Aegon Ltd. Q2 FY2024 earnings call

Management Statement and Operational Highlights

• Strategy Implementation: Focus on growing strategic assets and risk-managing financial assets. Achieved a EUR400 million decrease in required capital in H1 2024.
• Americas Progress: WFG licensed agents increased by 13%, Savings & Investments net deposits were $1.2 billion, and Protection Solutions new life sales rose 5% with Indexed Universal Life driving growth.
• UK Business: Workplace platform is on track for net deposit targets, while the Adviser platform faces challenges but AuA is growing.
• International Business: Mixed results in new life sales, but operating capital generation improved due to asset liability management actions.
• Asset Management: Strong third-party net deposits and AUM growth, with Global Platforms and Strategic Partnerships contributing significantly.

Segment Performance

• Americas:
  • Protection Solutions: Operating result increased 37% in H1 2024, driven by a growing profitable portfolio, higher investment balances, and CSM release.
  • Savings & Investments: Operating result rose 14% due to higher fees in retirement plans and net investment income from the General Account Stable Value product.
  • Distribution: Operating result increased 20% from higher net commission revenues and revenue sharing income.
  • Financial Assets: Operating result decreased 75% because of unfavorable mortality claims and a lower net investment result.
• UK:
  • Workplace platform: Net deposits in H1 2024 totaled GBP1.7 billion, on track to achieve annual net deposits of around GBP5 billion by 2028.
  • Adviser platform: Net outflows were GBP1.8 billion in H1 2024, affected by competition and low consumer activity.
• International:
  • New life sales decreased 20% overall, but increased 9% in Brazil; weaker in China and Spain due to new pricing regulations and higher interest rates in Spain. Operating capital generation increased 20% due to lower new business strain and asset liability management actions.
• Asset Management:
  • Global Platforms: Third-party net deposits reached EUR5.1 billion.
  • UK Fixed Income: Onboarded a large client, generating solid inflows.
  • Netherlands: Won a large contract with a fiduciary client.
  • Strategic Partnership: Positive net deposits of EUR2.7 billion, driven by the Chinese joint venture.

Guidance

• Operating Capital Generation: On track to meet the EUR1.1 billion guidance for 2024, having delivered EUR588 million in H1 2024.
• Dividend: Announced a EUR0.16 interim dividend for 2024, with a target of EUR0.40 per share by 2025.
• Share Buyback: Completed the EUR1.5 billion share buyback program related to the ASR transaction, and is executing a new EUR200 million program expected to finish by end 2024.

Risks

• Mortality and Morbidity Claims: Unfavorable experience in the US impacted financial assets, but assumptions were updated to mitigate future variances.
• Competition and Market Conditions: UK Adviser platform affected by competition and low consumer activity; Spain saw reduced mortgage-related sales due to higher interest rates.
• Financial Asset Run-off: Continued run-off of financial assets, which could impact the net investment result in future periods.

Question and Answer

Q: On back book management and assumption changes in the US, to what extent may these make it easier to do third-party in-force management?

A: Assumption updates reflect best estimate experience, with no real impact on future transactions. The Universal Life book is being run down through reinsurance and repurchase programs.

Q: Can we expect more in-force deals in Universal Life?

A: The Universal Life book is in a run-down phase, with efforts to reduce exposure, but no specific plans for additional in-force deals highlighted.

Q: On the operating profit guidance uplift, does it have impacts on operating capital generation?

A: IFRS and OCG frameworks differ; IFRS has an uplift in expected operating result, but OCG has a small drag, though business growth offsets this.

Q: On the Financial Assets reduction target, how much is due to market vs. management actions?

A: Split between market and management actions not specified, with focus on ongoing management actions to reach the $2.2 billion target by 2027.

Q: US GAAP reporting update?

A: No work begun on US GAAP, focusing on solidifying IFRS 17 figures first.