Aegon Ltd. (AEG) Earnings

Management highlights

- **Overall Financial Performance**: The group delivered 9% year-over-year operating result growth to 804 million euros, with all segments posting higher results. Operating capital generation (OCG) increased 27% year-over-year to 416 million euros, and free cash flow reached 392 million euros. Group solvency ratio stood at 169% as of June 30, 2026, and cash capital at holding hit 1.7 billion euros. Valuation equity per share increased 4% to 9.42 euros in the period. Aegon UK is classified as held for sale and excluded from core operating metrics. - **Commercial Highlights**: Transamerica's individual life new sales grew 54% year-over-year, driven by the successful expansion of digital instant-decision underwriting for final expense, indexed, and universal life products. WFG (World Financial Group) surpassed 100,000 licensed agents, delivering 5% life sales growth and 12% annuity sales growth. Retirement plan written sales remained strong, especially in pooled plans. Third-party net inflows were positive for Aegon Asset Management overall, and international growth was led by Brazil. For the first time, new business CSM additions in the U.S. exceeded CSM releases from the existing in-force portfolio, indicating structurally growing future profits. - **U.S. Relocation Progress**: The planned relocation of AGON's headquarters to the U.S. is progressing on time and on budget, with ~40% of the expected 350 million euros in transition expenses booked to date. Key completed actions include the announcement of Aegon UK sale, issuance of a $500 million senior unsecured U.S. dollar bond to build a U.S. yield curve, agreement with the largest shareholder on future relationship and U.S.-aligned governance, and preparation for U.S. GAAP implementation with dry runs planned for H2 2026. The Extraordinary General Meeting (EGM) to vote on the relocation is scheduled for October 8, 2026. New York City was selected as the headquarters location; CEO Lard Friese will relocate in January 2027, his mandate has been extended through 2030, and Will Fuller will become President and COO effective January 2027. The holding company will be renamed Transamerica when the legal seat moves in early 2028. - **Capital Return Updates**: The company increased its second half 2026 share buyback program by 150 million euros to 350 million euros, targeting ~1 billion euros in holding cash capital at year-end 2026. An interim dividend of 21 euro cents per share was announced, up 11% year-over-year. - **Leadership Update**: Current CFO Duncan Russell will not relocate to the U.S. for personal reasons and will step down after an orderly transition; a search for a new CFO is underway.

Guidance

- Core medium-term financial ambitions from the 2025 Capital Markets Day are maintained; updates to guidance only reflect mechanical adjustments for the sale of Aegon UK and the TAM segment transfer, with no changes to underlying business assumptions. - WFG targets reaching ~110,000 licensed agents by 2027. - The target of reducing capital employed in financial assets to $2.1 billion is maintained; the current balance is $2.4 billion, and management is confident of hitting the target via runoff, internal actions, or transactions if needed. - U.S. RBC ratio remains comfortably above the 400% operating target, standing at 420% in H1 2026. The company continues to target ending 2026 with approximately 1 billion euros in cash capital at holding. - Aegon UK sale proceeds are still planned to be used for a combination of debt reduction and additional share buybacks, with no change to this plan.

Segment performance

1. **Americas (Transamerica)**: Operating result reached $756 million, growing 14% year-over-year in local currency after adjusting for the transfer of Transamerica Asset Management (TAM) to Aegon Asset Management. Distribution saw improved operating margins on higher commissions; savings and investments benefited from higher AUA fees and margin expansion in stable value products; protection solutions grew portfolio size driving higher CSM releases that offset onerous contract impacts, and claims experience was favorable. The segment contributed 75% of total group operating results. OCG from the Americas increased 35% year-over-year in local currency. 2. **International**: New life sales were broadly stable year-over-year, with growth in Brazil (driven by strong demand for individual risk products) offset by lower sales in China due to product repricing. OCG decreased year-over-year due to €20 million in unfavorable items including China new business impacts and storm-related adverse claims in Spain and Portugal; the China joint venture continues to drag on OCG as previously guided. The segment contributed roughly 8% of total group operating results. 3. **Asset Management**: Operating result increased after adjusting for the TAM transfer, driven by a 5 percentage point expansion in the global platform operating margin (to 20%) from lower expenses, favorable market movements, and net inflows over the prior 12 months. Third-party net inflows were positive for global platforms and strategic partnerships, though TAM recorded net outflows in the first half of 2026. The segment contributed roughly 17% of total group operating results after the TAM transfer.

Risks & headwinds

- Policyholder behavior assumptions in the U.S. variable annuity and in-force life book required updates to reflect recent observed variances, resulting in a €231 million net-of-tax negative impact on valuation equity. - U.S. RBC ratio was negatively impacted by 12 percentage points from market movements that were more severe than implied by standard single-shock sensitivity analysis, due to lagging performance of private equity and energy assets, fund basis risk, and cross-asset effects in the variable annuity book. - Elevated new business strain from strong 54% U.S. life sales growth requires active capital management to keep OCG at targeted levels. - Long-term care (LTC) blocks remain a large source of locked capital in financial assets, though management has had success implementing premium increases and continues to evaluate potential market transactions if economically attractive. - Transition to U.S. GAAP and the U.S. holding company structure requires significant operational work, though it is currently on time and on budget.

Analyst Q&A

• Q: What drove Aegon's strong 54% individual life sales growth, what are the returns on these new sales, and will elevated capital strain create tensions between U.S. GAAP earnings and OCG targets? /

  A: Sales growth is primarily driven by a new digitally-enabled instant underwriting process that reduces policy issuance from multiple weeks to under 12 minutes, paired with growth of the WFG agent base. The instant issue products deliver an IRR of over 12% with an ~8-year payback on a fully cost-loaded basis, so returns are attractive. No details on U.S. GAAP impacts will be shared until the U.S. GAAP dry run is completed in H2 2026, and capital strain management will remain a core priority under the RBC framework.

• Q: What is the purpose of the recent savings and investment portfolio repositioning to Bermuda, and can it be used again to offset future new business strain? /

  A: Strong new business growth creates higher upfront capital strain, so the repositioning was done to improve capital efficiency, free up required capital, and bridge the period until new business generates incremental earnings and OCG. Aegon has built significant balance sheet flexibility from prior actions on in-force blocks, so it will continue to use similar actions to offset elevated strain from sustained high sales growth in future periods if needed.

• Q: What are the details of the recent policyholder assumption changes, and why were they made now? /

  A: Aegon conducts annual assumption reviews in Q2, and updates were needed to address observed negative variances in policyholder behavior, primarily in the variable annuity book and in-force life blocks, that had appeared in prior periods. The updates improve earnings quality and ensure the balance sheet remains strong and up-to-date, with most changes concentrated in policyholder behavior assumptions.

• Q: Will Aegon hedge more variable annuity base fees after the recent equity market rally, and what is the OCG outlook for H2 2026? /

  A: Aegon has already hedged ~25% of base fees, and additional hedging remains on the table, but naturally growing flawed reserves (prudent reserve buffers) act as an internal self-hedge as equity markets rise, reducing the need for external hedging. Full year OCG guidance from Capital Markets Day is maintained; strong financial market performance will support results, but the H1 assumption update will act as a small drag and new business strain will remain elevated in H2.