Aegon NV Q3 2016 Earnings Call Transcript

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

Question: Ashik Musaddi - JPMorgan - Analyst : Hi. Good morning Alex. Good morning Darryl. Just a couple of questions I have. One, can you just give us some indication about the Solvency ratio for the local unit? I guess you're not giving the exact numbers, but any sort of indication what has volatility adjusted in done. I mean, is your --? What is the longevity impact on Netherland, etc.? So, some color on that. And, secondly, can you give us a bit more color on what sort of assumption changes you have done in long-term care? And what is it leading to? I mean, is it just (inaudible) or should we be expecting any sort of further assumption changes? Or do you think it's more or less done? Because we saw actually this spike in the mortality, as well, recently. So, how should we square up things? Are there more to come? Or do you think it's good? Because, for example, last year you clearly flagged that this model updates, most of them were done. And clearly today we haven't seen any negative impact from that. So, any sort of indication like that for this long-term care business would be good, as well. Thank you. And, by the way, really well done today. It was a good set of numbers. 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. NOVEMBER 10, 2016 / 8:00AM, AEGN.AS - Q3 2016 Aegon NV Earnings Call

Question: Ashik Musaddi - JPMorgan - Analyst : So, with respect to the long-term care, should we be not expecting any more, going forward, based on your current knowledge? Or there could be more coming in, in coming quarters?

Question: Ashik Musaddi - JPMorgan - Analyst : Okay. That's very clear. Thank you.

Question: Arjan van Veen - UBS - Analyst : Thank you. If I just may follow up on the Netherlands Solvency position? Now, Darryl, you were very confident at the second quarter to upstream the EUR225 million reduced target for the Netherlands. I'm just curious, given that the Solvency ratio was [154%] at June and you're indicating it's probably reduced 5 to 10 points because of the volatility adjuster changes, whether you still have that confidence. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 10, 2016 / 8:00AM, AEGN.AS - Q3 2016 Aegon NV Earnings Call And if you maybe also could give some color or reaffirmation of guidance as to your total up-streaming of dividends from your various divisions is now EUR1.2 billion, reduced from EUR1.3 billion, at the beginning of the year. So, just if you could reaffirm you're still on track for that. Thank you.

Question: Arjan van Veen - UBS - Analyst : And just on that, Darryl, so the total target you're happy with is just going to come from other divisions?

Question: Arjan van Veen - UBS - Analyst : So, it's fair to say about EUR150 million of the EUR200 million was US?

Question: Arjan van Veen - UBS - Analyst : Okay. Thank you.

Question: Gordon Aitken - RBC Capital Markets - Analyst : Yes. Morning. Three questions please. First on the Mercer net outflows, I mean, you mentioned there they were in your expectations, but an 18% annualized for the quarter seems high. What was your expectation when you bought that business? And if you could say, please, if it continued into the fourth quarter? In the US, I mean, have we reached a trough on VA sales? And is there any impact on the in-force book of the Department of Labor ruling? And the final question is in the UK, the result of three legacy platforms in the UK, these all started out as funds supermarkets rather than wrap platforms. And one of them has announced a significant charge due to basically upgrading and basically moving from a fund supermarket to a wrap. Do you think you need to spend significantly on Cofunds? Thank you.

Question: Gordon Aitken - RBC Capital Markets - Analyst : So, on the point in the US VA book and the Department of Labor, is there any impact at all so far on the in-force book, please?

Question: Gordon Aitken - RBC Capital Markets - Analyst : The question's not about new business, it's about in-force business, please.

Question: Gordon Aitken - RBC Capital Markets - Analyst : Yes.

Question: Gordon Aitken - RBC Capital Markets - Analyst : That's right, yes.

Question: Gordon Aitken - RBC Capital Markets - Analyst : Thank you very much. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 10, 2016 / 8:00AM, AEGN.AS - Q3 2016 Aegon NV Earnings Call

Question: Matthias de Wit - KBC Securities - Analyst : Hi. Good morning. Three questions, please, from my side. The first is on the Dutch business. Is it possible to provide more color on the nature and the quantum of the management actions you are implemented during the quarter? And linked to that, you also referred to longevity impact. Could you also maybe quantify the impact it had on solvency? And I wonder in this respect whether your hedges absorbed any of these updated longevity assumptions impact. Second question is on the UK pension deficit. Is it possible to provide an update on where we are today? And I also wonder if there is any need from your side or whether you see any need to fund the plan going forward or could this have an impact on dividends, for example? And my last question is on the holding IFRS expenses. They're trending down, currently at EUR35 million for the third quarter. I wondered whether this is a good run rate for the future and whether we should expect any further decrease. Is there, for example, also an efficiency program running at the holding company currently on top of the EUR200 million program you have for the US and Dutch business, please? Thank you.

Question: Matthias de Wit - KBC Securities - Analyst : Okay. And on the -- I think in terms of cash holding, operating financial expense, you've been guiding for a EUR300 million annual impact. Is that still the right number to look for?

Question: Matthias de Wit - KBC Securities - Analyst : Okay. Thanks a lot.

Question: Andy Hughes - Macquarie Group - Analyst : Hey, guys. I just got a couple of quick questions, if I could. The first one is coming back on the Universal Life changes. I guess I was a bit surprised given the higher mortality in the quarter, which obviously has been a one-off, but also the comments you've made previously about lapse rates, that there wasn't a bigger charge for Universal Life in the US. Is this partly because of price rises coming through or could you explain what's going on there, please? And I guess the second question is on the US -- sorry, the Dutch solvency move, the 5% to 10%. If I understand the answer to the previous question, you're talking about minus 5% for Dutch longevity and something else for market conditions. Is that right? Is that in the 5% to 10% move? And the Dutch solvency, presumably if it was done today, given what's happened to Dutch mortgage spreads, it would be higher than where it was at the end of the quarter. Could you give us a comment on that? And then finally, just trying to get a feel about US interest rate sensitivity for the business. Are you reserving at 3.75%, the same as [Voyeur]? I can see the 4.25% for IFRS ultimate rate. I'm just wondering where the US reserving rate is and how I should think about US rate sensitivity, please. Thanks.

Question: Andy Hughes - Macquarie Group - Analyst : Okay. And that hasn't been reviewed downwards in line with what some other people are doing at the moment?

Question: Andy Hughes - Macquarie Group - Analyst : Great. Thanks very much.

Question: Nick Holmes - Societe Generale - Analyst : Hi there. Thank you very much. Just a couple of questions. I wondered if you could give us an update on the US run-off portfolio. I'm just wondering whether the rise in bond yields might make disposal candidates more promising within that portfolio. And then second point is, returning to the DOL, I just wondered whether you think the Republicans might be a little bit more forgiving on the DOL and whether there might be, therefore, a positive change for the industry. 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. NOVEMBER 10, 2016 / 8:00AM, AEGN.AS - Q3 2016 Aegon NV Earnings Call

Question: Nick Holmes - Societe Generale - Analyst : Okay. Thank you very much. Very clear answers.

Question: Nadine van der Meulen - Morgan Stanley - Analyst : Good morning. I was wondering if you could give a little bit more detail on the capital generation for the Group. It says on slide 26 that it's around EUR0.2 billion. That was the same as 18. Could you be a little bit more specific there? Has it gone up; has it gone down? Is it more towards the EUR1.6 billion of the EUR2.4 billion level? So if you could give some more details there that would be appreciated. And I suppose the second question is, with regard to -- yes, if you can comment on what you think the implications are of potential increase consolidation in the Dutch insurance space for Aegon's Dutch insurance business. Thank you very much.

Question: Nadine van der Meulen - Morgan Stanley - Analyst : Okay. Thank you very much.

Question: William Hawkins - Keefe, Bruyette & Woods - Analyst : Hi guys. Thank you. In the January Investor you talked about the health profit signature having an 8.7% premium factor and 22-basis-points reserve factor. Given all the changes that have happened this year and now your assumption change, what should we be plugging in for where those margins are going in the future? Obviously a number would be great. If not, I'm just trying to get a feel after this change. Are we restoring the earnings power you expected in January or is it going to be lower or maybe even higher? And then second, just briefly, the timing change in the US dividend, is that something that will occur now regularly? Are we going to expect more US dividends in the third quarter? And just broadly speaking, why has that happened? Thank you.

Question: William Hawkins - Keefe, Bruyette & Woods - Analyst : Thanks. Thanks, Darryl, for your help over the years. Cheers.

Question: Steven Haywood - HSBC - Analyst : Good morning. Thank you for taking my question. It's to do with the potential of debt refinancing a 2017 senior bond here. Is there -- because you're getting fairly close to the growth leverage ratio maximum target, 26% to 30%, would you consider redeeming the debt fully next year? And is there need to redeem this bond because of the sale of UK annuity books or would you just consider refinancing it in whole? And then if you could just discuss your capacity you have on Tier 2 debt and restricted Tier 1 debt under the Solvency II framework, please. Thank you.

Question: Steven Haywood - HSBC - Analyst : Thank you very much.