Aegon has set new medium-term financial targets with a focus on growing capital generation and dividends. By safeguarding a strong capital position, Aegon will continue to help millions of people to achieve a lifetime of financial security.
For the years 2019-2021, Aegon aims to achieve the following Group financial targets:
- Capital generation of EUR 4.1 billion cumulatively; excluding market impacts and one-time items, and after holding funding and operating expenses
- Dividend pay-out to shareholders between 45% and 55% of capital generation1)
- Return on shareholders' equity of more than 10% on an annual basis
For 2019, Aegon expects its units to upstream EUR 1.5 billion in dividends to the holding, including divestment proceeds. This confirms the fungibility of the capital generated and supports a sustainable return to shareholders.
The current capital framework and related target ranges remain unchanged for the years 2019-2021:
- The Solvency II ratio target range remains at 150% to 200%; the 2018 Solvency II ratio amounted to 211%
- Holding excess cash to remain in target zone of EUR 1.0 to 1.5 billion; year-end 2018 level was EUR 1.3 billion
- Gross financial leverage ratio targeted to be between 26% and 30%; year-end 2018 level was 29.2%
- Maintain a capitalization required for a financial strength AA- rating
As of the second half of 2018, Aegon is applying an adjusted capitalization definition. To align closer to definitions used by peers and rating agencies, Aegon has retrospectively changed its internal definition of adjusted shareholders' equity used in calculating return on equity for the group, return on capital for its units, and the gross financial leverage ratio. Shareholders' equity will no longer be adjusted for the remeasurement of defined benefit plans. As a result, the gross financial leverage ratio increases by 2.2%-point compared with the old definition. This means that maintaining a 26-30% gross financial leverage ratio effectively implies a more conservative target.
Statement of Alex Wynaendts, CEO
"The new set of financial targets we have announced today is building on the successes we have achieved during the previous three-year target period. Going forward, our focus remains on strong capital generation and providing shareholders with attractive returns.
"Our capital generation is backed by a proactive approach to managing our portfolio of businesses, which we have now grouped into three distinct categories – 'Manage for Value', 'Drive for Growth', and 'Scale up for Future' businesses. The first category consists of at-scale businesses, which are mostly spread-based, and we manage these for value in a sustainable way. The vast majority of our investments will be directed to 'Drive for Growth' businesses which are at the core of our strategy as they drive future capital generation. Finally, the third part of our portfolio – 'Scale up for Future' businesses – is aiming at capturing meaningful new opportunities.
"This approach allows us to grow profitably, and to create value for all our stakeholders including our customers and shareholders. In this way, we will fulfill our purpose to help people achieve a lifetime of financial security."
1) Assuming markets move in line with management's best estimate, no material regulatory changes and no material one-time items other than already announced restructuring programs