Aegon reports first half 2019 results
● Underlying earnings decrease by 5% to
● Fair value losses of
● Realized gains on investments of
● Other charges of
● Return on equity declines to 9.6% due to lower net underlying earnings
Net outflows of
● Net outflows of
● New life sales decline by 4% to
● Accident & health insurance sales down by 45% to
● Property & casualty new premium production up by 7% to
Increased interim dividend supported by strong capital position and normalized capital generation
● Interim 2019 dividend increases by 7% to
● 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
● Market impacts are driven by adverse credit spread movements in
● Holding excess cash increases to
● Gross financial leverage ratio amounts to 29.3% and remains in the 26 to 30% target range
Statement of
"In a turbulent first half of 2019, market movements had a negative impact on the capital position in
Underlying earnings before tax were slightly lower as a result of outflows in our fee businesses in
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
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 half 2018 |
% |
Underlying earnings before tax |
1 |
|||||
576 |
602 |
(4) |
614 |
(6) |
||
439 |
435 |
1 |
404 |
9 |
||
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 |
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 |
|||||
21,619 |
19,892 |
9 |
18,387 |
18 |
||
9,898 |
11,813 |
(16) |
11,985 |
(17) |
||
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 |
|||||
(3,471) |
(7,139) |
51 |
(7,594) |
54 |
||
(1,961) |
2,879 |
n.m. |
(100) |
n.m. | ||
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 |
|||||
200 |
212 |
(6) |
208 |
(4) |
||
137 |
140 |
(2) |
138 |
(1) |
||
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 included in 1H 2019. |
||||||
Revenue-generating investments & Employee numbers | ||||||
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 |
7,070 |
6,854 |
3 |
6,451 |
10 |
|
*Due to the announced divestment of Aegon’s 50% stake in the joint ventures with longer included in 1H2019. Off-balance investments for
|
Strategic highlights
● Drive for Growth: Commercial momentum increases in the US;
● 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
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
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
- 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.
In
Written sales of Retirement Plans increased by 74% to
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
The partnership with Tata Consultancy Services (TCS), announced on
In
On
In
In
To further optimize the pension business,
The combined benefit of these initiatives in
In the
In the
In
Asset Management
Growing external third-party assets remains an important part of Aegon Asset Management’s strategy. The continuing strong external third-party net inflows of
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
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
In the context of the creation of an alliance in the bancassurance sector,
Financial highlights
Underlying earnings before tax
Aegon’s underlying earnings before tax decreased by 5% compared with the first half of 2018 to
Underlying earnings from the
Underlying earnings before tax from Aegon’s operations in
Aegon’s underlying earnings in
Underlying earnings before tax from Aegon Asset Management were down by 27% to
The result from the Holding declined to a loss of
Net income
Net income increased by 26% to
Fair value items
The loss from fair value items amounted to
Fair value losses in
Fair value gains of
Fair value losses in the
Realized gains on investments
Realized gains on investments totaled
Net impairments
Net impairments were
Other charges
Other charges of
Run-off businesses
The result from run-off businesses amounted to a profit of
Income tax
Income tax amounted to a charge of
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
Sales
Gross deposits increased by 2% to
Net outflows amounted to
New life sales declined by 4% to
New premium production for accident & health insurance decreased by 45% to
Market consistent value of new business
Market consistent value of new business (MCVNB) decreased by 11% to
Revenue-generating investments
Revenue-generating investments increased by 8% during the first half of 2019 to
Shareholders’ equity
Shareholders’ equity increased by
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,
Holding excess cash
Holding excess cash increased from
The group received
Capital injections of
In the first half of 2019,
Capital generation
Capital generation after holding expenses amounted to
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
The estimated RBC ratio in
The estimated Solvency II ratio in
After discussions with the
As previously announced,
The estimated Solvency II ratio in the
Interim 2019 dividend
Aegon’s shares will be quoted ex-dividend on
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 |
Solvency II ratio | ||||
|
|
|
||
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% |
|
472% |
465% |
490% |
||
152% |
181% |
190% |
||
165% |
184% |
197% |
||
* Please note that as per 1H 2019, |
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
Supplements
Aegon’s 1H 2019 Financial Supplement is available on aegon.com.
Conference call including Q&A
Audio webcast on aegon.com
Dial-in numbers
Passcode: 3042273
Two hours after the conference call, a replay will be available on aegon.com.
Publication dates 2019 results
Second half year 2019 –
About
Aegon’s roots go back 175 years – to the first half of the nineteenth century. Since then,
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 new business are calculated by consolidating on a proportionate basis the revenues and expenses of Aegon’s joint ventures and Aegon’s associates. believes that these non-IFRS measures provide meaningful information about the underlying results of measures that measures, the non-IFRS measures presented in this document may nevertheless differ from the non-IFRS measures presented by other insurers. There is no standardized meaning to these measures under IFRS or any other recognized set of accounting standards. Readers are cautioned to consider carefully the different ways in which information for the investing public to evaluate Aegon’s business after eliminating the impact of current IFRS accounting policies for financial instruments and insurance contracts, which embed a number of accounting policy alternatives that companies may select in presenting their results (i.e. companies can use different 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 IFRS measure, reference is made to Note 3 "Segment information" of |
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|
|
|||||
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 economics assumptions. Market consistent value of new business is calculated using a risk neutral approach, ignoring the investment returns expected to be earned in the future 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 liquid point 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 options and 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 the revaluation 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 |
|||||
6) |
Includes production on investment contracts without a discretionary participation feature of which the proceeds are not recognized as revenues but are directly |
|||||
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 assumptions and projection periods that are consistent with those used to calculate the market consistent value of new business, discounted back to point of sale using the swap 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 |
First half 2019 |
||
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 by new business first year strain and required surplus on new business. Capital Generation is defined as the capital generated in a local operating unit measured as the change in the local binding capital metric (according to Aegon’s Capital Management Policy) for that period and after investments in new business. Capital Generation is a non-IFRS financial measure that should not be confused with cash flow from operations or any other cash flow measure calculated in accordance with IFRS. Management believes that Capital Generation provides meaningful information to investors regarding capital generated on a net basis by Aegon’s operating subsidiaries that may be available at the holding company. Because elements of Capital Generation are calculated in accordance with local solvency requirements rather than in accordance with any recognized body of accounting principles, there is no IFRS financial measure that is directly comparable 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 (United States, one 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 of Insurance Commissioners in the US, while the own funds is calculated by applying a haircut to available capital under the local regulatory solvency measurement of one time (100%) the upper end of the Company Action Level range. For entities in financial sectors other than the insurance sector, the solvency requirements of the appropriate regulatory framework are taken into account in the group ratio. The group ratio does not include the |
|||||
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.
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
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
- Changes in general economic and/or governmental conditions, particularly in
the United States ,the Netherlands and theUnited 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
- The effects of declining creditworthiness of certain public sector securities and the resulting decline in the value of government exposure that
- 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 theEuropean Union and potential consequences of otherEuropean Union countries leaving theEuropean 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 , theUnited 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 productsAegon 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 toAegon , including the designation ofAegon 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 wayAegon 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
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