H1 2023 Results | AEX:AGN | New York Stock Exchange:AEG
Solid performance in the first half of 2023 kicks off next chapter of AEGON’s transformation
- IFRS results will now be reported under new insurance accounting standard IFRS 17
- The net loss of €199 million reflects previously announced investments in the US and updated assumptions.
- Operating income up 3% compared to first half 2022 to €818 million
- Working capital generation before holding funding and operating expenses increased by 13% compared to the first half of 2022 to €620 million, reflecting business growth and improved claims experience
- The capital adequacy ratios of the major divisions are still above their respective operating levels.Group Solvency II ratio reaches 202%
- Holding cash capital reduced to €1.3 billion, mainly due to return of capital to shareholders
- The interim dividend for 2023 will be 0.14 euros per ordinary share, an increase of 0.03 euros compared to the 2022 interim dividend.
- The transaction combining Aegon’s Dutch operations with ASR was completed in July.A related €1.5 billion share buyback was initiated
- Significant sales growth in US and UK workplace businesses and life insurance businesses in China and Brazil.Sales Momentum in Wealth Management and UK Retail Businesses Impacted by Challenging Market Conditions
Statement from CEO Lard Friese
“Aegon had a solid first half of this year. Our final result was a loss of €199 million, reflecting previously announced items in the US that are well positioned for future growth. Our working capital generation was strong, driven primarily by our U.S. businesses Capital adequacy ratios for our major divisions remained above their respective operating levels in the first half of 2023. These results: A strong foundation for an interim dividend of 14 euro cents per share, an increase of 3 euro cents compared to the 2022 interim dividend.
In the US, Transamerica performed well. New Life’s sales grew 17% year-on-year and are now at a record high of 70,000, driven by another significant increase in the number of agents in the World Financial Group (WFG). Mid-tier retirement plan sales increased nearly 70%, driven primarily by his US$1.7 billion lump sum plan sales. AEGON’s UK Workplace Solutions platform also continued to perform well, with net deposits growing significantly due to the onboarding of new schemes and higher net deposits in existing schemes. Partnerships in China and Brazil also increased sales. At the same time, AEGON’s wealth management and UK retail operations continued to be impacted by difficult market conditions.
We have taken an important step in our transformation. The company completed the sale of AEGON’s insurance, annuities and wealth management businesses in Central and Eastern Europe and announced the sale of its stake in the Indian business. In addition, the Company completed a transaction with ASR in which AEGON received €2.2 billion and 29.99% of ASR shares and initiated a related €1.5 billion share buyback program.
We are now beginning the next chapter of our transformation. At Capital Markets Day 2023 in June, we outlined how to invest in strategic assets. In the United States, we ensure that Transamerica reaches its full potential and becomes America’s leading mid-market life and retirement company. At the same time, Transamerica will continue to reduce its exposure to financial assets and improve the level and predictability of capital generation. In this regard, we are able to execute additional reinsurance transactions on 14,000 secondary guaranteed universal life policies, generating approximately US$225 million in capital, which will be used to increase AEGON’s exposure to financial assets over the long term. We welcome the fact that we can further reduce over Combined with the previous reinsurance transaction in 2021, a total of 25% of the statutory reserves backing these policies will be reinsured.
As part of our strategy, we also invest in partnerships. Aegon Asset Management and La Banque Postal have extended their partnership through 2035 through their joint venture La Banque Postal Asset Management (LBP AM). Through its shareholding, AEGON also participated in LBP AM’s acquisition of La Financière de l’Echiquier. This will accelerate LBP AM’s growth strategy. In the UK, AEGON has expanded its partnership with the Nationwide Building Society (NBS), under which AEGON UK will integrate NBS’s financial planning team to become a leading digital platform provider in the workplace and retail markets. We plan to support a strategy that In addition, AEGON increased its economic ownership of its Brazilian joint venture Mongeral Aegon Group to almost 60%.
I would like to thank my colleagues for their efforts in ensuring the success of the ongoing transformation. ”
strategy
AEGON’s goal is to build a premier business that provides investment, protection and retirement solutions to its clients. Its business portfolio includes wholly owned US and UK subsidiaries and global asset managers. In addition, AEGON has partnerships in Spain and Portugal, Brazil and China, creating value by combining the power of local partners with AEGON’s international expertise. In the Netherlands, Aegon creates value through strategic shareholdings in market-leading insurance and annuity companies. The company takes important steps to improve its performance and create sustainable value for all its stakeholders.
AEGON’s operations in the United States are divided into financial assets and strategic assets. The aim is to reduce AEGON’s exposure to financial assets and improve the predictability of capital generation from these assets. Capital will be reallocated to strategic assets, growth markets and growth opportunities within the global asset manager. Exposure to businesses outside of AEGON’s core focus has been largely eliminated in recent years, with the latest milestone being the sale of a related business in India announced in July 2023.
Through its transformation, AEGON aims to maintain a strong capital base in its business units and holdings. Through active risk management activities, AEGON improves its risk profile and reduces the volatility of its capital adequacy. This is underscored by the capital strength conveyed in this press release.
Trading with ASR
On July 4, 2023, AEGON announced the completion of the integration of its Dutch pension, life, property and casualty, banking and mortgage origination businesses with ASR and the launch of a wealth management partnership with ASR as part of the transaction. . AEGON received cash proceeds of €2.2 billion and a 29.99% stake in ASR. A related €1.5 billion share buyback program has been initiated and is expected to be completed by June 30, 2024. In light of this transaction, Aegon of the Netherlands will now be reported as a separate segment and its first half 2023 results will be included in other income in the income statement.
Capital Markets Day 2023
On June 22, 2023, AEGON hosted Capital Market Day (CMD) to provide an update on its strategy and medium-term financial goals. This included plans to profitably grow the business and maximize the value of its financial assets, with a focus on Aegon’s largest business unit, Transamerica. His four key priorities for creating value for shareholders have been identified.
- Changes to Group Profile: Upon completion of the transaction with asr, AEGON will transfer its legal status to Bermuda, after which the Bermuda Monetary Authority (BMA) will assume the role of Group Supervisor. AEGON continues to refine its operating model to accelerate its key business creation strategies.
- Increasing the Value of Transamerica: Aegon’s ambition is to build America’s leading mid-market life and retirement company. Over the next three years, Transamerica is expected to improve the quantity and quality of capital generation while reducing its exposure to financial assets.
- Drive improvement and value creation in the rest of the portfolio: AEGON will continue to strengthen its UK and wealth management businesses, furthering its leading position in the market. AEGON is also investing to grow its highly successful joint venture with AEGON International and Asset Management.
- Proactively managing capital: AEGON will continue to allocate capital in a rational and disciplined manner and aim to create value for shareholders by leveraging the great financial flexibility of the holding company.
The next chapter of AEGON’s strategy is expected to increase working capital generation from the division to around €1.2 billion and free cash flow to around €800 million by 2025. The dividend per share he aims to increase to 0.40 euros. Applicable from 2025 onwards, subject to necessary approvals, except in unforeseen circumstances. Total financial leverage is expected to decrease to EUR 5 billion.
