AEGON N.V. (NYSE:AEG) Q2 2016 Earnings Conference Call - Final Transcript

Aug 11, 2016 • 08:00 am ET

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AEGON N.V. (NYSE:AEG) Q2 2016 Earnings Conference Call - Final Transcript

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Presentation
Operator
Willem van den Berg

Thank you. Good morning, everyone, and thank you for joining this conference call. We will start today's call with a summary of our second quarter 2016 results, followed by a brief overview of the strategic and financial rationale behind the Cofunds acquisition. Please also review our disclaimer on forward looking statements, which is at the back of our presentation. After prepared remarks, CEO Alex Wynaendts will be joined by our Chief Financial Officer, Darryl Button, to answer your questions.

Alex, go ahead.

Executive
Alex Wynaendts

Thank you, Willem, and good morning to everyone. Thank you for joining us for our second quarter 2016 earnings call.

This was clearly not a satisfactory quarter from an earnings perspective as earnings were affected by lower interest rates and adverse claims experience in US and made a book loss from the divestment of our annuity portfolio in the UK. Later in my presentation, I will outline the five-part plan that is being implemented in our US business to improve our results.

I'm pleased that our sales and in particular, our deposits remained very solid. This is a clear indication that we are successfully repositioning our business by providing attractive solutions to an expanding customer base. The acquisition of Cofunds, which we announced today, together with the earlier announced acquisition of BlackRock's DC business, firmly positions our UK business as the leader in the fast-growing digital platform market.

Our capital position increased to an estimated 158% during the quarter, despite adverse market impacts as a result of the management actions we've taken. Based on our solid capital position and year-to-date capital generation, we are announcing an interim dividend of EUR0.13 per share. This dividend will bring the total capital return to shareholders this year to an expected EUR950 million.

Here on Slide 3, it shows the development of our Solvency II ratio during the second quarter. As you can see, the Solvency II ratio increased as the negative impact of lower interest rates was more than offset by management actions in both the Netherlands and the UK, including the divestment of the UK annuity portfolio. In the Netherlands, our Solvency II ratio increased significantly from around 135% last quarter to 154% this quarter. And I will discuss the actions we have taken to achieve this on the next slide.

In the UK, market movements had a negative impact on the capital ratio as interest rates dropped to an all-time low following the Brexit vote. Additional interest rate hedges that we put in place before the vote, together with a capital release from the second reinsurance deal related to our annuity portfolio, did however more than offset the extreme movement in interest rates. And I would like to remind you that the 145% solvency ratio in the UK does not include the benefit of the Part VII transfers on our annuity book. These transfers are expected to add another 15 percentage points to the ratio next year after completion of the transfers.

As to the US, our RBC ratio remains