deposits of Japan are no
longerincluded in 1H 2019.
Revenue-generating investments
& Employee numbers June 30, Dec. 31, June 30,
2019
2018
%
2018
%
Revenue-generating investments (total)*
871,648
804,341
8
824,543
6
Investments general account
144,311
139,024
4
138,105
4
Investments for account of policyholders
213,137
194,353
10
193,211
10
Off balance sheet investments third parties
514,200
470,963
9
493,226
4
Employees
25,943
26,543
(2)
25,867
-
of which agents
6,878
6,793
1
6,511
6
of which Aegon's share of employees in joint ventures and
associates
7,070
6,854
3
6,451
10
*Due to the announced divestment of Aegon’s 50% stake in the joint
ventures with Sony Life, Revenue Generating Investments of Japan
are nolonger included in 1H2019. Off-balance investments for Japan
amount to USD 2.4 billion per June 30, 2019.
Strategic highlights
● Drive for Growth: Commercial momentum increases in the US;
UK completes last part of Cofunds integration with Nationwide
migration
● Scale-up for Future: Disciplined capital allocation with
divestment of stake in Japanese joint ventures combined with
continued investments in growth
● Manage for Value: Administration of defined benefit pension
business in the Netherlands transferring to TKP to further optimize
the business
Aegon’s strategy
Aegon’s purpose – to help people achieve a lifetime of financial
security – forms the basis of the company’s strategy. The central
focus of the strategy is to further transform Aegon from a product
provider to a customer needs-driven company. This means serving
diverse and evolving needs across the customer life cycle by being
a trusted partner for financial solutions that are relevant,
simple, rewarding, and convenient. Aegon aims to develop long-term
customer relationships by providing guidance and advice, and
identifying additional financial security needs at every stage of
customers’ lives.
The company continues to simplify its business while pivoting to
sustainable growth in sales and capital generation. By developing
long-term relationships with Aegon’s large customer base, and
further improving customer engagement, the company strives for
profitable organic growth. Active and structured portfolio
management enables Aegon to create value for all its stakeholders
including shareholders, business partners and customers.
Sustainably growing capital generation is the basis of being able
to provide shareholders with attractive returns, now and in the
future.
Aegon groups its businesses into three distinct categories –
Drive for Growth, Scale-up for Future, and Manage for Value:
- The vast majority of Aegon’s investments are directed to
multi-product, digitally‑enabled and relationship-based Drive for
Growth businesses which are at the core of the strategy and will
drive future capital generation.
- Scale-up for Future businesses are aimed at capturing
meaningful new opportunities in a systematic way.
- Manage for Value category consists of at-scale businesses,
which are mostly spread-based, single-product relationships which
are managed for value while keeping customers' interests at
heart.
Aegon remains committed to doing business in a responsible way
by contributing to smart financial planning, promoting healthy
lifestyles, and providing relevant solutions at every stage of the
lives of its customers. Furthermore, the company takes a thoughtful
approach to secure retirement and healthy aging in society, and
aims to make a lasting contribution to a healthy environment
through investments and active ownership. By acting as a
responsible business, Aegon invests, where it can, to bring social
benefits and contribute to a healthier environment. To support this
approach, Aegon is a signatory to a number of international
agreements, including the Global Coalition on Aging and the UN
Principles for both Sustainable Insurance and Responsible
Investments.
Americas
In April 2019, Transamerica implemented changes to its
organizational structure by establishing cohesive leadership for
two distinct business lines: Workplace Solutions and Individual
Solutions. Focusing on these business lines will further increase
Transamerica’s responsiveness to customers and distribution
partners, positioning it to improve retention and accelerate
growth.
Written sales of Retirement Plans increased by 74% to USD 10
billion in the first half of 2019 versus the same period last year,
as Transamerica recorded two sales in excess of USD 1.0 billion
each in the large market, while sales of middle market plans also
increased. Written sales usually translate into gross deposits
after 6 to 18 months.
Enhancements to Transamerica’s variable annuity product suite
have yielded positive results in the first half of this year, with
gross deposits of Transamerica’s Retirement Income Choice product
increasing 76% versus the same period last year. The positive
momentum is also reflected in Transamerica’s share of the variable
annuity market as measured by Morningstar data. Its market share
has steadily increased to 3.5% in the first quarter of this year,
up from 3.3% in the fourth quarter of 2018. Investing in wholesale
relationships and launching new products through the TCS platform
will create additional future growth opportunities.
In June 2019, Vanguard announced the strategic decision to exit
the white label distribution and administration partnership with
Transamerica by the end of this year. Vanguard sales were USD 0.4
billion in the first half of 2019. Although this will lead to lower
sales in the short term, it provides an opportunity in the medium
term to execute an alternative strategy to more widely distribute a
white label product, as Vanguard’s was an exclusive distribution
arrangement.
Aegon announced in March 2019 that it had entered into an
agreement with Long Term Care Group (LTCG), an independent
third-party administrator, to transfer the administration and
claims management of its long term care insurance business line.
The transaction will enable Transamerica to accelerate the
expansion of its digital capabilities and the modernization of its
Long Term Care insurance platform.
The partnership with Tata Consultancy Services (TCS), announced
on January 11, 2018, aims to transform the administration of
Transamerica’s insurance and annuities business lines.
Transamerica’s focus on improving customer experience in a
digitally enabled way is supplemented by this partnership as it
benefits from the transformation and technology innovation
capabilities of TCS. This has led to a 9 points increase in the
transactional Net Promoter Score (tNPS) between the end of 2017 and
the end of the first half of 2019 in the life and annuity business
lines. The tNPS measures the level of customer satisfaction
relating to their recent interaction with the company.
In Mexico, Transamerica took the strategic decision to wind down
its joint venture with Akaan, as the business has not performed
according to expectations. The joint venture started selling
products in 2017 by offering a variety of mutual funds and
investment solutions. This was an example of a Scale-up for the
Future business, which are established to develop profitable
businesses for the future. They are, however, measured against
clear investment criteria, and if these are not met, initiatives
are discontinued.
On July 1, 2019, Transamerica Advisors Life Insurance Company
(TALIC) merged with Transamerica Life Insurance Company (TLIC).
This is expected to generate approximately USD 0.2 billion of
capital in the second half of 2019, as a result of diversification
benefits.
Europe
In Europe, Aegon’s focus is on growing its modern
digitally-enabled businesses organically and reinforcing its
commitments to reallocate capital to future-proof businesses.
In the Netherlands, Aegon announced that it will operationally
integrate Aegon Bank and Knab. The Aegon Bank brand has been
successfully focusing on (bank) savings and investment products in
recent years. Aegon’s fully digital bank Knab has grown
significantly with a strong focus on customer experience in the
past few years. By combining Aegon Bank and Knab, Aegon will
strengthen its leading position as digital bank in the Dutch
marketspace. Knab will be the leading brand for the bank going
forward.
To further optimize the pension business, Aegon the Netherlands
has started to transfer the administration of the defined benefit
pension book to its TKP platform, expected to be completed by 2023.
TKP is recognized as a leading and efficient administrator in the
Dutch market. It is growing rapidly and had 3.7 million pension
participants at the end of the first half of 2019. By transferring
existing pension contracts onto the TKP platform, Aegon’s life
business will be able to make its expense base more variable.
The combined benefit of these initiatives in the Netherlands are
expected to lead to annual run-rate expense savings of
approximately EUR 35 million by 2023. Total restructuring charges
are estimated to be in a range around the total annual savings.
In the United Kingdom, the Cofunds integration was completed, as
the assets under administration related to Nationwide were migrated
onto Aegon’s platform. To date, Aegon has realized GBP 40 million
in annualized expense savings from integrating the Cofunds
business, a figure which will rise to GBP 60 million later this
year, as legacy systems are decommissioned and an office is closed.
Aegon UK offers personal and workplace pensions, investments,
protection products and services. It is the leading platform
provider in the United Kingdom with GBP 140 billion of assets under
administration at the end of the first half of 2019.
In the United Kingdom, Aegon took the first steps in
transferring the administration of the Existing Business to Atos.
The partnership with Atos became effective on June 1, 2019, and
included the transfer of approximately 800 Aegon employees to their
new employer. This agreement will generate run-rate expense savings
for Aegon of GBP 10 million initially, growing to GBP 30 million
over time, as announced on November 20, 2018.
Asia
In Asia, Aegon allocates capital to digital business models in
growing markets. In line with its strategy to focus on driving
profitable sales growth and sustainably growing capital generation,
Aegon announced an agreement to sell its 50% stake in the variable
annuity joint ventures in Japan for cash proceeds of approximately
EUR 130 million on May 17, 2019. The transaction agreements were
signed on June 28, 2019. The divestment is subject to normal
regulatory approvals and is expected to be completed by the end of
2019.
Aegon Life Insurance and MobiKwik, India's second largest mobile
wallet provider, have joined forces to launch a smart digital
insurance product in India. This product, called the Aegon Life
Group Term Plus Plan, offers both death and accidental disability
benefits to customers on MobiKwik platforms. With this partnership,
Aegon aims to expand its distribution reach while providing
innovative insurance solutions to its customers.
Asset Management
Aegon has appointed a new CEO for Aegon Asset Management, Bas
NieuweWeme. This appointment (effective per June 24, 2019)
demonstrates Aegon's continuing commitment to building a growing
and sustainably profitable business. Bas NieuweWeme will bring a
fresh perspective gained from having worked with leading global
asset management firms, in the world's largest markets.
Growing external third-party assets remains an important part of
Aegon Asset Management’s strategy. The continuing strong external
third-party net inflows of EUR 3.2 billion in the first half of
2019 reflect Aegon Asset Management’s competitive performance,
together with management’s ability to leverage scale and
capabilities from the general account and third-party affiliate
businesses.
One of the key elements enabling Aegon Asset Management’s
success in the long term is better proximity to customers in chosen
markets. To build out the distribution strategy in China, an
agreement was recently signed, supporting the development of a
Wholly Foreign-Owned Enterprise (WFOE), a new type of investment
entity that is fully foreign-owned. This will further deepen
Aegon’s strategic relationship in the region. It will create the
opportunity to sell offshore products into the Chinese market,
complementing the current local joint ventures. It will also give
access to the USD 2 trillion private fund market.
Responsible investing is another important element of Aegon
Asset Management’s strategy. For the third consecutive year, Aegon
Asset Management has scored the highest possible rating (A+) for
strategy and governance of responsible investment activities in the
annual assessment published by the Principles for Responsible
Investment (PRI), the world's leading authority in this field.
In the context of the creation of an alliance in the
bancassurance sector, Groupe BPCE and La Banque Postale have agreed
on the principles of an enhanced business partnership. Part of
those principles includes the implementation of a project to merge
their euro-fixed income investment activities, which are mainly
insurance-related, into a common platform. Today, this has no
influence on Aegon’s stake in La Banque Postale Asset Management.
Aegon Asset Management will remain close to its respected partner
throughout this process to work towards the optimal outcome in an
environment that continues to focus on consolidation as a key
driver for the creation of sustainable profitability.
Financial highlights
Underlying earnings before tax
Aegon’s underlying earnings before tax decreased by 5% compared
with the first half of 2018 to EUR 1,010 million. Excluding
favorable currency movements, earnings decreased by 9%. This was
largely the result of lower fee income from Retirement Plans and
Variable Annuities in the US, as well as investments in the
business to support growth and to improve customer experience.
Furthermore, Asset Management recorded lower performance fees,
while the loss in the Holding increased as more interest expenses
were reported through the profit & loss account instead of
directly through shareholders’ equity.
Underlying earnings from the Americas decreased by 4% to EUR 576
million. Excluding favorable currency effects, earnings declined by
11%, mainly caused by lower fee income in Retirement Plans and
Variable Annuities from lower average asset balances. Furthermore,
expenses increased as a result of investments to support growth and
improve customer experience. This was partly offset by better
claims experience in Life, higher earnings in Fixed Annuities and
EUR 23 million higher one-time benefits in Accident &
Health.
Underlying earnings before tax from Aegon’s operations in Europe
increased by 1% to EUR 439 million. This was driven by higher
investment results in the Netherlands, supported by a shift to
higher-yielding assets, as well as higher Digital Solutions
earnings in the UK, reflecting higher average asset balances. This
was largely offset by lower earnings in Southern and Eastern Europe
(SEE) caused by the loss of earnings due to the sale of the Czech
and Slovak operations. Furthermore, non-life earnings in the
Netherlands declined due to lower disability provision
releases.
Aegon’s underlying earnings in Asia increased by 2% to EUR 32
million. Excluding favorable currency movements, earnings decreased
by 5%, caused by the High-Net-Worth (HNW) business due to lower
interest rates. This was largely offset by better results from the
strategic partnerships in China, driven by business growth and
favorable persistency, and in India, reflecting lower investment in
new business in the traditional channel as the business pivots
towards digital channels.
Underlying earnings before tax from Aegon Asset Management were
down by 27% to EUR 60 million in the first half of 2019. This
decrease was largely the result of lower performance fees in
Aegon’s Chinese asset management joint venture Aegon Industrial
Fund Management Company (AIFMC), which were exceptionally high last
year. Furthermore, earnings in Europe declined, mainly due to
outflows in the United Kingdom.
The result from the Holding declined to a loss of EUR 98
million, mainly as a result of interest expenses on USD 800 million
Tier 2 securities issued in April 2018 to replace perpetual
securities. Interest expenses for these Tier 2 securities are
reported through the P&L, while the interest expenses for the
perpetuals were recognized directly through equity.
Net income
Net income increased by 26% to EUR 618 million in the first half
of 2019, driven by realized gains and lower other charges, partly
offset by a higher loss on fair value items.
Fair value items
The loss from fair value items amounted to EUR 394 million.
Fair value losses in the Netherlands were EUR 459 million,
caused by a EUR 1.4 billion strengthening of insurance provisions
as result of a shortfall in the Liability Adequacy Test (LAT)
driven by credit spread movements. The LAT assesses the adequacy of
IFRS insurance liabilities by comparing them to their fair value.
Aegon the Netherlands adjusts the outcome of the LAT for certain
unrealized gains in the bond portfolio and the difference between
the fair value and the book value of those assets measured at
amortized cost, mainly residential mortgages. In the first half of
2019, mortgage spreads widened as consumer prices did not react to
the drop in risk-free interest rates. This decreased the value of
Aegon’s mortgage portfolio, while unrealized gains on the value of
the bond portfolio reduced due to the sale of bonds to optimize the
investment portfolio in the Netherlands. In addition, the reduction
in illiquidity premium increased the fair value of IFRS insurance
liabilities. The LAT shortfall was partially offset by EUR 484
million fair value gains on hedges and a gain on the guarantee
provision of EUR 369 million, both mainly driven by lower interest
rates. Furthermore, fair value items included EUR 100 million real
estate revaluations.
Fair value gains of EUR 157 million in the Americas were driven
by gains on the macro hedge net of reserve movements.
Fair value losses in the United Kingdom amounted to EUR 76
million and were mainly due to negative fair value movements on
equity hedges following rising equity markets.
Realized gains on investments
Realized gains on investments totaled EUR 275 million,
reflecting EUR 224 million gains on the sale of bonds to optimize
the investment portfolio in the Netherlands.
Net impairments
Net impairments were EUR 39 million, predominantly caused by the
impairment of corporate bonds resulting from bankruptcy filings in
the United States.
Other charges
Other charges of EUR 93 million were driven by EUR 64 million
model & assumption changes, mainly in the United States, EUR 72
million restructuring expenses in the United Kingdom and the United
States, including the wind down of the Akaan Transamerica joint
venture in Mexico, as well as EUR 41 million IFRS 9 / 17
implementation expenses. These were partly offset by a EUR 70
million gain on the sale of Aegon’s Czech and Slovak operations and
a EUR 21 million gain resulting from the restructuring of financing
agreements related to the merger of two reinsurance captives in the
United States.
Run-off businesses
The result from run-off businesses amounted to a profit of EUR 8
million, driven by higher results on the retained individual life
reinsurance business, which can be volatile.
Income tax
Income tax amounted to a charge of EUR 149 million, while income
before tax was EUR 767 million, resulting in an effective tax rate
on net income of 19.4% in the first half of 2019. The effective tax
rate reflects the tax exempt gain on the divestment of Aegon’s
Czech and Slovak operations, and tax exempt income and the use of
tax credits in the United States.
Return on equity
Return on equity decreased by 50 basis points compared with the
same period last year to 9.6% in the first half of 2019, caused by
lower net underlying earnings and higher average shareholders’
equity excluding revaluation reserves.
Operating expenses
Operating expenses increased by 3% to EUR 1,918 million, but
were flat on a constant currency basis. This reflects investments
to support growth and improve customer experience in the United
States, the acquisition of Robidus in the Netherlands, and higher
IFRS 9 / 17 implementation expenses. These were offset by lower
restructuring expenses in the United States and the divestment of
Aegon’s Czech, Slovak and Irish operations.
Sales
Gross deposits increased by 2% to EUR 65 billion, and were
essentially stable excluding favorable currency movements, as
higher deposits in the Americas, the Netherlands and Asset
Management were offset by lower deposits in the United Kingdom.
Gross deposits in the Americas increased 9%, and 1% on constant
currencies, driven by higher takeover deposits in Retirement Plans,
higher Variable Annuity deposits reflecting product enhancements,
as well as increased fixed indexed annuity sales. Asset
Management’s gross deposits rose 4%, driven by AIFMC, Aegon’s joint
venture in China. In the Netherlands gross deposits increased by
41%, driven by continued momentum at Aegon’s Premium Pension
Institution (PPI) and online bank Knab. The 51% decline in the
United Kingdom was mainly the result of lower institutional
platform flows, which have a low margin.
Net outflows amounted to EUR 2.7 billion for the first half of
this year due to EUR 3.5 billion net outflows in the United States,
mainly due to contract discontinuances in Retirement Plans.
Variable Annuities and Fixed Annuities also recorded outflows, as
these businesses mature. Furthermore, the United Kingdom had net
outflows of EUR 2.8 billion, following lower gross deposits. This
was partly offset by EUR 3.2 billion external third-party net
inflows at Asset Management, driven by new mandates at AIFMC.
New life sales declined by 4% to EUR 405 million, as a result of
lower term life, universal life and whole life sales in the United
States and lower sales in the Asian HNW business. The latter was
impacted by macro uncertainties and a shift of the market towards
whole life type products.
New premium production for accident & health insurance
decreased by 45% to EUR 117 million. This was predominantly caused
by lower sales in the travel insurance, affinity and stop loss
segments in the United States, which resulted from the previously
announced strategic decision to exit these segments. Furthermore,
workplace voluntary benefits sales declined. New premium production
for property & casualty insurance increased by 7% to EUR 65
million, driven by Hungary.
Market consistent value of new business
Market consistent value of new business (MCVNB) decreased by 11%
to EUR 270 million, mainly due to lower margins as a result of
lower interest rates and lower sales volumes in the United States.
This was partially offset by higher MCVNB in the United Kingdom,
driven by higher pension volumes in Digital Solutions and better
margins in Existing Business.
Revenue-generating investments
Revenue-generating investments increased by 8% during the first
half of 2019 to EUR 872 billion. This reflects favorable market
movements, partly offset by net outflows.
Shareholders’ equity
Shareholders’ equity increased by EUR 1.9 billion to EUR 21.5
billion on June 30, 2019, primarily driven by higher revaluation
reserves as a result of lower interest rates and tightening credit
spreads. Shareholders’ equity excluding revaluation reserves
increased by EUR 0.1 billion to EUR 16.2 billion – or EUR 7.78 per
common share – at the end of the first half 2019. Net income more
than offset dividends paid to shareholders and the impact of
adverse market movements on defined benefit obligations.
Gross financial leverage ratio
The gross financial leverage ratio increased by 10 basis points
to 29.3% in the first half of 2019, which is within Aegon’s 26 –
30% target range. In the first half of 2019, Aegon successfully
issued EUR 500 million Restricted Tier 1 perpetual contingent
convertible securities, with a fixed coupon of 5.625%. The proceeds
thereof were used to redeem USD 500 million grandfathered Tier 1
securities with a coupon of 6.5%. This resulted in a slight
increase in leverage, which more than offset higher shareholders’
equity excluding revaluation reserves.
Holding excess cash
Holding excess cash increased from EUR 1,274 million to EUR
1,632 million during the first half of the year, as gross
remittances from subsidiaries more than offset cash outflows.
The group received EUR 765 million in gross remittances from
subsidiaries, of which EUR 397 million came from the Americas, EUR
344 million from Europe and EUR 24 million from Asset Management.
This included an extraordinary dividend from the United Kingdom of
EUR 112 million and EUR 131 million proceeds from the divestment of
Aegon’s activities in the Czech Republic and Slovakia. Aegon the
Netherlands retained its planned remittance over the first half of
the year, as the unit is currently below its Solvency II target
zone. Aegon the Netherlands intends to resume remittances once it
returns to its target zone.
Capital injections of EUR 142 million primarily related to
investments in business growth. Aegon Bank received capital of EUR
45 million to fund increased capital requirements as a result of a
shift to consumer and small business loans, as well as overall
balance sheet growth. Other capital injections in Europe of EUR 45
million mainly related to Aegon’s own business in Spain and Turkey.
Capital injections related to digital distribution initiatives in
Asia amounted to EUR 29 million, while those in the variable
annuity joint ventures in Japan were EUR 24 million. As part of the
sale of Aegon’s 50% stake in these joint ventures, which was
announced on May 17, 2019, it was agreed that the purchase price
will be increased for EUR 22 million of capital injections.
In the first half of 2019, EUR 169 million holding excess cash
was deployed for the cash portion of the final 2018 dividend. Net
debt issuance increased holding excess cash by EUR 51 million. The
remaining cash outflows of EUR 145 million mainly related to
holding funding and operating expenses.
Capital generation
Capital generation after holding expenses amounted to EUR (788)
million for the first half of 2019. Adverse market movements
totaled EUR 1.4 billion and unfavorable one-time items amounted to
EUR 114 million, bringing normalized capital generation to EUR 714
million. Market impacts were mainly driven by unfavorable credit
spread movements in the Netherlands. One-time items included the
change in the treatment of illiquid investments and the lowering of
the ultimate forward rate, both in the Netherlands, which more than
offset the benefits of management actions.
Solvency II ratio
Despite a decrease of Aegon’s Group Solvency II ratio from 211%
to 197% during the first half of 2019, the ratio was at the upper
end of the target zone of 150 – 200%. The ratio decreased, as
normalized capital generation was more than offset by payment of
the final 2018 dividend, adverse market impacts, and one-time
items, including model & assumption changes in Asia.
The estimated RBC ratio in the United States increased to 472%
on June 30, 2019, from 465% on December 31, 2018, and remained well
above the bottom-end of the target range of 350%. The increase
mainly resulted from retained capital generation and favorable
one-time items. Market impacts were on balance slightly adverse, as
the benefit from higher equity markets was more than offset by the
impact from lower interest rates.
The estimated Solvency II ratio in the Netherlands decreased to
152% on June 30, 2019, from 181% on December 31, 2018 mainly driven
by adverse market impacts. Negative market impacts of 38%-points
resulted from adverse credit spread movements on both assets and
insurance liabilities. Aegon expects a significant part of these
market impacts to reverse over time. The widening of credit spreads
on mortgages was driven by the drop in risk-free interest rates
while customer mortgage rates hardly moved, and resulted in a
decrease in the value of Aegon’s mortgage portfolio. In Aegon’s
view, this development is not a reflection of deterioration of
credit quality in the portfolio. At the same time, credit spreads
on bonds tightened and led to a 15 basis points reduction of the
EIOPA (European Insurance and Occupational Pensions Authority)
volatility adjustment from 24 to 9 basis points. This resulted in a
lower discount rate for Aegon’s insurance liabilities and a
corresponding reduction of the Solvency II ratio.
After discussions with the Dutch Central Bank, certain illiquid
investments are now treated as equities under the standard formula
instead of loans under the internal model. This resulted in a
significant increase in required capital and reduced the Solvency
II ratio of Aegon the Netherlands by 8%-points. Furthermore, the
lowering of the UFR had an adverse impact of 4%‑points. Management
actions contributed positively to the Solvency II ratio of Aegon
the Netherlands and consisted mainly of the benefit from the merger
between Aegon Leven and Optas as well as the optimization of the
investment portfolio, including the sale of bonds. In line with its
peers and consistent with the calculation of Aegon’s Group Solvency
II ratio, Aegon Bank has been removed from the calculation of the
Solvency II ratio of Aegon the Netherlands, which had a positive
impact of 3%-points on the unit’s ratio.
As previously announced, Aegon reviewed its Solvency II target
zone for the Netherlands following a change to the modeling of the
dynamic volatility adjustment in the second half of 2018. This
model change was made to align with EIOPA guidance, and resulted in
increased credit sensitivities for Aegon the Netherlands. As a
result, management decided to increase the bottom‑end of the target
range from 150% to 155%.
The estimated Solvency II ratio in the United Kingdom decreased
to 165% on June 30, 2019, from 184% on December 31, 2018, and
remained well above the bottom-end of the target range of 145%. The
decrease was mainly driven by GBP 160 million remittances to the
Holding, including an extraordinary dividend of GBP 100 million on
the back of Aegon UK’s solid and resilient capital positon. Adverse
market impacts were mainly caused by tightening credit spreads,
which led to a lower discount rate for the own employee pension
plan.
Interim 2019 dividend
Aegon aims to pay out a sustainable dividend to allow equity
investors to participate in Aegon’s performance, which can grow
over time if Aegon’s performance so allows. The 2019 interim
dividend amounts to EUR 0.15 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 interim 2019 stock dividend in the fourth quarter of this
year.
Aegon’s shares will be quoted ex-dividend on August 23, 2019.
The record date is August 26, 2019. The election period for
shareholders will run from August 28 up to and including September
13, 2019. 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 9 through September 13, 2019. The
stock dividend ratio will be announced on Aegon’s website on
September 13, 2019, and the dividend will be payable as of
September 20, 2019.
Aegon N.V. Holding excess cash
2018
2019
EUR millions First half Second half Full Year First half
Beginning of period
1,354
1,923
1,354
1,274
Dividends received
593
786
1,379
634
Divestments
196
-
196
131
Gross remittances
788
786
1,575
765
Capital injections
(87)
(57)
(144)
(142)
Acquisitions
-
(97)
(97)
-
Net capital flows to the holding
701
632
1,333
622
Funding and operating expenses
(163)
(170)
(333)
(142)
Dividends and share buybacks
(167)
(410)
(577)
(170)
Leverage issuances / (redemptions)
200
(700)
(500)
51
Other
(2)
(2)
(3)
(3)
Holding expenses and capital return
(132)
(1,281)
(1,413)
(264)
End of period
1,923
1,274
1,274
1,632
Aegon N.V. Solvency II ratio
June 30,
Dec. 31,
June 30,
EUR millions Notes
2019
2018
2018
Eligible Own Funds
17,679
17,602
17,092
Consolidated Group SCR
8,996
8,349
7,940
Solvency II ratio 11b, 12
197%
211%
215%
Eligible Own Funds to meet MCR
6,296
7,335
7,275
Minimum Capital Requirement (MCR)
2,150
1,965
1,909
MCR ratio
293%
373%
381%
United States - RBC ratio
472%
465%
490%
The Netherlands - Solvency II ratio *
152%
181%
190%
United Kingdom - Solvency II ratio
165%
184%
197%
* Please note that as per 1H 2019, Aegon Bank is excluded from the
Solvency II ratio of Aegon NL.
Full version press release
Use this link for the full 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 1H 2019 Financial Supplement is available on
aegon.com.
Conference call including Q&A
9:00 a.m. CET
Audio webcast on aegon.com
Dial-in numbers
United States: +1 720 543 0206
United Kingdom: +44 (0)330 336 9126
The Netherlands: +31 (0) 20 703 8211
Passcode: 3042273
Two hours after the conference call, a replay will be available
on aegon.com.
Publication dates 2019 results
Second half year 2019 –
February 13, 2020
About Aegon
Aegon’s roots go back 175 years – to the first half of the
nineteenth century. Since then, Aegon has grown into an
international company, with businesses in more than 20 countries in
the Americas, Europe and Asia. Today, Aegon is one of the world’s
leading financial services organizations, providing life insurance,
pensions and asset management. Aegon’s purpose is to help people
achieve a lifetime of financial security. More information on
aegon.com/about.
Notes:
1)
For segment reporting purposes underlying earnings before tax, net
underlying earnings, commissions and expenses, operating expenses,
income tax(including joint ventures (jv's) and associated
companies), income before tax (including jv's and associated
companies) and market consistent value of newbusiness are
calculated by consolidating on a proportionate basis the revenues
and expenses of Aegon’s joint ventures and Aegon’s associates.
Aegonbelieves that these non-IFRS measures provide meaningful
information about the underlying results of Aegon's business,
including insight into the financialmeasures that Aegon's senior
management uses in managing the business. Among other things,
Aegon's senior management is compensated based in part onAegon's
results against targets using the non-IFRS measures presented here.
While other insurers in Aegon's peer group present substantially
similar non-IFRSmeasures, the non-IFRS measures presented in this
document may nevertheless differ from the non-IFRS measures
presented by other insurers. There is nostandardized meaning to
these measures under IFRS or any other recognized set of accounting
standards. Readers are cautioned to consider carefully thedifferent
ways in which Aegon and its peers present similar information
before comparing them.Aegon believes the non-IFRS measures shown
herein, when read together with Aegon's reported IFRS financial
statements, provide meaningful supplementalinformation for the
investing public to evaluate Aegon’s business after eliminating the
impact of current IFRS accounting policies for financial
instruments andinsurance contracts, which embed a number of
accounting policy alternatives that companies may select in
presenting their results (i.e. companies can usedifferent local
GAAPs to measure the insurance contract liability) and that can
make the comparability from period to period difficult.For a
definition of underlying earnings and the reconciliation from
underlying earnings before tax to income before tax, being the most
comparable IFRSmeasure, reference is made to Note 3 "Segment
information" of Aegon's condensed consolidated interim financial
statements.
Aegon segment reporting is based
on the businesses as presented in internal reports that are
regularly reviewed by the Executive Board which is regarded as the
chief operating decision maker. For Europe, the underlying
businesses (the Netherlands, United Kingdom including VA Europe,
Central & Eastern Europe and Spain & Portugal) are separate
operating segments which under IFRS 8 cannot be aggregated,
therefore further details will be provided for these operating
segments in the Europe section.
2)
New life sales is defined as new
recurring premiums plus 1/10 of single premiums.
3)
The present value, at point of sale, of all cashflows for new
business written during the reporting period, calculated using
approximate point of sale economicsassumptions. Market consistent
value of new business is calculated using a risk neutral approach,
ignoring the investment returns expected to be earned in thefuture
in excess of risk free rates (swap curves), with the exception of
an allowance for liquidity premium. The Swap curve is extrapolated
beyond the last liquidpoint to an ultimate forward rate. The market
consistent value of new business is calculated on a post tax basis,
after allowing for the time value financial optionsand guarantees,
a market value margin for non-hedgeable non-financial risks and the
costs of non-hedgeable stranded capital.
4)
Return on equity is a ratio calculated by dividing the net
underlying earnings after cost of leverage, by the average
shareholders' equity excluding therevaluation reserve and cash flow
hedge reserve.As from H2 2018 reporting, based on new definition
for all periods.
5)
Included in other income/(charges) are income/charges made to
policyholders with respect to income tax in the United Kingdom.
6)
Includes production on investment
contracts without a discretionary participation feature of which
the proceeds are not recognized as revenues but are directly added
to Aegon's investment contract liabilities for UK.
7)
APE = recurring premium + 1/10 single premium.
8)
PVNBP: Present value of new business premiums (PVNBP) is the
premiums for the new business sold during the reporting period,
projected using assumptionsand projection periods that are
consistent with those used to calculate the market consistent value
of new business, discounted back to point of sale using theswap
curve (plus liquidity premium where applicable). The Swap curve is
extrapolated beyond the last liquid point to an ultimate forward
rate.
9)
Reconciliation of operating expenses, used for segment reporting,
to Aegon's IFRS based operating expenses. First half2019
Employee expenses
1,078
Administrative expenses
721
Operating expenses for IFRS reporting
1,798
Operating expenses related to jv's and associates
120
Operating expenses in earnings release
1,918
10)
New life sales, gross deposits and net deposits data include
results from Aegon’s joint ventures and Aegon’s associates
consolidated on a proportionate basis.
11a)
Capital Generation reflects the sum of the return on free surplus,
earnings on in-force business, release of required surplus on
in-force business reduced bynew business first year strain and
required surplus on new business. Capital Generation is defined as
the capital generated in a local operating unit measured asthe
change in the local binding capital metric (according to Aegon’s
Capital Management Policy) for that period and after investments in
new business. CapitalGeneration is a non-IFRS financial measure
that should not be confused with cash flow from operations or any
other cash flow measure calculated inaccordance with IFRS.
Management believes that Capital Generation provides meaningful
information to investors regarding capital generated on a net
basisby Aegon’s operating subsidiaries that may be available at the
holding company. Because elements of Capital Generation are
calculated in accordance withlocal solvency requirements rather
than in accordance with any recognized body of accounting
principles, there is no IFRS financial measure that is
directlycomparable to Capital Generation.
11b)
The calculation of the Solvency II capital surplus and ratio are
based on Solvency II requirements. For insurance entities in
Solvency II equivalent regimes (UnitedStates, Bermuda and Brazil)
local regulatory solvency measurements are used. Specifically,
required capital for the regulated entities in the US is calculated
asone and a half times (150%) the upper end of the Company Action
Level range (200% of Authorized Control Level) as applied by the
National Association ofInsurance Commissioners in the US, while the
own funds is calculated by applying a haircut to available capital
under the local regulatory solvencymeasurement of one time (100%)
the upper end of the Company Action Level range. For entities in
financial sectors other than the insurance sector, thesolvency
requirements of the appropriate regulatory framework are taken into
account in the group ratio. The group ratio does not include Aegon
Bank N.V. Asthe UK With-Profit funds is ring fenced, no surplus is
taken into account regarding the UK With-Profit funds for Aegon UK
and Group numbers.
12)
The solvency II ratio reflects Aegon’s interpretation of Solvency
II requirements which is subject to supervisory review.
13)
The results in this release are unaudited.
Cautionary note regarding non-IFRS-EU 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 adjusted for the
revaluation reserve. Aegon believes that these non-IFRS-EU
measures, together with the IFRS-EU information, provide meaningful
supplemental 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, could, 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 and/or governmental 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 public 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 an actual or potential break-up of the European
monetary union in whole or in part;
- Consequences of the anticipated exit of the United Kingdom from
the European Union and potential consequences of other European
Union countries leaving 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, operational risks such as system disruptions or
failures, security or data privacy breaches, cyberattacks, human
error, failure to safeguard personally identifiable information,
changes in operational practices or inadequate controls including
with respect to third parties with which we do business 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, shareholders’
equity or regulatory capital adequacy levels;
- 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;
and
- Aegon’s failure to achieve anticipated levels of earnings or
operational efficiencies as well as other cost saving and excess
cash and leverage ratio management initiatives.
This document contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
of the EU Market Abuse Regulation (596/2014). 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.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20190814005816/en/
Media relations Dick Schiethart +31 (0) 70 344 8821
gcc@aegon.com
Investor relations Jan Willem Weidema +31 (0) 70 344 8028
ir@aegon.com
Conference call including Q&A (9:00 a.m. CET) Audio
webcast on aegon.com United States: +1 720 543 0206 United Kingdom:
+44 (0)330 336 9126 The Netherlands: +31 (0) 20 703 8211 Passcode:
3042273
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