Aegon provides update on plans to strengthen position in attractive US market.
At Aegon's Analyst and Investor Conference hosted in New York, CEO Alex Wynaendts and Aegon's US management team will today: reaffirm the company's 2018 financial targets; detail additional management actions to accelerate the restructuring of its US business; and demonstrate how Aegon is strongly positioned to achieve growth.
"Today, we are announcing a number of comprehensive measures in order to further reduce expenses in our US business and improve our operational performance," said Alex Wynaendts.
"We will continue to build on our strong franchises, which have a significant presence in some of the world's largest insurance and retirement markets. This gives me confidence in our ability to achieve our objectives of growing our business profitably, reducing expenses, and returning capital to shareholders."
Reaffirming 2018 group financial targets
- Return on equity of 10% through organic growth, expense savings and capital return
- EUR 2.1 billion capital return to shareholders in 2016-2018
- Expense reduction program significantly increased to EUR 350 million
Aegon is on track to reach its financial targets for 2018, as additional expense savings are implemented to offset the effects of lower than anticipated interest rates, regulatory changes and lower profitability of sales.
The company now aims to reduce its annual operating expenses by EUR 350 million by year-end 2018, up from its original target of EUR 200 million. This will enable the company to reach the 10% RoE target in 2018. Restructuring charges associated with the expense savings target are expected to amount to EUR 20 million in the fourth quarter of 2016.
During 2016, Aegon has returned EUR 950 million to shareholders of the targeted EUR 2.1 billion of capital over the 2016-2018 period. Aegon aims to return the remainder through growing dividends supported by Aegon's solid capital position and capital generation in its businesses.
- New management actions announced today to accelerate restructuring in the US
- Doubling of the 2018 expense savings target to USD 300 million
- Further net reduction of over 500 positions
- First phase of location strategy implemented – closing 3 offices
- Strategic decision to exit the Affinity, Direct TV and Direct Mail channels
- Invest in capabilities to create a differentiated digital offering
The original USD 150 million expense savings plan will be completed in 2017, one year ahead of schedule, and the expense savings target to be achieved by year-end 2018 has now been doubled to USD 300 million. These additional savings will be realized through, among other measures, further reduction of positions, closure of locations, a more efficient use of technology and outsourcing capabilities.
Aegon has also decided to exit the Affinity, Direct TV and Direct Mail channels, which are part of its Accident & Health line of business in the United States. After reviewing these businesses, Aegon decided that these no longer fit with its strategic objectives. As a result, USD 100 million of capital will be released over the next three years, while underlying earnings before tax will be reduced by approximately USD 25 million per annum.
Strong strategic positioning to support growth
Aegon's US operations are well positioned across a number of key business lines to capture the significant opportunities it sees in the sizable US market. It has a diversified and growing profit pool in the growing retirement market, as well as leading protection and accident & health franchises.
The Transamerica brand is differentiated and has strong customer resonance, which management is looking to build upon to develop a truly customer-centric model.
The key focus of the US management team to date has been to transform Aegon's US operations from a business lines orientation into one, functionally-organized business. The aim is to better meet customers' needs and create a consistent, positive experience for customers, business partners and employees.
The US management team will today highlight how it is executing the accelerated five part plan to transform the customer experience to facilitate growth in the target markets of wealth and health-related products and solutions.
In addition, management will detail how the company is leveraging its integrated worksite strategy and market leading capabilities in key retirement markets as a provider of over 40,000 institutional retirement plans, and turn these into 5 million retail customer relationships over time.
Finally, management will also outline its plans to deliver an innovative, digital front-end for retirement plans and employee benefits to obtain one view of the customer and enable the company to provide relevant and timely information, guidance and advice to customers.