Aegon to Increase Profitability and Capital Returns
Strategy update and 2018 financial targets presented at Analyst & Investor Conference
New financial targets
<pre>
- Deliver on return on equity ambition of 10% by 2018
- Reduce annual operating expenses by EUR 200 million by 2018
</pre> Solid capital base allowing for capital return to shareholders
<pre>
- Solvency II ratio of ~160% end-2015, based on approved partial internal model
- EUR 400 million share buyback program launched today
- Dividend pay-out ratio of 50% of operational free cash flows after holding costs
- Increase final 2015 dividend per share to EUR 0.13
</pre> Strategic priorities
<pre>
- Focus on growing fee businesses and expanding in asset management
- Restructure US operations into one, functionally-organized business
- Explore options for UK annuity book
- Implement accounting policy changes with estimated impact on shareholders' equity of
EUR 1.3 billion to align accounting policies with inforce management
</pre> Aegon CEO Alex Wynaendts, CFO Darryl Button and Aegon's senior management will detail
their plans to increase profitability and return of capital to shareholders at Aegon's
Analyst & Investor Conference in London.
"Today, we are announcing a number of significant measures to improve the operational
performance of the company," said Alex Wynaendts. "I am pleased that we have a strong
Solvency II capital ratio of 160%, which is in the upper-end of our target range of
140-170%. This allows us to launch a EUR 400 million share buyback program today and
announce a 9% increase in the dividend for the full year of 2015. I am confident that
delivering on our strategy to grow our business profitably, reduce expenses, and return
capital to shareholders will enable us to achieve a 10% return on equity in 2018."
Financial targets
Aegon is focused on return on equity as one of its key performance indicators and
management is committed to delivering attractive returns to shareholders. The company
targets a group return on equity of 10% by 2018 supported by:
<pre>
- Reducing annual operating expenses by EUR 200 million by the end of 2018
- Additional investments in digital capabilities and expertise of EUR 50 million per
annum above the current level to further support the organic growth of the business
- Aligning accounting policies with inforce management, specifically related to UK
deferred acquisition costs and accounting for reinsurance contracts as part of
business exits. The retrospective adoption of these accounting changes as of January 1,
2016, is expected to
- decrease shareholders' equity by EUR 1.3 billion
- increase underlying earnings before tax by approximately EUR 20 million in 2016
</pre> Capital and cashflow
Aegon's solid capital position and cash flow generation provide the foundation to
accelerate capital returns to shareholders. Today's main announcements on capital and
cashflow are:
<pre>
- Group Solvency II ratio as of December 31, 2015, of ~160% - in the upper-end of
the 140-170% target range
- Regulatory approval received to use the partial internal model in calculating Solvency
II capital
- Cumulative free cash flows after holding expenses of EUR 3.3 billion until 2018 -
Dutch and UK operations expected to resume dividend payments in 2016 and 2017
respectively
- Capital returns to shareholders of over EUR 2 billion in the period 2016-2018
- dividend pay-out ratio of 50% of free cash flows by 2018
- EUR 400 million share buyback to be launched today
- Proposal to increase the 2015 final dividend per share to EUR 0.13 bringing the
total 2015 dividend per share to EUR 0.25, a 9% increase over the 2014 dividend
</pre> Execution of strategy
Aegon's strategic agenda includes the following key steps to improve performance:
<pre>
- Leverage leadership positions in key retirement markets as a provider of thousands
of institutional pension plans, and turn these into millions of retail customer
relationships
- Continue to invest in digital capabilities to obtain one view of the customer and
enable the company to provide relevant and timely information, guidance and advice to
customers
- Restructure US operations from a business lines orientation into one,
functionally-organized business to get closer to customers
- Implement the outcome of the strategic review of Aegon's businesses in the UK; explore
options for the annuity book, and continue the growth of the successful platform
- Add functions of Chief Technology Officer, CEO of Aegon Asset Management, Global HR
Director and General Counsel to the Management Board, reflecting the company's key
strategic priorities
</pre> Share buyback program details
Aegon will repurchase EUR 400 million worth of common shares in 2016, of which a first
tranche of EUR 200 million will be repurchased before March 31, 2016. These shares will be
repurchased to neutralize the dilutive effect of the cancellation of the preferred shares
in 2013. The transactions will commence today, January 13, 2016. It will be proposed to
shareholders at their next Annual General Meeting on May 20, 2016, to cancel any
repurchased shares under this program. The shares will be repurchased at or below the
daily volume-weighted average price. Weekly updates regarding the transactions will be
available on aegon.com/sharebuyback.
Presentations
The keynote presentations by Aegon's CEO and CFO will be audio webcast at 9.45 am CET
on aegon.com [http://www.aegon.com ]. All other presentations will also be available as of
8 am CET on the company's website.
DISCLAIMERS
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:
<pre>
- 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 sovereign 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 or the potential 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, 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 also 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;
- 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 capital and leverage ratio management
initiatives.
</pre> 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.
Aegon's roots go back more than 170 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: aegon.com [http://www.aegon.com ].
<pre>
Media relations
Debora de Laaf
+31(0)70-344-8730
[email protected]
Investor relations
Willem van den Berg
+31(0)70-344-8405
[email protected]
</pre>
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