Aegon reports second quarter 2021 results

Aegon's strategy
Aegon is taking significant steps to transform the company in order to improve its performance and create value for its customers and shareholders. To ensure delivery against these objectives, a rigorous and granular operating plan has been developed across the Group. Aegon focuses on three core markets (the United States, the Netherlands, and the United Kingdom), three growth markets (Spain & Portugal, China, and Brazil) and one global asset manager. Aegon’s businesses within its core markets have been separated into Financial Assets and Strategic Assets. The aim is to release capital from Financial Assets and from businesses outside its core and growth markets, and re-allocate capital to growth opportunities in Strategic Assets, growth markets and Asset Management. Throughout this transformation, the company aims to maintain a solid capital position in the business units and at the Holding. Through proactive risk management actions, Aegon is improving its risk profile and reducing the volatility of its capital ratios.

Operational improvement plan
Aegon has an ambitious plan comprised of more than 1,100 detailed initiatives designed to improve the operating performance of its business by reducing costs, expanding margins and growing profitably. A total of 528 initiatives have been executed between the launch of the operational improvement plan and the end of the second quarter 2021, of which 421 are related to expense savings.

Aegon is implementing an expense savings program aimed at reducing addressable expenses by EUR 400 million in 2023 compared with the base year 2019. Aegon has delivered on its ambition to achieve half of its expense reduction target by the end of 2021. In the trailing four quarters, Aegon has reduced addressable expenses by EUR 245 million compared with the base year 2019. Of this expense reduction, EUR 220 million was driven by expense savings initiatives. The remaining reduction in annual addressable expenses reflects expense benefits related to reduced activity in a COVID-19 environment net of expenses made for growth initiatives, which are aimed at improving customer service, enhancing user experience and developing new products. These growth initiatives contributed EUR 26 million to the operating result in the second quarter of 2021. The company will continue to execute the expense and growth initiatives at pace.

Strategic Assets
Strategic Assets are businesses with a greater potential for an attractive return on capital, and where Aegon is well positioned for growth. In these businesses, Aegon will invest in profitable growth by expanding its customer base and increasing its margins.

Americas
In the US Individual Solutions business, Transamerica’s aim is to achieve a top-5 position in Term Life, Whole Life Final Expense, and Indexed Universal Life through profitable sales growth. New life sales in the second quarter of 2021 amounted to USD 95 million, which represents an increase of 24% compared with the same period last year. This was mainly driven by an increase in new sales of Indexed Universal Life. Transamerica is benefiting from an increase in licensed agents at World Financial Group (WFG) and a higher market share in this distribution channel from the addition of a funeral planning benefit to Indexed Universal Life products for qualifying policyholders. Transamerica developed this new benefit to provide grieving beneficiaries valuable resources to help the insured person’s family plan end-of-life services. Furthermore, Whole Life Final Expense sales increased following enhancements made both to the product and the application process. In the second quarter of 2021, the market consistent value of new business for Life increased by 45% compared with the same period last year to USD 73 million. This was largely driven by higher sales, lower underwriting expenses, and a more favorable product mix.

In the US Workplace Solutions business, Transamerica aims to compete as a top-5 player in new sales in the Middle‑Market segment of Retirement Plans. Momentum is building here with four consecutive quarters of written sales of over USD 1 billion. Written sales were supported by Pooled Plan Arrangement contract wins. These multi-employer pension schemes are a strategic growth driver. Net deposits for the Middle-Market were positive at USD 324 million.

The Netherlands
Aegon is the largest third-party mortgage originator in the Netherlands, benefiting from its scale, high service levels to intermediaries and customers, and diversified funding. In the second quarter of 2021, the company originated EUR 2.9 billion of residential mortgages – of which two thirds were fee-based mortgages originated for third-party investors – and mortgages under administration reached a record EUR 58 billion. Aegon expects mortgage origination volumes to decrease in the second half of 2021, as spreads on mortgages have come down year-to-date.

Net deposits for the Workplace Solutions defined contribution products (PPI) in the Netherlands increased by 20% compared with the second quarter of 2020 to EUR 198 million. PPI assets under management surpassed the EUR 5 billion mark for the first time, underscoring Aegon’s leading position in this market.

Aegon is further developing its online bank Knab into a digital gateway for individual retirement solutions. In the second quarter of 2021, the online bank grew its customer base by over 5,000. To accelerate its strategy, Aegon has stopped offering savings products to customers of its original savings bank. These customers are being encouraged to either convert their accounts to Knab accounts or transfer their funds to another bank. Knab customers receive access to products, services and features that provide insight into daily banking matters and to products that help them accumulate wealth.

United Kingdom
Aegon's assets under administration in the United Kingdom reached GBP 200 billion for the first time, as it continues to increase scale in the UK pension and savings market. The growth in assets reflects strong markets, and benefits from a number of ongoing investments in the business. Aegon’s platform business in the United Kingdom – excluding the low-margin Institutional business – doubled its net deposits compared with the same quarter last year to GBP 1.0 billion, driven by the Workplace segment. This reflects Aegon’s ability to serve the needs of both middle-market employers and large corporates. This quarter’s net deposits in the United Kingdom included a significant Master Trust contract win, which underscores that Aegon is well positioned in this fast-growing market of multi-employer pension schemes. Aegon continues to invest in the overall Workplace proposition to give the business a distinctive position in the key area of member engagement. An example thereof is the acquisition of Pension Geeks, an award-winning business that specializes in connecting people with their finances through innovative engagement techniques, communication and events. This acquisition is expected to further improve the customer experience, make communications more personalized, and drive growth.

By profitably growing its platform business, and by reducing expenses, Aegon UK aims to mitigate the impact from the gradual run-off of its traditional product portfolio. The traditional product portfolio is the main driver behind annualized revenue lost on net deposits for the second quarter. Expense initiatives, as well as the favorable impact from market movements on assets have contributed to an improvement in efficiency, with platform expenses as a percentage of assets under administration decreasing by 5 basis points compared with the second quarter of last year to 21 basis points.

Financial Assets
Financial Assets are blocks of business which have closed for new sales, and which are capital intensive with relatively low returns on capital employed. Aegon has established dedicated teams to manage these businesses, who are responsible for maximizing their value through disciplined risk management and capital management actions. To achieve this, Aegon is initially focusing on unilateral and bilateral actions before any third-party solutions would be taken into consideration. Unilateral actions are those that can be executed fully under Aegon’s control, while bilateral actions require the interaction and consideration of other stakeholders.

Americas
An example of such a bilateral action, is the lump-sum buy-out program that Transamerica launched in July 2021 for policyholders of Variable Annuities with guaranteed minimum income benefit (GMIB) riders, whose financial objectives may have changed since the issuance of their policies. Under the program, policyholders are being offered a lump-sum payment – exceeding the account value – in return for surrendering their Variable Annuity policy with GMIB riders, subject to certain conditions. The program will reduce hedge costs for the remaining Variable Annuities portfolio going forward and will reduce Transamerica’s economic exposure at a price that is more favorable than the price that Aegon believes would be possible to achieve in a transaction with a third party.

Aegon expects to expand the dynamic hedging program, covering the equity and interest rate risks of its US Variable Annuities block with guaranteed minimum withdrawal benefits (GMWB), to the entire Variable Annuities portfolio once the take-up rate of the lump-sum buy-out program becomes more clear. This expanded hedging program will include policies with guaranteed minimum death benefit riders (GMDB) and the remaining policies with GMIB riders, as of the start of the fourth quarter of 2021. This builds on the effective dynamic hedging program of the GMWB portfolio where the hedge effectiveness for the targeted risks was consistently above 95% over the last six quarters. Dynamic hedging stabilizes cash flows on an economic basis and reduces sensitivities to equity and interest rate risks. The operational preparations for the expansion of the dynamic hedge program were completed in the second quarter of 2021, and the existing macro hedges will be adjusted during the third quarter to smoothen the transition to dynamic hedging.

The combination of extending the dynamic hedge to the full portfolio of Variable Annuities together with the execution of the lump-sum buy-out program is expected to have up to 5%-points negative impact on the RBC ratio based on current market conditions. Dynamic hedging decreases available capital as a result of reflecting the hedge costs in the calculation of the reserves, which is largely offset by lower required capital as a result of holding higher reserves. On an ongoing basis, the expansion of the dynamic hedging program is expected to reduce operating capital generation by around USD 50 million per year. At the same time, Transamerica’s reduced exposure to equity and interest rate risks leads to more predictable capital generation over the lifetime of the variable annuity business, and increases the certainty of remittances. Expanding the Variable Annuity dynamic hedging program and executing the lump-sum buy-out program is expected to result in a USD 0.5 to 0.7 billion pre-tax, one-time loss to be reported in Other charges in the third quarter of 2021. This is mostly driven by a non-cash write-off of deferred acquisition costs.

After the full implementation of both programs in the second half of 2021, Aegon will consider further unilateral and bilateral actions to maximize the value of the variable annuity business. Aegon will also allocate internal resources to investigate its options regarding potential third‑party solutions. Aegon will update the market on its progress in the first half of 2022.

The primary management action regarding Transamerica's Long-Term Care block is a multi-year rate increase program that has a value of USD 300 million. In the second quarter of 2021, the company obtained regulatory approvals for additional rate increases worth USD 64 million, bringing the value of approvals achieved year-to-date to USD 176 million. Furthermore, claims experience developed favorably for the Long-Term Care business with an actual-to-expected ratio of 52% for the second quarter of 2021 as a result of elevated claims terminations due to the impact of the COVID-19 pandemic, and a one-time reserve release. Adjusted for this reserve release, the actual-to-expected claims ratio amounted to 81%.

The Netherlands
The dedicated team responsible for the Dutch Life business is actively managing risks and the capital position to enhance the consistency of remittances to the Group. The main legal entity of the Dutch Life business – Aegon Levensverzekering N.V. – implemented a quarterly remittance policy in the fourth quarter of 2020, and again remitted EUR 25 million in the second quarter of 2021. Its Solvency II ratio increased from 149% to 172% during the second quarter of 2021, which is above the operating level of 150%. The increase includes benefits from management actions, model updates and favorable market movements.

Growth Markets and Asset Management
In its growth markets – Brazil, Spain & Portugal and China – Aegon will continue to invest in profitable growth.

To align the organization to its strategy, Aegon's Brazilian joint venture Mongeral Aegon Group (MAG) will become part of Aegon International, and will be reported as part of this segment from 2022 onwards. As a result, Aegon International will include all three growth markets. This will sharpen the focus on growth, and offer the necessary support to these important markets.

The market consistent value of new business (MCVNB) from life products in Aegon's growth markets increased by 6% to EUR 17 million, mainly driven by higher new life sales in Brazil and Spain & Portugal. New premium production for property & casualty and accident & health insurance increased by 167% compared with the second quarter of 2020 to EUR 28 million as a result of new products launched in Spain & Portugal. Sales through Aegon’s bancassurance partners are benefitting from the redesign of the digital sales channels to accelerate the digital transformation in insurance distribution. The redesign includes easier customer access to these sales channels by upgrading websites, enhanced data analytics to better understand customer behavior and needs, and the introduction of monthly online sales campaigns. These actions supported a doubling of sales through the digital channels to over 15% of total production in June.

Aegon Asset Management aims to significantly increase the operating margin of its Global Platforms by improving efficiency and driving growth. Third-party net deposits on the Global Platforms were EUR 2.1 billion in the second quarter of 2021, driven by significant net deposits in various investment strategies on the Fixed Income platform. This builds on Aegon’s track record of positive third-party net deposits. Annualized revenues gained for the Global Platforms amounted to EUR 4 million for the quarter and reflect strong net deposits. The operating margin of the Global Platforms increased by 2 percentage points compared with the second quarter of 2020 to 13.6% as a result of higher revenues from net deposits, favorable market movements and origination fees in Aegon’s Real Assets business associated with responsible investment mandates in Workforce housing and Affordable housing. Aegon Asset Management is transitioning to a global operating platform to improve efficiency and customer experience. This will also significantly reduce technical complexity by bringing several different solutions to a single enterprise solution. As an important first step in this process, all front office and risk teams now have access to a shared risk management module Aladdin provided by BlackRock.

Smaller, niche or sub-scale businesses
In small markets or markets where Aegon has sub-scale or niche positions, capital will be managed tightly with a bias to exit.

Aegon has taken the decision to combine its programs for purchasing corporate insurance – such as management liability risks – and centralize all retained risks into one existing US-based carrier to achieve cost and capital efficiencies. As part of this process, Aegon will wind down its Irish corporate insurance entity. Over time, this is expected to result in a release of EUR 40 million of capital invested in this entity.

On April 27, 2021, Transamerica closed the sale of its portfolio of fintech and insurtech companies to a fund managed and advised by Swiss-based private equity firm Montana Capital Partners. The transaction had a positive impact of EUR 40 million on Cash Capital at the Holding in the second quarter of 2021.

Strengthening the balance sheet
Aegon aims to continue strengthening its balance sheet, and is taking proactive management actions to improve its risk profile and reduce the volatility of its capital ratios.

At the Capital Markets Day on December 10, 2020, Aegon announced its plans to reduce its economic interest rate exposure in the United States by one third to one half in order to reduce its dependency on financial markets and improve its risk profile. At the end of the second quarter of 2021, Aegon had already executed over two thirds of this plan through management actions, primarily by lengthening the duration of its asset portfolio and extending its forward starting swap program.

Today, Aegon announced that it is exercising its right to redeem the USD 250 million floating rate perpetual capital securities with a minimum coupon of 4% issued in 2005. The redemption is in line with Aegon’s target to reduce leverage. The redemption of these grandfathered Tier 1 securities will be effective September 15, 2021, when the principal amount will be repaid together with any accrued and unpaid interest. After the redemption, Aegon will have reduced its gross financial leverage by approximately EUR 700 million since the third quarter of 2020 to EUR 5.9 billion. Aegon targets to reduce its gross financial leverage to between EUR 5.0 to 5.5 billion by 2023.

Operating result
Aegon's operating result increased by 62% compared with the second quarter of 2020 to EUR 562 million with higher earnings across all segments. This was mainly driven by better claims experience in the Americas, expense savings, and increased fees due to higher equity markets. This more than offset the reclassification of the result of Central & Eastern Europe from operating result to Other income following the announced divestment of the business. Adjusted for this reclassification and on a constant currency basis, Aegon’s operating result increased by 74% compared with the second quarter of 2020.

The operating result from the Americas more than doubled compared with the second quarter of 2020 to EUR 282 million, driven by better claims experience related to the COVID-19 pandemic. Unfavorable mortality claims experience improved from EUR 88 million in the second quarter of last year to EUR 27 million in this quarter. Favorable morbidity claims experience – including a one-time reserve release – contributed EUR 55 million in this quarter compared with EUR 48 million in the second quarter of 2020. The operating result also benefited from increased fees due to favorable equity market performance – especially in Variable Annuities, Retirement Plans, and Mutual Funds – as well as a higher investment margin in Life, and lower addressable expenses.

Aegon’s operating result in the Netherlands increased by 11% compared with the second quarter of 2020 to EUR 185 million. This was mainly driven by a higher investment margin in the Life business, growth in Mortgages, and the benefit of expense savings initiatives.

The operating result from the United Kingdom increased by 19% compared with the second quarter of 2020, or 15% on a constant currency basis to EUR 44 million. Higher fee revenues from the growth of the platform business and favorable equity markets, along with lower expenses, more than offset the impacts from the loss of earnings due to the sale of Stonebridge and the gradual run-off of the traditional product portfolio. Lower expenses were in part driven by expense savings initiatives, as well as favorable timing with respect to incurring costs.

The operating result from International increased by EUR 1 million to EUR 34 million in the second quarter of 2021, as better results at TLB and in Spain & Portugal were only partly offset by the reclassification of the result of Central & Eastern Europe from operating result to Other income following the announced divestment of the business. Adjusting for this impact and on a constant currency basis, the operating result increased by 60% driven by improved claims experience, as well as business growth in Spain & Portugal.

The operating result from Aegon Asset Management more than doubled compared with the second quarter of 2020 to EUR 71 million. The increase was mostly driven by higher management fees and performance fees in Aegon's Chinese asset management joint venture, Aegon Industrial Fund Management Company (AIFMC). The operating result from Global Platforms also increased, mainly because of higher revenues resulting from net deposits and favorable market movements.

The operating result from the Holding improved by EUR 2 million to a loss of EUR 54 million, mainly driven by funding expenses.

Non-operating items
The result from non-operating items amounted to EUR 644 million in the second quarter of 2021, mainly resulting from fair value items and realized gains on investments.

Fair value items  

The gains from fair value items amounted to EUR 468 million in the second quarter of 2021. A positive result on fair value investments was largely driven by private equity and real estate revaluations in the Americas and the Netherlands. In addition, the macro hedge programs in the Americas delivered a gain because of the interest rate hedge paying off as interest rates declined.

Realized gains on investments

Realized gains on investments amounted to EUR 162 million, mainly due to gains on debt securities which were sold to fund investments in long-duration assets as part of the interest rate risk management plan.

Net recoveries
Net recoveries amounted to EUR 15 million, as recoveries on investments – including the unsecured loan portfolio in the Netherlands, and corporate credits and mortgage-backed securities in the Americas – more than offset gross impairments.

Other charges
Other charges amounted to EUR 153 million and were mainly the result of assumption updates for Variable Annuities surrender rates to reflect portfolio and industry experience. One-time investments related to the operational improvement plan, along with charges related to settlements of litigation in the Americas, were almost fully offset by the release of a technical provision in the Netherlands following a settlement related to a co‑insurance contract.

Net result
The income tax expense amounted to EUR 205 million, while the profit before tax was EUR 1,053 million, resulting in a net result of EUR 849 million. The effective tax rate of 19% is below the nominal tax rate, which is mainly due to tax-exempt income and tax credits in the Americas. Moreover, there was a one-time tax benefit in the United Kingdom due to an increase in the corporate income tax rate from 19% to 25%, effective from April 2023, that was enacted in May 2021. This led to an increase in the value of deferred tax assets.

Expenses
Addressable expenses decreased by 10% compared with the second quarter of 2020, or 6% on a constant currency basis, to EUR 706 million. This was mainly driven by expense savings initiatives as part of the operational improvement plan. Furthermore, expenses benefited from lower travel, marketing, and sales activities due to the impact of the COVID-19 pandemic. Addressable expenses in both the second quarter of 2020 and 2021 exclude expenses related to Central & Eastern Europe following the announced divestment of the business.

Operating expenses decreased by 3% compared with the second quarter of 2020 to EUR 961 million. The decline in addressable expenses, lower IFRS 9 / 17 project costs, and favorable currency movements were partly offset by higher one-time investments, which included EUR 94 million related to the operational improvement plan in the second quarter of 2021.

Sales
Net deposits for the Group amounted to EUR 1.3 billion in the second quarter of 2021. This was mainly the result of EUR 2.9 billion third-party net deposits in Asset Management, from both the Global Platforms and AIFMC. Furthermore, the United Kingdom contributed EUR 1.8 billion net deposits driven by the platform business, and the Netherlands contributed EUR 0.2 billion as a result of continued demand for defined contribution products (PPI). These were partly offset by EUR 3.6 billion net outflows in the Americas, which were mainly attributable to outflows in the large market segment of Retirement Plans and Variable Annuities. The latter reflects Aegon’s decision to stop the sale of Variable Annuities with significant interest rate sensitive living benefit riders and increased surrenders in part of the book.

New life sales declined by 2% compared with the second quarter of 2020 to EUR 172 million. This was mainly driven by exclusion of new life sales from Central & Eastern Europe following the announced divestment of the business. Adjusting for this impact and on a constant currency basis, new life sales were up 16% compared with the second quarter of 2020. This was mostly driven by higher sales in the Americas, where Indexed Universal Life sales benefited from a 13% increase in licensed agents at World Financial Group, and a higher market share in this distribution channel. This was partly offset by lower sales in the Netherlands following the decision to classify the Dutch Life business as a Financial Asset and, over time close most products for new sales. In International, higher sales in Spain & Portugal from initiatives to grow the bancassurance channel more than offset lower sales in China.

New premium production for accident & health insurance decreased by 37% compared with the second quarter of 2020 to EUR 29 million due to lower sales in the Americas. This was mainly due to last year's decision to exit the individual Medicare supplement segment, and the fact that last year’s second quarter included sales of three, larger contracts in Workplace Solutions that did not repeat this year.

New premium production for property & casualty increased by 16% compared with the second quarter of 2020 to EUR 26 million, as a result of higher sales in Spain & Portugal. This was partially offset by the exclusion of sales from Central & Eastern Europe following the announced divestment of the business. Adjusting for this impact, property & casualty sales almost tripled.

Market consistent value of new business
Market consistent value of new business (MCVNB) increased from EUR 8 million in the second quarter of 2020 to EUR 124 million in the second quarter of 2021. This was mainly driven by an increase in MCVNB in the Americas resulting from higher volumes and margins in Indexed Universal Life, and a lower production of Variable Annuities following the decision to stop selling Variable Annuities with significant interest rate sensitive riders. In addition, MCVNB in the United Kingdom benefited from higher premium increments by existing customers, which led to higher volumes and margins.

Shareholders' equity
Shareholders' equity excluding revaluation reserves increased by EUR 0.8 billion during the second quarter of 2021, to EUR 17.5 billion – or EUR 8.38 per common share – on June 30, 2021, driven by retained earnings.

Gross financial leverage
Gross financial leverage remained stable at EUR 6.1 billion in the second quarter of 2021. The gross financial leverage ratio improved from 26.7% on March 31, 2021, to 25.8% on June 30, 2021, as a result of the increase in shareholders’ equity excluding revaluation reserves.

Today, Aegon announced that it is exercising its right to redeem the USD 250 million floating rate perpetual capital securities with a minimum coupon of 4% issued in 2005. The redemption is in line with Aegon’s target to reduce leverage. The redemption of these grandfathered Tier 1 securities will be effective September 15, 2021, when the principal amount will be repaid together with any accrued and unpaid interest. After the redemption, Aegon will have reduced its gross financial leverage by approximately EUR 700 million since the third quarter of 2020 to EUR 5.9 billion. Aegon targets to reduce its gross financial leverage to between EUR 5.0 to 5.5 billion by 2023.

Cash Capital at Holding and free cash flow
Aegon's Cash Capital at the Holding increased from EUR 1,191 million to EUR 1,386 million during the second quarter of 2021, which is in the upper half of the operating range of EUR 0.5 billion to EUR 1.5 billion. Free cash flow to the Holding of EUR 175 million resulted from EUR 275 million gross remittances from the units and EUR 100 million holding funding and operating expenses. In addition, EUR 40 million proceeds were received by the Holding in the second quarter from the divestment of Transamerica’s portfolio of fintech and insurtech companies. These cash inflows were partly offset by EUR 17 million capital injections, mainly due to adverse claims experience in India, and EUR 4 million of other items.

In the third quarter of 2021, Aegon expects to inject approximately EUR 40 million in its joint venture in Brazil in light of adverse mortality experience attributable to COVID-19, and to strengthen the balance sheet to support its growth.

Capital ratios
Aegon’s Group Solvency II ratio increased from 194% to 208% during the second quarter of 2021, with the capital ratios of its three main units above their respective operating levels at the end of the quarter. Capital generation after holding expenses amounted to EUR 1,470 million for the second quarter of 2021. The benefit from market movements totaled EUR 488 million and was mainly driven by favorable equity market movements in the United States, and private equity and real estate revaluations in the United States and the Netherlands. One-time items amounted to EUR 606 million, mainly from management actions and model changes in the Netherlands, and a forthcoming increase in the corporate income tax rate in the United Kingdom, which led to a reduction in required capital. Operating capital generation amounted to EUR 376 million, and reflects net favorable claims experience from morbidity and mortality in the United States, and strong new business margins in the United Kingdom.

The estimated RBC ratio in the United States increased from 428% on March 31, 2021, to 444% on June 30, 2021, and remained above the operating level of 400%. The RBC ratio was positively impacted by higher equity markets, and by private equity and real estate revaluations. Furthermore, management actions had a favorable impact, and included the sale of an alternative asset portfolio. This more than offset settlements of litigation related to monthly deduction rate adjustments on certain universal life policies. Assumption updates contributed positively, mostly because of an expense assumption update to reflect expected benefits from expense savings initiatives. This more than offset the impact from changing the surrender assumptions to reflect portfolio and industry experience. Strong operating capital generation, reflecting favorable experience from morbidity and expenses, contributed favorably and broadly offset dividend payments to the intermediate holding company.

The estimated Solvency II ratio of NL Life increased from 149% on March 31, 2021, to 172% on June 30, 2021, which is above the operating level of 150%. The increase includes benefits from management actions, model updates and favorable market movements. The main management action was a settlement related to a co-insurance contract. Model updates relate to refinements and were mostly driven by more granular asset and expense modeling. Furthermore, market movements had a favorable impact, mainly driven by positive real estate revaluations following a strong Dutch housing market and flattening of the interest rate curve at the longer end. The latter impact reflects the fact that Aegon hedges on an economic basis. Operating capital generation had a positive impact, which more than offset the EUR 25 million dividend payment to Group in the second quarter.

The estimated Solvency II ratio for Scottish Equitable Plc increased from 158% on March 31, 2021 to 163% on June 30, 2021, and remained above the operating level of 150%. The increase was primarily driven by a forthcoming increase in the corporate income tax rate, which led to a reduction in required capital. In addition, operating capital generation had a positive impact.

2021 interim dividend
Aegon aims to pay out a sustainable dividend to allow equity investors to participate in the company’s performance, which can grow over time if Aegon’s performance so allows. Aegon targets a dividend per common share of around EUR 0.25 over 2023. At its Capital Markets Day, Aegon guided for muted near-term dividend growth. Since then, Aegon has made steady progress on its strategic priorities and financial targets. As a result, Aegon announces today an interim dividend for 2021 of EUR 0.08 per common share, which represents an increase of EUR 0.02 compared with the interim dividend for 2020.

The interim dividend will be paid in cash or in stock at the election of the shareholder. The value of the dividend to be paid in shares will be approximately equal to the dividend to be paid in cash. Aegon intends to neutralize the dilutive effect of the 2021 interim dividend to be paid in shares in the fourth quarter of this year.

Aegon's shares will be quoted ex-dividend on August 20, 2021. The record date is August 23, 2021. The election period for shareholders will run from August 25 up to and including September 10, 2021. The stock fraction will be based on the average share price on Euronext Amsterdam, using the high and low of each of the five trading days from September 6 through September 10, 2021. The stock dividend ratio will be announced on  Aegon's website on September 10, 2021 after business hours. The dividend will be payable as of September 17, 2021.