Business context and reporting period
Aegon N.V. filed this annual Form 20-F for the fiscal year ended December 31, 2021; it is not a standalone fourth-quarter report. Aegon is an international insurer, retirement and investment-services group headquartered in the Netherlands, with core markets in the United States, the Netherlands and the United Kingdom, growth markets in Spain and Portugal, Brazil and China, and a global asset manager. The consolidated statements are prepared under IFRS as issued by the IASB. Aegon notes that its EU-IFRS figures differ in some respects.
Key financial metrics
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | EUR 25.209 billion | EUR 25.657 billion |
| Premium income | EUR 15.444 billion | EUR 16.099 billion |
| Operating result (non-IFRS measure) | EUR 1.906 billion | EUR 1.710 billion |
| Net result (IFRS) | EUR 2.029 billion | Loss of EUR 135 million |
| Free cash flows | EUR 729 million | EUR 530 million |
| Operating expenses | EUR 3.775 billion | EUR 3.852 billion |
| Addressable expenses | EUR 2.903 billion | EUR 2.986 billion |
| Total assets | EUR 468.252 billion | EUR 443.814 billion |
| Shareholders’ equity | EUR 23.813 billion | EUR 22.018 billion |
| Cash and cash equivalents | EUR 6.889 billion | EUR 8.372 billion |
| Borrowings, including subordinated and trust pass-through securities | EUR 11.980 billion | EUR 10.735 billion |
The Group Solvency II ratio was estimated at 211%, up from 196%. US RBC was 426%, Dutch Life Solvency II was 186%, and UK Scottish Equitable Solvency II was 167%; each was above Aegon’s respective operating level. Cash Capital at Holding rose to EUR 1.3 billion from EUR 1.1 billion. Gross financial leverage was EUR 5.9 billion, versus EUR 6.0 billion at year-end 2020. The filing does not provide a clear consolidated profit margin measure.
Aegon’s reported IFRS cash flow statement shows net cash outflow from operating activities of EUR 1.796 billion, compared with an outflow of EUR 2.854 billion in 2020. This accounting cash-flow measure is distinct from management’s free cash flow measure.
Material changes versus the prior comparable period
- Operating result increased 11%, with improved performance across most businesses, expense savings, business growth and higher equity markets. Adverse US mortality experience, mainly related to COVID-19, partly offset these gains.
- Net result improved from a EUR 135 million loss to EUR 2.029 billion profit, chiefly reflecting a swing in non-operating items from a EUR 788 million loss to a EUR 1.352 billion gain, alongside lower other charges. The 2021 gain included fair-value gains and realized investment gains; 2020 included pandemic-related market losses and larger assumption-related charges.
- Addressable expenses fell 3% from 2020. Savings initiatives reduced addressable expenses by EUR 244 million relative to the 2019 base year.
- Net deposits improved to EUR 5.374 billion from net outflows of EUR 15.223 billion. The UK and Asset Management turned positive; Americas and the Netherlands still recorded net outflows.
- Aegon Asset Management reported EUR 12.9 billion in third-party net deposits, its tenth consecutive year of positive third-party net deposits, and assets under management of EUR 410 billion, up 6%.
- New life sales fell 7% to EUR 686 million, mainly due to lower sales in International and the Netherlands, partly offset by US growth.
Outlook, management commentary, risks and unusual items
- Management expects 2022 free cash flow of EUR 550–600 million and around EUR 1.2 billion of operating capital generation, barring unforeseen circumstances. It targets EUR 400 million of addressable expense savings by 2023, against EUR 244 million achieved to date, and gross financial leverage of EUR 5.0–5.5 billion by 2023.
- Aegon targets a dividend of around EUR 0.25 per common share over 2023 and expects more linear dividend growth in 2022. The proposed 2021 final dividend is EUR 0.09 per common share; combined with the EUR 0.08 interim dividend, the proposed total is EUR 0.17 per share. The final dividend remains subject to shareholder approval.
- US mortality experience was adverse: the filing reports EUR 345 million of adverse mortality in the Americas, with most attributed directly or indirectly to COVID-19. The US business also recorded a EUR 789 million other-charge category in its segment reporting, mainly related to variable-annuity risk-reduction actions and model and assumption updates.
- Management cited uncertainty from geopolitical developments, financial markets, inflation and ongoing COVID-19 effects. The filing identifies credit, equity and interest-rate risk, longevity and policyholder behavior, operational resilience, cybersecurity, data privacy, regulatory change and execution of the transformation program among key risks. Solvency sensitivities are predominantly single-factor shocks and may not represent combined market effects.
- The planned sale of Central and Eastern European businesses to Vienna Insurance Group remained subject to approvals and had not closed by the report date. In February 2022, Aegon and VIG reached an agreement with the Hungarian government for a 45% participation by the Hungarian state in the Hungarian operations. The report also describes the sale of Stonebridge as completed in 2021.
- Russia’s invasion of Ukraine on February 24, 2022 was disclosed as a subsequent event. Aegon reported no direct operations in either country; as of March 3, 2022, direct general-account investment exposure was approximately EUR 27 million to Russia and EUR 42 million to Ukraine, with approximately EUR 38 million of combined exposure in policyholder investments with guarantees.
- The Group’s IFRS net result was EUR 2.029 billion, while the EU-IFRS reconciliation reports EUR 1.701 billion for 2021. Aegon attributes differences to the EU IAS 39 carve-out for portfolio hedge accounting. The filing states the initial impact of IFRS 17, effective in 2023, is expected to be significant; methodology and policy choices were still being finalized.
- PwC issued unqualified opinions on the consolidated financial statements and internal control over financial reporting. Management reported effective disclosure controls and no material weaknesses. The auditor identified insurance-contract valuation and certain Level 3 investment valuations as critical audit matters.
Most important facts an investor should verify
- Reconcile IFRS and EU-IFRS results and equity, and distinguish IFRS net result from the non-IFRS operating result and free cash flow measures.
- Check the assumptions and durability behind the 2022 cash-flow and capital-generation outlook, 2023 expense and leverage targets, and proposed dividend.
- Track the US mortality and claims experience, variable-annuity hedging and buyout costs, and the Dutch liability adequacy test deficit and sensitivity to interest rates and spreads.
- Confirm the status, approvals, terms and eventual proceeds of the Central and Eastern Europe divestment, including the Hungarian state participation arrangement.
- Assess the timing, methodology and financial impact of IFRS 17 adoption, and the exposure to market, credit, operational, cybersecurity and litigation risks.
- Consider Aegon’s share structure and control: Vereniging Aegon held all common shares B and had 32.6% of voting rights in a defined Special Cause, while its ordinary voting rights are restricted under the Voting Rights Agreement.