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Aegon(AEG) - 2023 Q2 - Earnings Call Transcript
AegonAegon(US:AEG)2023-08-18 01:17

Financial Data and Key Metrics Changes - The operating result increased by 3% compared to the first half of 2022, driven by increases in the U.S., the U.K., and the International segments, offset by a decrease in Asset Management [30][32] - Operating capital generation before holding, funding, and operating expenses increased by 13% compared to the first half of 2022, reflecting business growth in the U.S. [8][37] - Free cash flow in the first half of 2023 amounted to €287 million, primarily reflecting remittances from the U.S., the U.K., and Aegon's asset management joint venture in China [31] - The group Solvency II ratio decreased by 6 percentage points since year-end 2022 to 202% due to various factors including the deduction of the interim dividend and unfavorable market movements [31][32] Business Line Data and Key Metrics Changes - Transamerica delivered strong sales growth in all U.S. Strategic Assets, with new life sales increasing by 17% compared to the first half of last year [15][16] - The U.K. Workplace Solutions platform saw net deposits amounting to a record high of GBP 1.5 billion, an increase of 36% compared to the first half of last year [17] - The Asset Management business faced challenges, with Assets Under Management declining by 7% compared to the end of June 2022 due to adverse market conditions [18][19] Market Data and Key Metrics Changes - New Life sales in growth markets increased by 45% compared to the first half of 2022, largely driven by business growth in China and Brazil [20] - Non-life premium production in Spain and Portugal rose by 6%, with growth in Accident and Health insurance offsetting weaker demand for Property and Casualty Solutions [20] Company Strategy and Development Direction - The company is focused on three core markets, three growth markets, and one global asset manager, aiming to reduce exposure to U.S. Financial Assets and improve capital generation predictability [7][12] - Aegon plans to increase its dividend to around €0.40 per share by 2025, having increased the 2023 interim dividend to €0.14 per share, up more than 25% compared to the 2022 interim dividend [10][44] - The company intends to transfer its legal seat to Bermuda, which is expected to provide stability and support the execution of its global strategy [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's strong financial position and prospects, emphasizing the importance of executing the transformation strategy [10][44] - The management highlighted the need for further work on Asset Management and the U.K. Retail business, with plans to address these areas in 2024 [44] Other Important Information - The company has closed the transaction with a.s.r. and initiated a €1.5 billion share buyback program, expected to be completed by June 2024 [6][11] - Aegon has increased its financial stake in its Brazilian joint venture and expanded partnerships in the U.K. and France [7][22] Q&A Session Summary Question: Operating Capital Generation (OCG) and New Business Strain - The OCG reported for the second quarter was €328 million, with favorable claims experience contributing significantly [49] - The reduction in New Business Strain was primarily from the Retirement Plans business, while life insurance continued to see growth [50] Question: U.S. Claims Experience - The mortality claims experience was better than expected, but management does not anticipate this trend to continue [60] - The Universal Life buyout program has been ongoing, with significant capital generation expected from it [62] Question: U.K. Partnership with Nationwide - The extended partnership with Nationwide is aimed at enhancing customer access to Aegon's products and improving advisory services [69] Question: CSM Roll Forward and Policyholder Experience - The CSM release was primarily driven by the Financial Assets portfolio, which is expected to decline over time as these assets run off [75] - The company is focused on improving agent productivity within the WFG distribution network [73]