DONALD J. SHEPARD
CHAIRMAN OF THE EXECUTIVE BOARD
AEGON remains firmly focused on life insurance, pensions and investments. What makes this an attractive business and why have you chosen this focused strategy?
At AEGON we continue to believe that it’s important to stay focused on what we know and do best. Life insurance, pensions and related investment products are lines of business that continue to present strong growth potential. People in general realize that they have to take responsibility for their own longterm financial needs and life companies have the expertise to provide the long-term protection, savings and investment solutions to serve those needs. Pension systems throughout much of Europe are being reformed and new systems based on private savings and investment are emerging.
At the same time, people are transitioning into retirement with a lifetime of accumulated assets that have to be managed for a longer period of time. AEGON is focused on assisting those individuals manage the drawdown of those assets in a fiscally attractive way. In the United States, for instance, there is an estimated USD 6 trillion in accumulated assets that will be distributed over the next six years. We expect a similar trend in other countries as wealth levels and life expectancies also increase. By continuing to develop need-specific products, ensuring quality service and advice, and strengthening AEGON’s broad distribution capability, we are confident that AEGON will continue to be a leader in the life and pensions market.
What do you consider to be AEGON’s main growth drivers, given its strong presence in a number of markets that are generally seen as relatively mature?
We believe that there is sufficient growth opportunity in those markets where AEGON has a well-established presence. In the Netherlands, we have reorganized our operations to be more efficient and responsive to the needs of our customers, while at the same time making some good progress in growing our group pensions business. We anticipate further consolidation in the Dutch group pension market and AEGON is well-positioned to capture further growth given our strong presence in pension administration (TKP Pensioen), asset management and as a leading provider of insured pension solutions.
In the United Kingdom, we have strengthened our distribution capability through Positive Solutions, our independent financial advisor network. This past year, we accelerated our 100% acquisition of Positive Solutions to take fuller advantage of the opportunities in the UK market. While maintaining AEGON’s leading position in the UK pensions market is our primary goal, we have also expanded AEGON’s product offering to include annuities, risk and investment products.
In the United States, there is an increasing demand for a broader menu of investment, protection and dissavings products as individuals face the prospect of managing their assets for a longer period of time during retirement. We intend to strengthen AEGON’s leading position in the US retirement market by assisting customers to better manage the drawdown of their accumulated assets over time and even make provisions for wealth transfer to second and third generations. We continue to see opportunity in serving the middle-income market with need specific life protection and asset accumulation products, and also see good growth potential for our reinsurance business in light of the consolidation that has occurred in recent years. AEGON Direct Marketing Services continues to be a very effective and efficient means for entering new markets. The business model has proven successful in a number of international markets and will, no doubt, provide us further opportunities in the future. Finally, our professional agent channel network is a core strength for AEGON in the US market given the increasing need for value added, sound financial advice.
In addition to the steps we have taken to capture the growth that we see in our major markets, we have also made notable progress in growing our businesses in Central and Eastern Europe and in Asia. Life insurance penetration is still relatively low in these markets and it is clear that the economic developments underway will fuel further growth. In just the past five years, the areas where we are now active in Central and Eastern Europe have experienced double digit percentage growth in new life and pensions premiums. In China and Taiwan the market growth has been even more promising during the same period. Clearly, there is plenty of opportunity for our industry in general and we believe AEGON is well positioned to capture a fair share of the growth potential, with continued financial discipline and a view to the long term.
In all your main markets, regulators are moving to greater transparency and disclosure by insurance companies. What impact does this have on AEGON and the way it operates around the world?
Transparency in our business is a top priority at AEGON. It’s the only way to really gain the trust of our partners, customers and shareholders, and keep it. The way we conduct our business, the relationships that we depend on and the products we deliver have to be transparent not only to regulators but to all our stakeholders. Of course, the costs for doing so are significant and are likely to increase over time. The work of ensuring transparency is ongoing and requires a substantial commitment or resources both in terms of people and costs.
It is for this reason that we have moved to greater centralization in certain areas, such as risk management, our capital management and compliance programs. We have taken these steps not only because they are necessary in today’s environment, but also because they will contribute to ensuring long-term confidence in AEGON’s businesses and the sustained trust of our many stakeholders.
