Business Context and Reporting Period
Company: Aegon Ltd.
Filing Type: Form 6-K (Report of Foreign Issuer)
Reporting Period: First Half (1H) 2024, ended June 30, 2024
Release Date: August 22, 2024
Aegon is an international financial services holding company focused on investment, protection, and retirement solutions. The company is executing a strategy to reduce exposure to capital-intensive "Financial Assets" (primarily in the US) and reallocate capital to "Strategic Assets," partnerships, and its global asset manager. Key strategic milestones in the period included the completion of the EUR 1.535 billion share buyback program related to the a.s.r. transaction and the divestment of its Indian business.
Key Financial Metrics
| Metric | 1H 2024 | 1H 2023 | Change |
|---|---|---|---|
| Net Result (IFRS) | Loss of EUR 65 million | Loss of EUR 199 million | Improvement of 67% |
| Operating Result | EUR 750 million | EUR 818 million | Decrease of 8% |
| Operating Capital Generation (OCG) (Before holding funding/expenses) |
EUR 588 million | EUR 620 million | Decrease of 5% |
| Free Cash Flow | EUR 373 million | EUR 287 million | Increase of 30% |
| Shareholders' Equity per Share | EUR 4.02 | EUR 4.27 (Dec 31, 2023) | Decrease of 6% |
| Contractual Service Margin (CSM) per Share (Pro-forma after tax) |
EUR 4.17 | EUR 3.65 (Dec 31, 2023) | Increase of 14% |
| Gross Financial Leverage | EUR 5.1 billion | EUR 5.1 billion | Stable |
| Cash Capital at Holding | EUR 2.1 billion | EUR 1.3 billion (1H 2023) | Increase of 59% |
Material Changes vs. Prior Period
- US Financial Assets Impact: The operating result decline was primarily driven by unfavorable mortality experience in US Financial Assets (specifically Universal Life), resulting in a negative contribution of USD 73 million to earnings on in-force, compared to a positive USD 88 million in 1H 2023.
- Strategic Assets Growth: Despite the headwinds in Financial Assets, US Strategic Assets showed strong growth. Individual Life new sales increased 5% to USD 245 million, and the World Financial Group (WFG) sales force grew 13% to nearly 79,000 agents.
- Asset Management Performance: Global Platforms and Strategic Partnerships generated combined third-party net deposits of nearly EUR 8 billion, a significant turnaround from outflows in the prior year.
- UK Transformation: Net deposits in the UK Workplace platform increased to GBP 1.7 billion, while the Adviser platform saw net outflows of GBP 1.8 billion due to macroeconomic conditions and consolidation in non-target segments.
- Non-Operating Items: A loss of EUR 430 million from non-operating items (including EUR 312 million in fair value losses and EUR 403 million in other charges) offset the operating result, leading to the net loss. Other charges included EUR 373 million related to actuarial assumption updates in the US.
Guidance, Outlook, and Management Commentary
- 2024 Guidance: Management remains on track to meet the 2024 Operating Capital Generation (OCG) guidance of EUR 1.1 billion.
- Capital Targets: Aegon aims to reduce capital employed in US Financial Assets to EUR 2.2 billion by the end of 2027. The company targets operating capital generation of around EUR 1.2 billion and free cash flow of around EUR 800 million by 2025.
- Dividend Policy: The interim dividend for 2024 is set at EUR 0.16 per share (up EUR 0.02 from 2023). The long-term target is to grow the dividend to around EUR 0.40 per share over 2025.
- Share Buybacks: A new EUR 200 million share buyback program commenced in July 2024 and is expected to be completed in the second half of 2024.
- Outlook on Assumptions: Management expects recent actuarial assumption updates to reduce future IFRS claims experience variances, leading to an increase in the operating result going forward.
Investor Verification Checklist
- Mortality Experience: Verify the sustainability of the unfavorable mortality claims in US Financial Assets and the effectiveness of the reinsurance and rate increase strategies in Long-Term Care.
- Actuarial Assumption Updates: Confirm the impact of the EUR 373 million charge related to assumption updates on future earnings volatility and the timeline for the expected improvement in operating results.
- Capital Run-off: Monitor progress on reducing capital employed in US Financial Assets toward the EUR 2.2 billion 2027 target.
- UK Market Dynamics: Assess the continued outflows in the UK Adviser platform and the ability of the Workplace platform to offset these trends.
- Shareholder Returns: Track the execution of the new EUR 200 million buyback program and the timing of the final 2024 dividend.