Aegon(AEG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Operating capital generation before holding and funding expenses increased by 16% to €354 million, driven by higher earnings on in-force in Transamerica, which rose by 45% in U.S. dollars compared to the prior year [7][20][25] - Free cash flow for Q3 2023 amounted to €79 million, primarily reflecting the interim dividend received from a.s.r. [20][31] - Cash capital at the holding increased to €2.9 billion, largely due to €2.2 billion of cash proceeds from the transaction with a.s.r. [20][31] Business Line Data and Key Metrics Changes - In the U.S. Individual Solutions business, the number of licensed agents at World Financial Group (WFG) increased by 17% to 69,000, with new life sales up by 10% [10][11] - In the U.S. Workplace Solutions retirement plans business, written sales in the midsize plans segment more than doubled to $1.8 billion compared to Q3 2022 [12] - New life sales in growth markets increased by 34%, driven largely by a Brazilian joint venture where new life sales nearly doubled [14] Market Data and Key Metrics Changes - Net outflows in the UK workplace channel amounted to £0.4 billion, primarily due to the departure of a low-margin pension scheme, while net deposits excluding this were £0.5 billion [13][64] - The retail channel in the UK experienced weak momentum due to the cost of living crisis, resulting in annualized revenue losses of £6 million [13][66] - In asset management, third-party net outflows amounted to €1.2 billion, driven by outflows from two larger clients [15][70] Company Strategy and Development Direction - Aegon is focused on creating leading businesses in investment, protection, and retirement solutions, with a strong emphasis on U.S. strategic assets and growth markets [6][9] - The company is actively managing U.S. financial assets, including a program to purchase institutionally owned universal life policies to reduce mortality risk [9][30] - The partnership with a.s.r. is expected to strengthen Aegon's asset management positions in alternative fixed income and retirement investment solutions in the Netherlands [8][17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ongoing transformation and commercial momentum, particularly in U.S. strategic assets [6][34] - The company anticipates continued growth in operating capital generation, with a full-year expectation of around €1.2 billion [8][25] - Management acknowledged the need for improvement in profitability and commercial momentum in the asset management and UK retail business [34][70] Other Important Information - Aegon completed 45% of its €1.5 billion share buyback program, reducing the number of common shares outstanding by 7% compared to June 30 [31] - The company redomiciled to Bermuda, which is expected to provide stability and facilitate regulatory relationships without impacting capital management approaches [9][58] Q&A Session Summary Question: Can you provide the usual bridge to the underlying operating capital generation for the quarter? - Management provided details on operating capital generation, noting €354 million for the quarter, with operational and experience variances contributing to this figure [37][39] Question: Has the unit linked misselling court ruling against a.s.r. impacted the strategic holding? - Management confirmed satisfaction with the strategic shareholding in a.s.r. and emphasized the expected synergies from the integration of the businesses [38] Question: What is the impact of the buyout of institutionally owned universal life contracts on operating capital generation? - Management indicated that achieving a 40% buyout could lead to an ongoing impact of about €50 million in operating capital generation by 2027 [45][46] Question: What are the reasons for the recent outflows in the UK workplace and retail segments? - Management clarified that the workplace business had positive net flows excluding one low-margin client, while retail outflows were attributed to macroeconomic factors and competition [64][66]