Aegon Ltd. Q2 FY2025 earnings call

Management Statement and Operational Highlights

• Transformation Progress: Operating result up 19% to EUR 845 million, operating capital generation before holding and funding expenses EUR 576 million (down 2%), new business strain increased, commercial momentum strong, capital position strong, announced a EUR 200 million increase to the share buyback program (total EUR 400 million in second half), and a review of head office relocation to the U.S. to align with majority business presence.
• Americas Commercial Performance: Transamerica grew strategic assets, World Financial Group licensed agents up to over 90,000, new life sales in Individual Life up 13%, RILA product net deposits nearly doubled, retirement plan had solid net deposits in mid-sized and large pooled plans.
• Other Units: Aegon U.K. continued progress on strategy, International segment joint ventures had mixed sales, Aegon Asset Management had solid third-party net deposits with Global Platforms and Strategic partnerships contributing.

Segment Performance

• Americas: Transamerica grew strategic assets; World Financial Group saw a 14% increase in licensed agents, new life sales in Individual Life up 13%, RILA product net deposits nearly doubled, retirement plan had solid net deposits, general accounts stable value product and IRAs grew. Absolute terms: Various growth metrics in different segments. Revenue contribution: Americas accounts for a significant portion, with Transamerica being a key driver.
• Aegon U.K.: Progress on strategy, benefited from onboarding a larger scheme in the Workplace platform; Adviser platform affected by consolidation. Absolute terms: Business growth with some lumpy deposits. Revenue contribution: Part of overall group revenue.
• International Segment: Joint ventures in Brazil, China, Spain, and Portugal had higher new life sales; TLB in Singapore affected by competitive landscape change. Absolute terms: Mixed sales across joint ventures. Revenue contribution: International segment has varying contributions.
• Aegon Asset Management: Solid third-party net deposits, Global Platforms net deposits from alternative fixed income, Strategic partnerships net deposits driven by Chinese joint venture. Absolute terms: Net deposits in specific areas. Revenue contribution: Asset management contributes to overall group revenue.

Guidance

• Operating Results: Increased the U.S. guided operating results range by $50 million to EUR 700 million to EUR 800 million, while the group guidance remains EUR 750 million to EUR 850 million reflecting current exchange rates.
• Share Buyback: Announced a EUR 200 million increase to the ongoing share buyback program, bringing the total for the second half to EUR 400 million.
• Head Office Relocation: Review of potential relocation to the U.S. to align legal domicile, tax residency, etc., with the majority business presence, outcome to be shared at Capital Markets Day on December 10.

Risks

• Market Risks: Exposure to downward equity markets, impact of exchange rate movements on the group CSM.
• Operational Risks: Challenges in implementing U.S. GAAP, potential disruptions in head office relocation processes affecting operations.

Question and Answer

Q: Can you talk about what drove the decision to cover 25% of the variable annuity based fee?

A: It's an additional tool to manage capital generation and earnings profile of legacy variable annuity book, with prudence and monitoring planned. OCG is not particularly equity sensitive.

Q: Can you give an indication where U.S. GAAP will land relative to operating profit or OCG?

A: Too early to tell on U.S. GAAP impact; capital requirement from VA has a small benefit.

Q: How big is the pooled plan?

A: EUR 1.9 billion.

Q: What's the thinking on the decision to review head office relocation to U.S.?

A: U.S. accounts for ~70% of operations, aligning legal domicile, etc., with majority business presence is logical for growth.

Q: How clean is the EUR 845 million operating profit?

A: Pretty clean; adding back negative variances gives adjusted number around EUR 937 million, with recurring VA interest accretion deducted.

Q: Any thoughts on M&A and how U.S. redomiciliation helps with M&A?

A: M&A linked to strategy; U.S. redomiciliation positions closer to largest market, but M&A approach disciplined.

Q: What are the main challenges of redomiciling?

A: Building head office processes in U.S., implementing U.S. GAAP (project taking time), and change management during transition.

Q: Thoughts on ASR stake and deleveraging ahead of potential relocation?

A: No change on ASR stake (long-term patient holder) or deleveraging plans; leverage unchanged based on current footprint.