Market Overview

Aegon reports strong first half 2018 results

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Net income amounts to EUR 491 million supported by increase in
underlying earnings

  • Underlying earnings increase by 2% to EUR 1,064 million, or 10% on
    constant currencies driven by expense savings, a higher investment
    margin in the Netherlands, performance fees, and growth in Asia
  • Realized losses on investments of EUR 67 million are driven by the
    sale of US treasuries as part of ongoing asset-liability management
  • Other charges of EUR 294 million, mostly due to a loss on the sale of
    Aegon Ireland and charges related to restructuring programs, which are
    expected to generate substantial expense savings
  • Return on equity increases significantly to 9.2% as a result of higher
    underlying earnings and a lower corporate tax rate in the United States

Net deposits increase driven by asset management flows; accident &
health sales impacted by product exits

  • Net deposits improve to EUR 3.9 billion, mainly driven by higher asset
    management inflows and better retention in the UK business, which more
    than offset outflows in the US retirement plan business
  • New life sales decline by 2% to EUR 422 million on a constant currency
    basis, partly driven by lower indexed universal life and term life
    sales in the US; Adverse currency movements impact sales by an
    additional 8%
  • Accident & health and general insurance sales down 48% to EUR 274
    million mostly as a result of previously announced strategic decision
    to exit travel and stop loss insurance in the United States

Strong capital position and growing capital generation allow for
increase in interim dividend

  • Solvency II ratio increases by 14%-points compared with year-end 2017
    to 215%, driven by own funds growth; Solvency ratios main units remain
    well within or above target zones
  • Capital generation of EUR 1,386 million, including favorable market
    impacts and one-time items of EUR 628 million
  • Interim 2018 dividend increases to EUR 0.14 per share
  • Holding excess cash increases to EUR 1.9 billion mostly driven by
    remittances from the units; EUR 700 million has been earmarked to
    reduce leverage in the second half of 2018
  • Gross financial leverage ratio of 28.9% expected to reduce by ~200
    basis points following planned deleveraging

Statement of Alex Wynaendts, CEO

"In the first half of 2018, Aegon delivered a strong performance,
demonstrating operational excellence, commitment to growth and continued
capital allocation discipline. Building on our track record of expense
savings, we further improved efficiency by transferring more than 2,000
employees as part of our outsourcing agreement in the United States, and
migrated more than 400,000 retail customers from Cofunds to our
platform. These actions will enable us to significantly reduce expenses,
drive profitability and enhance customer experience.

"I'm excited that new propositions across our company are resonating
well with customers, and the potential this offers to drive future
growth. In the United States, we launched our new Wealth + Health brand
identity to raise awareness about the connection between physical and
financial well-being. By raising awareness and by offering the right
solutions, we have the potential to help millions of people better
prepare for the future.

"Our balance sheet remains strong with a Solvency II ratio of 215%, a
significant increase compared with the end of last year. Furthermore, I
am pleased that our businesses in the Netherlands and United Kingdom
remitted capital to the group, and that our financial strength has
enabled us to increase our interim dividend to 14 cents per share. This
progress, together with expense savings, gives me confidence that we
will be able to meet our 2018 targets."

Note: All comparisons in this release are against 1H 2017, unless
stated otherwise

           
Financial overview
                         
EUR millions 13   Notes  

First half
2018

 

First half
2017

  %  

Second half
2017

  %
 
Underlying earnings before tax 1
Americas 602 653 (8) 728 (17)
Europe 435 383 14 362 20
Asia 31 23 38 26 20
Asset Management 83 69 19 67 24
Holding and other       (87)   (87)   (1)   (84)   (4)
Underlying earnings before tax 1,064 1,041 2 1,099 (3)
 
Fair value items (3) (273) 99 212 n.m.
Realized gains / (losses) on investments (67) 187 n.m. 226 n.m.
Net impairments - 1 n.m. (16) 98
Other income / (charges) (294) 297 n.m. (365) 19
Run-off businesses       (7)   41   n.m.   (11)   38
Income before tax 692 1,294 (46) 1,144 (39)
Income tax       (201)   (387)   48   311   n.m.
Net income / (loss)       491   907   (46)   1,454   (66)
 
Net underlying earnings       863   754   15   818   6
 
Return on equity   4   9.2%   8.0%   15   8.8%   5
 
Commissions and expenses 3,269 3,314 (1) 2,995 9
of which operating expenses   9   1,863   1,984   (6)   1,893   (2)
 
Gross deposits (on and off balance) 10
Americas 19,892 22,123 (10) 16,420 21
Europe 11,813 12,694 (7) 12,985 (9)
Asia 76 121 (37) 100 (24)
Asset Management       32,167   24,498   31   36,834   (13)
Total gross deposits       63,949   59,436   8   66,339   (4)
 
Net deposits (on and off balance) 10
Americas (7,139) (2,458) (190) (27,255) 74
Europe 2,879 2,675 8 3,246 (11)
Asia 5 85 (94) 44 (88)
Asset Management       8,254   (3,769)   n.m.   10,681   (23)
Total net deposits excluding run-off businesses 4,000 (3,466) n.m. (13,285) n.m.
Run-off businesses       (109)   (240)   55   (98)   (11)
Total net deposits / (outflows)       3,891   (3,706)   n.m.   (13,382)   n.m.
 
New life sales 2, 10
Life single premiums 693 875 (21) 889 (22)
Life recurring premiums annualized       353   382   (8)   338   4
Total recurring plus 1/10 single 422 469 (10) 427 (1)
 
New life sales 2,10
Americas 212 251 (16) 221 (4)
Europe 140 132 6 141 (1)
Asia       70   86   (18)   65   9
Total recurring plus 1/10 single 422 469 (10) 427 (1)
 
New premium production accident and health insurance 213 473 (55) 303 (30)
New premium production property & casualty insurance 61 57 7 52 16
 
Market consistent value of new business   3   304   237   28   172   77
                         
Revenue-generating investments & Employee numbers
                         
June 30, Dec. 31, June 30,
        2018   2017   %   2017   %
Revenue-generating investments (total)       824,543   817,447   1   816,915   1
Investments general account 138,105 137,311 1 140,544 (2)
Investments for account of policyholders 193,211 198,838 (3) 198,278 (3)
Off balance sheet investments third parties       493,226   481,297   2   478,093   3
 
Employees 25,867 28,318 (9) 29,657 (13)
of which agents 6,511 6,689 (3) 6,768 (4)
of which Aegon's share of employees in joint ventures and associates       6,451   6,497   (1)   6,146   5
 

Strategic highlights

  • Aegon Americas transfers over 2,000 employees to TCS, leading to
    significant expense savings
  • Aegon the Netherlands acquires leading Dutch income protection
    service provider Robidus
  • More than 400,000 retail Cofunds customers migrated to Aegon UK's
    leading platform
  • Aegon Spain expects to significantly improve profitability
    following management actions and M&A
  • New products and business models drive significant inflows at Aegon
    Asset Management

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-based to a
customer needs-driven company. This means serving diverse and evolving
needs across the customer life cycle; being a trusted partner for
financial solutions that are relevant, simple, rewarding, and
convenient; and developing long-term customer relationships by providing
guidance and advice, and identifying additional financial security needs
at every stage of customers' lives.

Aegon is focused on reducing complexity, eliminating duplication,
improving accuracy and increasing automation in order to realize cost
efficiencies, thereby enabling it to invest and become a more digitally
enabled and customer-centric company. Furthermore, the company is
focused on driving scale and establishing strong positions in its
current markets, adhering to strict standards to ensure the efficient
use of capital by all of its businesses. Four key strategic objectives
that enable the company to execute its strategy are embedded in all of
Aegon's businesses: Optimized portfolio, Operational excellence,
Customer loyalty and Empowered employees.

Americas

Aegon announced on January 11, 2018, that Transamerica had entered into
an agreement with Tata Consultancy Services (TCS) to transform the
administration of its US insurance and annuity business lines. The
partnership is a significant step forward in the execution of its
strategy as it enables Transamerica to accelerate both the enhancement
of its digital capabilities and the modernization of its platforms to
service its customers across all insurance and annuities lines of its
business. As part of the agreement, which is expected to lead to
run-rate expense savings of USD 100 million over time, over 2,000
Transamerica employees transitioned to TCS on April 16, 2018. Related to
these expense savings, Aegon recorded USD 119 million of transition and
conversion expenses in Other charges in the first half of 2018.

Transamerica successfully launched its Wealth + Health brand identity in
the first half of 2018. This new identity is focused on helping
customers improve their overall well-being by encouraging them to manage
both their wealth and health. The launch included a high-profile
advertising campaign targeted at financial professionals to demonstrate
Transamerica's commitment to Wealth + Health. Transamerica also launched
a series of new product enhancements over the course of the first half
of the year to further improve its competitive positioning. Product
enhancements for variable annuities have resulted in a favorable change
in sales momentum. On top of the variable annuity enhancements,
additional improvements were made in July to strengthen the competitive
position of two of the products riders on offer. Regarding life
products, new enhancements to indexed universal life (IUL) were launched
in late April and have been very well received.

In support of the stated strategic objective to reduce the amount of
capital allocated to its run-off businesses, Aegon announced on August
7, 2018 its agreement to divest the last substantial block of its life
reinsurance business to SCOR Global Life. This transaction covers
business that Transamerica retained after it divested the vast majority
of its reinsurance business to SCOR Global Life in 2011 and 2017. The
transaction is expected to result in a pre-tax IFRS loss of
approximately USD 105 million and a one-time benefit of approximately
USD 50 million on Transamerica's capital position in the second half of
2018. The IFRS equity allocated to run-off businesses has declined by
USD 1.3 billion since the end of 2015 driven by a series of divestments.

Europe

To expand its position in the income protection value chain, Aegon the
Netherlands reached an agreement to acquire Robidus, a leading income
protection service provider in the Netherlands, from Avedon Capital
Partners. This transaction fits Aegon's strategic objective to grow its
fee-based businesses. Aegon will acquire approximately 95% of the
company with the remainder to be retained by Robidus' management team.
Robidus will continue to operate on a standalone basis under its own
brand name. Aegon will pay EUR 105 million for this acquisition from
holding excess cash.

In the United Kingdom, Aegon's broad platform offering and omni-channel
distribution strategy have established Aegon as the leading platform
provider in the market. So far in 2018, Aegon has completed several
major migrations totaling GBP 85 billion assets as part of the Cofunds
integration. The migration of GBP 57 billion institutional assets was
completed in March, followed by the migration of more than 400,000
retail customers and GBP 28 billion of assets to the Aegon platform in
May. After the migration process, some advisors and customers have
experienced operational and customer services issues. Aegon UK has taken
several measures to solve these and recover service levels, which led to
GBP 3 million additional expenses in June. Aegon expects to incur
additional integration expenses in Other charges until the Cofunds
integration has been completed. Migration of the assets related to the
Nationwide business is the final milestone in respect of the Cofunds
integration and is expected to be completed in the first half of 2019.
The full integration of Cofunds will enable Aegon to realize the
GBP 60 million targeted annualized expense savings compared with GBP 20
million achieved through the first half of 2018.

Another important milestone in the transformation of Aegon UK was the
successful transfer of GBP 16 billion of assets from BlackRock's defined
contribution business, which brought new and enhanced capabilities to
Aegon as part of its workplace proposition. The Part VII transfer for
this business was completed on July 1, 2018 and is expected to lead to
an approximate 10%-points reduction of Aegon UK's Solvency II ratio in
the second half of 2018 driven by an increase in required capital due to
the additional assets under administration.

The UK platform business reached a record high of GBP 120 billion
assets. This increase was driven by a net inflow of GBP 2.6 billion and
the upgrade of GBP 1.5 billion in customer assets to the platform. Since
the start of the program, GBP 12.5 billion of customer assets have been
upgraded to the platform out of a cumulative target of approximately GBP
20 billion by year-end 2020.

On April 3, 2018, Aegon successfully completed the sale of Aegon Ireland
plc to Athora Holding Ltd. This transaction is consistent with Aegon's
strategic objective to optimize its portfolio of businesses. The
divestment led to an improvement in Aegon's group solvency ratio of over
4%-points and a book loss of EUR 93 million in the first half of 2018.

Aegon focuses on profitable growth in Spain & Portugal, where it aims to
grow mostly in protection products. A clear example of this strategy is
the agreement Aegon signed to expand its successful partnership with
Banco Santander in Spain. The expansion, which covers term life and
selected lines of non-life insurance following Banco Santander's
acquisition of the Banco Popular franchise in 2017, will give Aegon
access to an additional client base of four million customers and is
expected to lead to substantial growth going forward. Aegon will pay an
upfront consideration of EUR 215 million, plus an additional amount of
up to EUR 75 million to be paid after 5 years, depending on the
performance of the partnership. The final terms (including closing and
date of payment) of the transaction are subject to due diligence,
regulatory approval, several other conditions and to the process of
terminating the existing alliances of Banco Popular.

In addition, to improve the results of Aegon's own business in Spain,
which is currently loss-making, the company initiated a significant
restructuring program in the first half of 2018. Through rationalization
of distribution, expense savings and more effective claims handling,
Aegon expects to generate improved financial results in this business.
The restructuring, in combination with the continued growth and
expansion of the partnership with Banco Santander, is expected to enable
Aegon's business in Spain & Portugal to improve its profitability
significantly.

Asia

Aegon focuses on three fast-growing customer segments in Asia:
High-Net-Worth (HNW) individuals, aging affluent customers, and
ascending affluent customers. Universal life insurance, variable
annuities, and protection products are core products in the region.
These products are supplemented with direct-to-customer digital
distribution platforms in markets in which Aegon does not have an
insurance license.

Transamerica Life Bermuda (TLB), Aegon's HNW business, continues to
expand geographically and is serving and writing business for
high-net-worth individuals in a growing number of markets. While
universal life products are the key product for TLB, the company has
launched a retirement product to complement the product suite while also
developing other product ideas to better serve a competitive HNW segment
in Asia.

In China, Aegon's commitment to a protection led strategy and strength
of their critical illness products have enabled the joint venture to
grow sales during the first half of 2018 in a challenging life insurance
market. One of the key drivers of Aegon's strong sales growth is its
award-winning digital distribution platform Zeus. Zeus is being upgraded
in the second half of 2018 to deliver even more customer services and
product offerings by further leveraging artificial intelligence
technologies and big data capabilities.

In India, Aegon's joint venture continues to drive the
direct-to-consumer strategy and the regions digital transformation with
simple and transparent protection led products. From a sum assured
perspective, the company ranks 8th in India in the first half
of 2018, further demonstrating Aegon's focus on a protection led
strategy.

Asset Management

Growing external third-party assets is an important element of the
growth strategy of Aegon Asset Management. The continued strong
commercial momentum in the Netherlands was underlined by strong inflows
into the Dutch Mortgage Funds, which grew to EUR 15 billion of assets
under management in the first half of 2018. Furthermore, Stap, the Dutch
APF initiated by Aegon, for which TKPI (a subsidiary of Aegon Asset
Management) undertakes the fiduciary management, won a significant
mandate of EUR 1.7 billion. At the end of the first half of 2018, total
assets under management in Stap stood at EUR 4.6 billion, making it the
single largest APF in the Netherlands.

During the first half of 2018, Aegon Asset Management made significant
progress in moving toward a globally integrated operating model to
strengthen its organizational set-up and support its growth ambitions.
In order to create an integrated, multi-location commercial business
that makes doing business with Aegon simpler and more efficient, Asset
Management combined its European based sales teams under one leadership.
The globally integrated model with one Europe and one US region will
enable the creation of a global suite of relevant investment strategies
that can be distributed via its various brands in all of its markets,
accelerate growth of third party business, and enhance Aegon's ability
to attract and serve clients.

Operational highlights

Underlying earnings before tax

Aegon's underlying earnings before tax increased by 2% compared with the
first half of 2017 to EUR 1,064 million. Earnings increased by 10% on a
constant currency basis driven by expense savings, higher investment
margin in the Netherlands, business growth in Asia and higher
performance fees. In the first half of 2018, adverse mortality in the
United States more than offset favorable underwriting results in Asia
and the Netherlands.

Underlying earnings from the Americas decreased by 8% to EUR 602 million
driven by the weakening of the US dollar. On a constant currency basis
earnings were up by 3%, as expense savings more than offset adverse
mortality. The current half year included EUR 55 million unfavorable
mortality compared with EUR 34 million in the same period last year
across the Life and Fixed Annuity businesses.

Underlying earnings before tax from Aegon's operations in Europe
increased strongly by 14% to EUR 435 million. This was the result of
growth in all regions, most notably in the Netherlands. Earnings growth
was mostly driven by a higher investment margin from the shift to
higher-yielding assets, lower funding costs and growth of the bank's
balance sheet, and lower expenses. Furthermore, earnings from non-life
benefited from EUR 22 million in provision releases related to the
disability business.

Aegon's underlying earnings in Asia increased by 38% to EUR 31 million
as a result of higher earnings across all business lines. The increase
in earnings from the HNW businesses was the result of higher investment
yields and favorable claims experience. The other business lines
benefited from expense savings and business growth, particularly in
China.

Underlying earnings from Aegon Asset Management increased by 19% to EUR
83 million as a result of a EUR 18 million increase in performance fees,
mostly driven by Aegon's Chinese asset management joint venture.

The result from the holding remained stable at a loss of EUR 87 million,
as expense savings offset temporary higher interest expenses due to
refinancing activities.

Net income

Net income amounted to EUR 491 million in the first half of 2018, and
reflects strong underlying earnings as well as realized losses on
investments, restructuring and integration expenses, and a book loss on
the sale of Aegon Ireland.

Fair value items

The loss from fair value items amounted to EUR 3 million. Positive real
estate revaluations in the Netherlands were offset by losses in the
Netherlands and the United States on hedges in place to protect Aegon's
capital position.

Realized losses on investments

Realized losses on investments totaled EUR 67 million, as losses from
the sale of US treasuries more than offset gains as a result of
portfolio optimization in Europe, including EUR 20 million in the United
Kingdom.

Net impairments

Net impairments amounted to nil and reflect the continued benign credit
environment.

Other charges

Other charges of EUR 294 million were mainly driven by a book loss on
the sale of Aegon Ireland and restructuring expenses in the United
Kingdom, Spain and United States.

In Europe, Other charges of EUR 179 million were partly driven by the
EUR 93 million book loss on the sale of Aegon Ireland, which closed on
April 3, 2018. Restructuring and integration expenses in the United
Kingdom and Spain totaled EUR 59 million. In the United Kingdom, a
reserve strengthening of EUR 49 million for the residual annuity book
was driven by the aforementioned portfolio optimization, which led to
EUR 20 million realized gains. These items were partly offset by a
benefit of EUR 27 million from assumption changes and model updates.

In the United States, Other charges of EUR 88 million were largely the
result of EUR 98 million transition and conversion charges related to
the agreement with TCS to administer Aegon's US insurance and annuity
business lines. During the first half of 2018, Transamerica conducted
its annual assumption review, which resulted in a charge of EUR 32
million. The IFRS assumption review for Long-Term Care resulted in no
material charges. These items were partly compensated by a
EUR 45 million gain related to last year's divestment of the majority of
the run-off businesses to Wilton Re.

Other charges at the holding amounted to EUR 21 million and were driven
by IFRS 9 / 17 implementation expenses.

Run-off businesses

The result from run-off businesses declined to a loss of EUR 7 million
due to the divestment of the majority of the remainder of these
businesses in 2017.

Income tax

Income tax amounted to EUR 201 million, which implies an effective tax
rate for the first half of 2018 of 29%, making it higher than the
expected effective tax rate going forward. This was mainly the result of
a one-time tax expense related to last year's divestment of the majority
of the run-off businesses, which is offset by the aforementioned
one-time gain. The effective tax rate on underlying earnings was 19%
compared with 28% in the first half of 2017. This decrease reflects the
lowering of the nominal corporate tax rate in the United States from 35%
to 21%.

Return on equity

Return on equity increased by 120 basis points compared with the same
period last year to 9.2%. The increase was driven by higher underlying
earnings and a lower corporate tax rate in the United States.

Operating expenses

Operating expenses decreased by 6% to EUR 1,863 million driven by the
weakening of the US dollar. On a constant currency basis, expenses were
stable, as expense savings, and the divestment of UMG and Aegon Ireland
more than offset higher restructuring expenses. Aegon is on track to
achieve EUR 350 million in annual run-rate expense savings by year-end
2018 as part of its plans to improve return on equity. Initiatives to
reduce expenses have led to annual run-rate expense savings of
approximately EUR 325 million since the beginning of 2016, including the
agreement with TCS. Annual run-rate expense savings increased by EUR 45
million in the first half of 2018.

Deposits and sales

Gross deposits increased by 8% to EUR 64 billion, as strong deposits in
Asset Management more than offset adverse currency movements and lower
deposits on the platform in the United Kingdom. Asset Management
deposits benefited from continued strong inflows in the Dutch Mortgage
Funds, fiduciary management inflows in the Netherlands related to
general pension fund Stap, and strong inflows in China.

Net deposits amounted to EUR 3.9 billion, as continued strong asset
management inflows and increased net inflows in the United Kingdom as a
result of improved retention more than offset net outflows in the
Americas driven by retirement plan outflows. These outflows were caused
by a limited number of large contract losses in the 403(b) retirement
business, which mostly related to medical care provider merger and
acquisition activity. Excluding these outflows, net deposits in the US
retirement business were neutral in the first half of 2018.

New life sales amounted to EUR 422 million, a decline of 10% as a result
of the weakening of the US dollar. On a constant currency basis, new
life sales declined by 2%. Lower term life and indexed universal life
sales in the United States and lower sales in the Asian HNW businesses
more than offset the continued success of the critical illness product
in China, and higher sales in Spain & Portugal and the Netherlands.

New premium production for accident & health and general insurance
decreased by 48% to EUR 274 million. This was predominantly driven by
lower supplemental health, travel and stop loss insurance sales in the
United States. The reduction in travel and stop loss insurance sales
resulted from the previously announced strategic decision to exit the
Affinity, Direct TV and Direct Mail distribution channels.

Market consistent value of new business

Market consistent value of new business (MCVNB) increased by 28% to EUR
304 million driven by the Americas and Europe. The increase in MCVNB in
the Americas resulted from tax reform, a favorable product mix and
updated expense assumptions, which more than offset lower life and
accident & health sales. The MCVNB in Europe doubled as a result of an
enhanced sales mix in Spain & Portugal and improved margins on the
platform business in the United Kingdom.

Revenue-generating investments

Revenue-generating investments increased by 1% compared with the end of
2017 to EUR 825 billion. Net inflows and the strengthening of the US
dollar more than offset the divestment of Aegon Ireland.

Shareholders' equity

Shareholders' equity decreased by EUR 0.1 billion to EUR 20.5 billion on
June 30, 2018, as retained earnings and strengthening of the US dollar
were more than offset by a lower revaluation reserve as a result of
increased interest rates in the United States. Shareholders' equity
excluding revaluation reserves and defined benefit plan remeasurements
increased by EUR 0.6 billion to EUR 18.0 billion – or EUR 8.68 per
common share – at the end of the first half 2018. This increase reflects
retained earnings and strengthening of the US dollar.

Gross financial leverage ratio

The gross financial leverage ratio increased by 30 basis points to 28.9%
as the increase in shareholders' equity was more than offset by a
temporary increase in leverage as a result of refinancing activities.

On April 11, 2018, Aegon issued USD 800 million Tier 2 subordinated debt
securities, first callable on April 11, 2028, and maturing on April 11,
2048. The coupon is fixed at 5.5% until the first call date and floating
thereafter with a margin including a 100 basis points step-up. The net
proceeds from this issuance are being used to redeem grandfathered
subordinated debt and for general corporate purposes.

Effective May 15, 2018, Aegon redeemed USD 525 million 8% grandfathered
Tier 2 subordinated notes. On May 24, 2018, Aegon exercised its right to
redeem the EUR 200 million 6% perpetual capital securities. The
redemption of these grandfathered Tier 1 securities was effective on
July 23, 2018, when the aggregate principal amount was repaid together
with any accrued and unpaid interest.

The redemption of the aforementioned grandfathered Tier 1 securities,
together with the maturity of EUR 500 million senior debt in August
2018, is expected to lead to an improvement in the gross financial
leverage ratio by approximately 200 basis points in the second half of
2018.

Holding excess cash

Holding excess cash increased from EUR 1,354 million to EUR 1,923
million during the first half of the year. Aegon has earmarked EUR 700
million to reduce leverage in the second half of 2018. The group
received EUR 593 million in remittances from subsidiaries, of which
EUR 390 million from the United States and EUR 203 million from Europe,
including from the Netherlands and United Kingdom. The divestment of
Aegon Ireland added a further EUR 196 million to holding excess cash. In
addition, refinancing activities led to a temporary increase in holding
excess cash by EUR 200 million.

These cash inflows were partly offset by EUR 167 million for the cash
portion of the final 2017 dividend, EUR 163 million cash outflows mainly
related to holding funding and operating expenses and EUR 87 million
capital injections to support growth of the business, and to strengthen
the capital positions of Aegon's own business in Spain and its joint
venture in Japan.

Capital generation

Capital generation of the operating units amounted to EUR 1,386 million
for the first half of 2018. Market impacts and one-time items totaled
EUR 628 million. Market impacts were mainly driven by the favorable
impact from equity market and interest rate movements in the United
States, and positive impact from credit spread and equity market
movements in the United Kingdom. One-time items included the benefit
from the divestment of Aegon Ireland, capital release from exiting the
Affinity, Direct TV and Direct Mail distribution channels in the United
States, and management actions in the United Kingdom. These more than
offset the negative impact of lowering the Ultimate Forward Rate (UFR),
the capital strain from investments in illiquid assets, and model
updates in the Netherlands.

Solvency II ratio

Aegon's Solvency II ratio increased from 201% to 215% during the first
half 2018 mainly due to normalized capital generation, market impacts
and management actions, which were only partly offset by the final 2017
dividend.

The estimated RBC ratio in the United States increased to 490% on June
30, 2018, from 472% at the end of 2017. This increase was mainly driven
by normalized capital generation, the positive impact from equity market
and interest rate movements, and management actions, which were only
partly offset by other items including remittances to the group. The
benefit from management actions was mostly driven by the release of
capital as a result of the previously announced strategic decision to
exit the Affinity, Direct TV and Direct Mail distribution channels.

The estimated Solvency II ratio in the Netherlands decreased to 190% on
June 30, 2018, from 199% at the end of 2017. Normalized capital
generation was more than offset by remittances to the group and one-time
items, including the lowering of the UFR by 15 basis points to 4.05%,
capital strain from investments in illiquid assets, and model updates.
Market impacts had a minor negative impact on the ratio, as the increase
in Own Funds was offset by an increase in SCR, mostly as a result of
credit spread movements.

The estimated Solvency II ratio in the United Kingdom increased to 197%
on June 30, 2018, from 176% at the end of 2017. The increase was mainly
driven by normalized capital generation, the positive impact from credit
spread and equity market movements, and management actions, which were
only partly offset by other items including remittances to the group.
Management actions included derisking of the investment portfolio, funds
restructuring and a temporary benefit from changes in the equity hedging
program, which is expected to reverse in the second half of the year.

Interim 2018 dividend

Aegon aims to pay out a sustainable dividend to allow equity investors
to share in Aegon's performance, which can grow over time if Aegon's
performance so allows. The 2018 interim dividend amounts to EUR 0.14 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 2018 stock dividend on earnings per
share in the fourth quarter of this year, barring unforeseen
circumstances.

Aegon's shares will be quoted ex-dividend on August 24, 2018. The record
date is August 27, 2018. The election period for shareholders will run
from August 29 up to and including September 14, 2018. 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
10 through September 14, 2018. The stock dividend ratio will be
announced on September 19, 2018, and the dividend will be payable as of
September 21, 2018.

       
Aegon N.V.
Holding excess cash                
2017 2018
EUR millions   First half   Second half   Full Year   First half
Beginning of period 1,512 1,725 1,512 1,354
 
Dividends received 599 1,247 1,846 593
Capital injections (59) (1,033) (1,092) (87)
Divestments / (acquisitions) - 3 3 196
Net capital flows to the holding 540 218 757 701
 
Funding and operating expenses (187) (164) (352) (163)
Dividends and share buybacks (142) (417) (559) (167)
Leverage issuances / (redemptions) - - - 200
Other 3 (8) (5) (2)
Holding expenses and capital return (327) (588) (916) (132)
 
End of period   1,725   1,354   1,354   1,923
 
       
Aegon N.V.
Solvency II ratio                
June 30, Dec. 31, June 30,
EUR millions   Notes   2018   2017   2017
Eligible Own Funds 17,092 15,628 16,185
 
Consolidated Group SCR 7,940 7,774 8,732
 
Solvency II ratio   11b, 12   215%   201%   185%
 
United States - RBC ratio 490% 472% 464%
The Netherlands - Solvency II ratio 190% 199% 144%
United Kingdom - Solvency II ratio       197%   176%   169%
 

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 first half 2018 Financial Supplement and Condensed Consolidated
Interim Financial Statements

are available on aegon.com.

Conference call including Q&A

9:00 a.m. CET

Audio webcast on aegon.com.

Dial-in numbers

United States: +1 720 543 0206

United Kingdom: +44 330 336 9125

The Netherlands: +31 20 703 8211

Passcode: 5162185

Two hours after the conference call, a replay will be available on aegon.com.

Publication dates 2018 results

Second half 2018 – February 14, 2019

About Aegon

Aegon's roots go back almost 200 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.

For the Editor

 

     

Updates

 

Disclaimers

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, the
revaluation reserve and the reserves related to defined benefit plans.
Aegon believes that these non-IFRS-EU measures, together with the
IFRS-EU information, provide meaningful 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 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 or both;
  • 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 press release contains information that qualifies, or may qualify,
as inside information within the meaning of Article 7(1) of the EU
Market Abuse Regulation (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.

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