AEGON N.V. Q1 2003 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Jason Zucker - - Analyst : Great, thank you and good morning or good afternoon everybody.

Question: Jason Zucker - - Analyst : I had a few questions, they're quick questions so let me just list them out. One, I was hoping you could talk about average crediting rates in fixed annuities and where they are. Then you said you had lowered them during the quarter sales slow down. I was hoping you could talk about whether or not you're at risk of losing any bank agreements because you have been bringing crediting rates down. Next I was hoping you could comment on spreads in your fixed annuity business. New business versus your booker business. With higher equity markets in the second quarter, if they stay with us, do we see DAK and GNBB unlocking for the second quarter. Lastly, did you make any capital contributions from Corporate to the US subs during the quarter?

Question: Jason Zucker - - Analyst : Okay. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Jason Zucker - - Analyst : Great, Pat, on 160 basis points, what is that equivalent return on equity?

Question: Jason Zucker - - Analyst : Great. Thanks everybody.

Question: Rob Proctor - Morgan Stanley - Analyst : Hello it's Rob Proctor here, good afternoon.

Question: Rob Proctor - Morgan Stanley - Analyst : I've got a few questions as well. Apology, there was an echo but that appears to have gone. The first question is on Trans America Finance Corporation. I was surprised by the strength of the result in this business 73m I think net. I think you've explained 31m of this with an exceptional tax charge, sorry tax credit. Can you just say what that is and maybe just give a little more flavor as to why this appears to be the best quarter that you've had in some time. That's the first question. The second question is relatively quick I think. The interest charge for the Group as a whole also was materially higher than I'd expected in the quarter and I think higher than any quarter in the past year or so. I wonder if there's anything particular that explains that situation. The third question is just on the cost and the outlook for expenses. I notice in the text of the release you mentioned that expenses were up 2% I think, like-for-like in the US life business. I'm just wondering why that is. It strikes me as perhaps slightly disappointing and I'm just trying to figure out if there's any particular explanation for that. Thanks.

Question: Rob Proctor - Morgan Stanley - Analyst : I think that would be useful, yes.

Question: Rob Proctor - Morgan Stanley - Analyst : Okay.

Question: Rob Proctor - Morgan Stanley - Analyst : Should we expect this refinancing activity to tail-off or would you consider it reasonable to expect some more of this as we go through the year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Rob Proctor - Morgan Stanley - Analyst : Okay.

Question: Rob Proctor - Morgan Stanley - Analyst : Yes I thought you - there were various initiatives to reduce expenses in the US business and I just wondered why we would have expected on a

Question: Rob Proctor - Morgan Stanley - Analyst : Okay. Can you remind me what the actual to allowable was for the full year 2002?

Question: Rob Proctor - Morgan Stanley - Analyst : Okay.

Question: Rob Proctor - Morgan Stanley - Analyst : Would we expect the subsequent quarters this year to be more like the quarters, the corresponding quarters of last year then, is that what you're saying?

Question: Rob Proctor - Morgan Stanley - Analyst : Okay fair enough.

Question: Rob Proctor - Morgan Stanley - Analyst : Right okay. Thanks very much.

Question: Fred Nanto - Execution Limited - Analyst : Good afternoon this is Fred Nanto at Execution Limited(ph.). Just going through the results I have a question on what your target for fixed annuity spreads between [200-250] basis points. Firstly what you commented about the absence of indirect investment income. I guess I just want to have an understanding on your target spreads. What do you factor in as a realized gain field inside of those target spreads because it looks as though you're not putting through any indirect investment income in 2003? I just want to get a feel for if that's going to be the trend that continues for the rest of the year and how we should understand what you target as your price sale on the spreads?

Question: Fred Nanto - Execution Limited - Analyst : But that is I guess as far as what you record in terms of this segment or the product segment's profit. If we try and measure that as a ratio the assets which it [indiscernible] I always think of that as whatever the spread was plus your cost income and then any earnings that are achieved on the capital and [indiscernible] business.

Question: Fred Nanto - Execution Limited - Analyst : Thanks.

Question: Yak Myer - [indiscernible] - Analyst : Yes this is Yak Myer [indiscernible]. You gave some comments about the internal rate of return on fixed annuities. Can you give it also indicative for the new production of the total production because I thought you highlighted it last time after the Q4 results at almost [9%], is that true?

Question: Yak Myer - [indiscernible] - Analyst : Right. Could we see some more emphasis on [indiscernible] the non-core assets, certainly now it's improving the performance, how do you see?

Question: Yak Myer - [indiscernible] - Analyst : Okay. Maybe you could shed some light on the [indiscernible] and the DAK and the guarantees and the capital gains. We see a deteriorating trend over the quarter sequentially, it is kind of worrying. Perhaps you could comment on that, this is really related to the spreads coming down and fee income coming down. What do you see in the next quarters? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Yak Myer - [indiscernible] - Analyst : It's just when you strip out the exceptional and special items the underlying trend is so much worse than your peers. I think um?

Question: Yak Myer - [indiscernible] - Analyst : But the real question is you failed to offset the decline in spreads and fees through lower costs. I think that's the key if you get [indiscernible]?

Question: Yak Myer - [indiscernible] - Analyst : All right, thanks for that.

Question: Nick Holmes - Lehman Brothers - Analyst : Yes hello. Nick Holmes from Lehman Brothers. I have just a couple of questions. The first one is on the guarantees within the Dutch mixed fund, the Dutch unit link business. I just wanted to ask, you took a charge of [31m] in Q1 how did you calculate this? Is this against the Dutch market decline in Q1, which was around about [23%] or, as of today, which is around about [11%]? That was my first question. My second question is, looking at the solvency, you've said previously that your solvency is [200%] of the EU requirements but you won't give us breakdown of that calculation. I wanted to ask, does that calculation, could you tell us, in spite of your lack of disclosure on this, just one thing which is does it include DAK or not? Because I find it very hard to reconcile.

Question: Nick Holmes - Lehman Brothers - Analyst : Can I just ask. You didn't take significant charges for GMBB and RD in America and yet you did for the Dutch mixed fund, or at least relatively so, I mean, why is there such a difference?

Question: Nick Holmes - Lehman Brothers - Analyst : Okay thank you.

Question: Nick Holmes - Lehman Brothers - Analyst : I'm sorry. So does that mean that DAK is going into your solvency capital?

Question: Nick Holmes - Lehman Brothers - Analyst : So the translation is that yes DAK is in the solvency capital effectively? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Nick Holmes - Lehman Brothers - Analyst : But isn't that against what the EU Regulations say about DAK?

Question: Nick Holmes - Lehman Brothers - Analyst : Yes. I was just thinking of your reference, I thought it was to the EU Solvency Regulations and my understand of those was that DAK is not permitted as an asset.

Question: Nick Holmes - Lehman Brothers - Analyst : Yes.

Question: Nick Holmes - Lehman Brothers - Analyst : But doesn't that you are then including it in capital? Before you deduct the DAK.

Question: Nick Holmes - Lehman Brothers - Analyst : Okay. That's great. Thank you very much indeed.

Question: Bart van Devine - Amber Securities - Analyst : Bart van Devine, Amber(ph.) Securities, Amsterdam. I have four questions. My first question is about your indirect income on equities. You expect for the full year [450] do you still expect that because Q1 is somewhat higher than the one before? My second question is about your US Bond Portfolio. The below investment grade part has increased from [7% to 8%], perhaps you can explain this? My third question is about your [42m] higher pension costs. Can we also expect this higher pension costs in the next few quarters? My last question is about DAK locking, for the full year you expect [12%] return on equities so what will happen with the DAK locking if at the end of the year the market will stay at the same level as next year? Do you expect [indiscernible] DAK unlocking and what is the size this DAK unlocking?

Question: Bart van Devine - Amber Securities - Analyst : Yes.

Question: Bart van Devine - Amber Securities - Analyst : Okay.

Question: Bart van Devine - Amber Securities - Analyst : So we can expect also around [40m] in the next few quarters.

Question: Bart van Devine - Amber Securities - Analyst : Okay.

Question: Bart van Devine - Amber Securities - Analyst : Okay clear.

Question: Bart van Devine - Amber Securities - Analyst : Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.