Starting the next chapter of Aegon’s transformation with solid 1H 2023 performance
IFRS results from now on reported under the new insurance accounting standard IFRS 17
Net loss of EUR 199 million reflects previously announced investments and assumption updates in the US
Operating result increases by 3% compared with the first half of 2022 to EUR 818 million
Operating capital generation before holding funding and operating expenses increases by 13% compares with the first half of 2022 to EUR 620 million reflecting business growth and improved claims experience
The capital ratios of main units remain above their respective operating levels; Group Solvency II ratio amounts to 202%
Cash Capital at Holding decreases to EUR 1.3 billion, mainly as a result of capital returns to shareholders
2023 interim dividend increases by EUR 0.03 compared with 2022 interim dividend to EUR 0.14 per common share
Transaction combining Aegon’s Dutch businesses with a.s.r. closed in July; related EUR 1.5 billion share buyback has begun
Strong sales growth in US, UK Workplace business, and life insurance businesses in China and Brazil. Sales momentum in asset management and UK Retail businesses affected by challenging market conditions
Statement of Lard Friese, CEO
“Aegon had a solid first half of the year. Our operating result increased by 3% compared with the same period in 2022, and reflects improved results in all insurance units while asset management was negatively impacted by a challenging market environment. Our net result was a loss of EUR 199 million, and reflects previously announced items in the US that will position us well for future growth. Our operating capital generation was strong, driven largely by our US business. The capital ratios of our main units remained above their respective operating levels in the first half of 2023. These results provide a solid basis to raise the interim dividend by 3 eurocents compared with the 2022 interim dividend to 14 eurocents per share.
In the US, Transamerica performed well. New Life sales increased by 17% compared with the previous year, driven by another strong increase in the number of World Financial Group (WFG) agents, now at a record-high of 70,000. Written sales of mid-sized retirement plans increased almost 70%, driven largely by a pooled plan sale of USD 1.7 billion. Aegon’s UK Workplace solutions platform also continued to deliver strong results, with a significant increase in net deposits driven by the onboarding of new schemes and higher net deposits on existing schemes. We also saw increased sales in our partnerships in China and Brazil. At the same time, results at Aegon’s asset management and UK Retail businesses continued to be affected by adverse market conditions.
We took significant steps in our transformation. We completed the sale of Aegon’s insurance, pension and asset management business in Central and Eastern Europe, and we announced the sale of our stake in our business in India. In addition, we closed the transaction with a.s.r. for which Aegon received EUR 2.2 billion and a 29.99% stake in a.s.r., and we have started the related EUR 1.5 billion share buyback program.
Now we have begun the next chapter in our transformation. At our 2023 Capital Markets Day held in June, we outlined how we will invest in our Strategic Assets. In the US, we will ensure that Transamerica captures its full potential and becomes America’s leading middle market life insurance and retirement company. At the same time, Transamerica will continue to reduce its exposure to Financial Assets and to improve the level and predictability of capital generation. In this respect, we welcome the fact that we have been able to execute an additional reinsurance transaction on 14,000 universal life policies with secondary guarantees, generating approximately USD 225 million of capital that will be used to further reduce Aegon’s exposure to Financial Assets over time. Together with the prior reinsurance transaction undertaken in 2021, a total of 25% of the statutory reserves backing these policies have now been reinsured.
As part of our strategy, we are also investing in our partnerships. Aegon Asset Management and La Banque Postale have extended their partnership via their joint venture, La Banque Postale Asset Management (LBP AM), through to 2035. Through our shareholding, Aegon has also participated in LBP AM’s acquisition of La Financière de l’Echiquier, which will accelerate LBP AM’s growth strategy. In the UK, Aegon has extended its partnership with Nationwide Building Society (NBS) under which Aegon UK will integrate NBS’ financial planning teams in order to support its strategy to be the leading digital platform provider in the workplace and retail markets. In addition, Aegon has increased its economic ownership in its Brazilian joint venture, Mongeral Aegon Group, to almost 60%.
I would like to thank our colleagues for all their hard work and dedication in ensuring the success of our ongoing transformation.”
Aegon’s ambition is to build leading businesses that offer customers investment, protection and retirement solutions. Its portfolio of businesses includes fully owned subsidiaries in the US, UK and a global asset manager. In addition, Aegon has partnerships in Spain & Portugal, Brazil, and China, which create value by combining the strength of local partners with Aegon’s international expertise. In the Netherlands, Aegon generates value via a strategic shareholding in a market leading insurance and pensions company. The company is taking significant steps to improve its performance and create sustainable value for all of its stakeholders.
Aegon’s businesses in the US have been 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 is to be reallocated to growth opportunities in Strategic Assets, growth markets and the global asset manager. Exposure to businesses outside of Aegon’s core focus has been largely eliminated over recent years with the announced divestment of the associate business in India in July 2023 being the most recent milestone.
Throughout its transformation, Aegon aims to maintain a solid capital position in its 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. This is underscored by the capital strength conveyed in this press release.
Transaction with a.s.r.
On July 4, 2023, Aegon announced the completion of the combination of its Dutch pension, life and non-life insurance, banking, and mortgage origination activities with a.s.r., and the beginning of its asset management partnership with a.s.r. As part of the transaction, Aegon received EUR 2.2 billion in cash proceeds and a 29.99% stake in a.s.r. The associated EUR 1.5 billion share buyback program has commenced and is expected to be completed on or before June 30, 2024. In light of the transaction, Aegon the Netherlands is no longer reported as a separate segment, and its first half 2023 result is included in Other income in the income statement.
2023 Capital Markets Day
On June 22, 2023, Aegon hosted a Capital Markets Day (CMD) to provide an update on its strategy and medium-term financial targets. This included plans to profitably grow its businesses and maximize the value from its Financial Assets, with a focus on Aegon’s largest business unit, Transamerica. Four key priorities to create value for shareholders were identified:
Change the group profile: Following the completion of the transaction with a.s.r., Aegon intends to transfer its legal seat to Bermuda and the Bermuda Monetary Authority (BMA) will then assume the role of group supervisor. Aegon continues to sharpen its operating model to accelerate the strategy to create leading businesses.
Increase Transamerica’s value: Aegon’s ambition is to build America’s leading middle market life insurance and retirement company. Over the next three years, Transamerica is expected to improve the quantum and quality of its capital generation, while reducing its exposure to Financial Assets.
Drive improvement and value creation in the rest of the portfolio: Aegon continues to strengthen its UK and asset management businesses to facilitate them in building leading positions in their markets. Aegon is also investing to grow its highly successful joint ventures in Aegon International and Asset Management.
Manage capital actively: Aegon will continue to be a rational and disciplined allocator of capital, looking to utilize its significant financial flexibility at the Holding to create value for our shareholders.
This next chapter in Aegon’s strategy is expected to lead to an increase of operating capital generation from its units to around EUR 1.2 billion, and of free cash flow to around EUR 800 million by 2025. The dividend per share is targeted to increase to EUR 0.40 over 2025, barring unforeseen circumstances and subject to the necessary approvals. Gross financial leverage is expected to reduce to EUR 5.0 billion.