AEGON N.V. Q3 2008 Earnings - Analyst Presentation Transcript

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

Question: Michael van Wegen - Soc Gen - Analyst : Yes, good afternoon. Mike van from Soc Gen. A couple of questions. First one, you mentioned indeed, corporate credit as let's say, the next potential risk. And you showed that 38% of your portfolio is industrial related. Could you give some further segmentation in that area to give us a better feel of where the risks are for you in that area? The second question, on the fixed annuity business. Incredible sales in this quarter, but at the same time we've seen AIG not being in the market and a lot of consolidation in the banking sector. Could you give a sense of where your distribution is, after all these events? And final question, and a somewhat broader question, on the releasing of capital, 440 million in Q3 excluding the Barclays deal. Could you indicate what elements were done there and on the 600 million to 800 million, how much of that is securitizations? And finally, related to that, you show in your slides that basically a research strengthening on your VA book is one of your big risks. You indicated before that you wanted to reduce that in the future. Obviously, hedging is very expensive at the moment. But what is your stance on that currently and the capital you released, I assume you're not going to pay that tomorrow to the -- back to the Dutch government. But you want to keep that for a buffer. Thanks.

Question: Michael van Wegen - Soc Gen - Analyst : Thank you.

Question: Marc Thiele - - Analyst : Hi, thank you and good afternoon. First question is regarding Slide 19. And thank you, Jos, for providing us with the components. Could you repeat what you said regarding the first 25% being absorbed, and do you think this is still a good reflection on the current balance sheet sensitivities, because there was this press release

Question: Marc Thiele - - Analyst : Thank you very much.

Question: Farooq Hanif - - Analyst : Hi there. I've got a couple of questions on variable annuities, and also a question on the alternative investments. If we go to Slide 21 where you talk about the hedged and unhedged portfolio, could you just talk about firstly if you do increase hedging of living benefits, what is the cost approximately, let's say, for on average for 1 billion or 2 billion of living benefits to hedge. I know it depends on the how much you are close to being in the money, I'm not surprised, but if you could give a guide on that? 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: Farooq Hanif - - Analyst : Of the fair value movement.

Question: Farooq Hanif - - Analyst : Is it 222 -- 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: Farooq Hanif - - Analyst : Okay, that really helps. Well, thank you.

Question: Duncan Russell - JPMorgan - Analyst : Hello, good afternoon. Duncan Russell from JPMorgan. First question is, is there -- do you anticipate any issue with the Dutch Government's involvement in AEGON now for your US subsidiary, do you think there will be any negative backlash either from customers or competitors or the regulator? I know you've structured it via the AEGON association, but still there is an explicit link; so that's the first question. Second question is can you tell us what the impact of the US elections is on some of your major product lines and pension business, et cetera? And then the third question is, the derivatives in the Netherlands which are used for hedging purposes it is my understanding that the normal derivative results through the P&L would be zero, but if I look over the last three years, I think you only had one positive quarter from those derivatives and every other quarter has been significantly negative. So what should I plug in for '09 and 2010 for that derivative line and drives it please? Thank you.

Question: Duncan Russell - JPMorgan - Analyst : Okay. 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.

Question: Frank Stoffel - Merrill Lynch - Analyst : If I -- this is Frank Stoffel from Merrill Lynch. Everything is -- two questions left. First, could you please give us your US risk-based capital ratio as per end of September? And the second question relates to your life reinsurance operations in the Americas; I think you had a mortality charge in the third quarter. So I was just wondering what is going on there, is this somehow related to the data cleaning processes I think you did in the second quarter or is this something completely independent and what is your view, obviously, on the overall situation in your life reinsurance business? Thank you.

Question: Frank Stoffel - Merrill Lynch - Analyst : So can you say how much of new capital of 3 billion does this protection include?

Question: Frank Stoffel - Merrill Lynch - Analyst : Okay. Well, thank you very much. Well, just a quick follow-up. On the EUR600 million to EUR800 million that you expect to free up in the fourth quarter, you've already given us some indications how you expect to free this capital up; can you elaborate a bit on where do you believe you are on your way to freeing up EUR600 million to EUR800 million? Do you feel you are halfway through already or you're just starting to taking these actions?

Question: Frank Stoffel - Merrill Lynch - Analyst : Okay, looking forward to EUR1 billion then. Okay. Thank you.

Question: Christopher Hitchings - - Analyst : Hi, good afternoon gentlemen. Thanks. A couple of questions. You signaled I think at the capital raising time that you might take advantage of the TARP in the US. Have you got any further in whether you kind of will do that? It seems to depend of -- what I read last night -- of whether you own a thrift and/or could be classified as one? Secondly, you've got fairly good inflows on your GICs business in the US. Can you give some comment on the margins on what you're writing that business? Thirdly, just these are fixed annuity sales. I think you had some special commission arrangements in the second quarter. Did they -- were they benefiting in the third? And just, fourth question, you've given a lot of sensitivity as to what's happen -- what the impact of credit spreads widening on equity markets have been on your balance sheet in the third quarter. Is there any reason why we shouldn't just use those sensitivities to project what the balance sheet might look like today, i.e. the sort of the -- or I think it's 10 basis points equals X amount on the credit spreads and the sensitivities you've given. And finally, just a clarification; did you actually charge any DAC unlocking in the third quarter? Thanks.

Question: Christopher Hitchings - - Analyst : Okay.

Question: Christopher Hitchings - - Analyst : Yes.

Question: Christopher Hitchings - - Analyst : Is that dollars or euros?

Question: Christopher Hitchings - - Analyst : $20 million. Okay. Just as a follow-up to that; what risk is it to DAC in the UK?

Question: Christopher Hitchings - - Analyst : Okay.

Question: Christopher Hitchings - - Analyst : Okay. Thank you.

Question: Farquhar Murray - Fox-Pitt - Analyst : Good afternoon gentlemen. It's Farquhar, Fox-Pitt. Two short questions from me. Firstly, just on capital. Of the -- you're confident of gaining the EUR600 million to EUR800 million, but I just wondered if you could give us any color on how much of that might already been done or whether actually it's still zero so far? 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: Farquhar Murray - Fox-Pitt - Analyst : Okay.

Question: Farquhar Murray - Fox-Pitt - Analyst : Okay, great.

Question: Farquhar Murray - Fox-Pitt - Analyst : Okay. Thanks.

Question: Johnny Vo - Goldman Sachs - Analyst : Yes, hi, it's Johnny Vo from Goldman Sachs. Just a quick question in regards to the -- what is the average duration of the outstanding GMIBs? When can the policyholders elect to take the benefit and I think, Farguhar asked the question, but you're not willing to answer about the what's the split between the reserve strengthening and the increase in capital required? And just the last question; in terms of the bulk of the equity market sensitivity, you're showing there is that resulting from the living benefits or is that from the [JMD] base?

Question: Johnny Vo - Goldman Sachs - Analyst : Just -- the third question is just the impact of the equity market sensitivity on Slide 19; is that resulting predominantly from the GMIB or GMD base?

Question: Johnny Vo - Goldman Sachs - Analyst : Yes.

Question: Johnny Vo - Goldman Sachs - Analyst : Okay. Okay. Thanks very much.

Question: William Elderkin - Citi - Analyst : Hello everybody, it's William Elderkin from Citi calling. Two questions. First of all, could you give us a sense of what the earnings impact of your de-risking plans are? I'll assume that those additional risk was contributing to earnings. And then secondly within the Dutch business, you've got a provision for, I think, some unit-linked restitution selling type things; is that a one of or can we expect to see further charges coming through?

Question: William Elderkin - Citi - Analyst : Right. Thank you.

Question: Bruno Paulson - - Analyst : Thank you for letting me squeeze under the wall there. Just on page 19, where we look at the income effects or the earnings effects of the fallen equity market, first question I'm presuming is that post-tax or pretax? And secondly, my assumption is that the direct effect is just the one-off that the fee effect is a permanent one. And the -- sorry it is direct and guarantees are one-off, the fees is a permanent quarterly effect. Is the DAC effect a one-off?

Question: Bruno Paulson - - Analyst : Yes. And these DAC effects do they do both --- this is a removing effect or not a permanent federation? [Devising] off the DAC?

Question: Bruno Paulson - - Analyst : Right.

Question: Bruno Paulson - - Analyst : Okay. That's one.

Question: Bruno Paulson - - Analyst : Right. Thanks. And very finally what was the -- in '03, '04 when you revised everything. Why did you decide -- why did you not then introduce a retrospect hedging programs of the IB and DB stuff?

Question: Bruno Paulson - - Analyst : Okay. Thanks very much.