2H 2023 Results | AEX:AGN | NYSE:AEG
IFRS results
- Net result of EUR 0 million with operating result offset by realized losses on investment portfolio; net loss of EUR 199 million for the full-year
- Operating result of EUR 681 million, down 32% due to previously executed management actions and one-time benefits in the prior period. Full-year 2023 operating result of EUR 1,498 million, a decrease of 17% from EUR 1,802 million in 2022
- Shareholders’ equity reduces by EUR 0.7 billion to EUR 7.5 billion following EUR 1.1 billion capital returns. Shareholders’ equity per share remains stable at EUR 4.27
Capital generation, cash and capital management
- Operating capital generation before holding funding and operating expenses increases by 16% compared with the second half of 2022 to EUR 660 million and to EUR 1,280 million for the full-year
- Capital ratios remain robust, above their respective operating levels
- Cash Capital at Holding at EUR 2.4 billion. EUR 829 million of the announced EUR 1.5 billion share buyback completed at year‑end; reduced financial leverage to target level of around EUR 5 billion
- Free Cash Flow of EUR 429 million includes special dividend from Aegon AM of EUR 75 million; full-year Free Cash Flow of EUR 715 million exceeds guidance of around EUR 600 million
- Proposed final 2023 dividend of EUR 0.16 per common share, bringing the full-year dividend to EUR 0.30 per common share, up 30% versus the full-year 2022 dividend
Lard Friese, Aegon CEO, commented:
“The second half of 2023 saw Aegon maintain commercial momentum, driven by the strong performance of our US business, Transamerica, as well as our UK workplace business and our joint venture in Brazil. Aegon’s operating capital generation (OCG) from the units of EUR 660 million was solid during the period, bringing the total OCG for 2023 to EUR 1,280 million, exceeding the initial guidance for the year. Our business units remained well capitalized and our holding cash position continued to be robust. Free cash flow amounted to EUR 429 million for the second half of 2023, contributing to a total of EUR 715 million for the year, enabling us to exceed our guidance of EUR 600 million. The IFRS operating result of EUR 681 million was lower than in the second half of 2022, reflecting one-time benefits in 2022 that did not recur in 2023, as well as the impact of announced management actions in 2023.
The contrasting trend in our IFRS results compared to our OCG results is caused by differences in the timing of recognition of earnings between the two frameworks. OCG continues to be the primary lens by which we evaluate business performance and steer the company.
At our Capital Markets Day (CMD) in June of last year, we announced Transamerica’s strategy to become America’s leading middle market life insurance and retirement company. In 2023, Transamerica again delivered a strong performance. The Individual Solutions business generated new life sales of USD 486 million, an increase of 13% compared with the prior year and the highest sales level in the past eight years. The number of agents at World Financial Group (WFG) grew by 18% compared with a year earlier to almost 74,000. Written sales of mid-sized plans for our Workplace Solutions business amounted to USD 6.7 billion, an increase of 72% compared with the prior year. This was driven by growth in sales of both single employer plans and pooled plans. Meanwhile, we continued to actively manage our Financial Assets, including recent actions to reduce the exposure of Transamerica’s capital ratio
to equity market movements.
Our UK Workplace platform also performed well. Despite the loss of a large, low margin pension scheme in the third quarter, we reported positive net inflows for 2023 and expect continued net inflows as a result of the onboarding of new schemes and higher net deposits on existing schemes.
At the same time, both Aegon’s UK Retail platform and asset management business experienced net outflows as they were adversely affected by the macro-economic environment in 2023.
Moving to our insurance joint ventures: in Brazil, new life sales at Mongeral Aegon Group increased by 37% to EUR 144 million reflecting both business growth and Aegon’s increased economic stake, while new life sales in China increased by 19% to
EUR 103 million in 2023.
We have completed 76% of our current EUR 1.5 billion share buyback program (on February 23, 2023) and we have executed upon our planned de-leveraging. We have proposed a final dividend of 16 eurocents per share. On this basis, the total dividend paid for the full‑year 2023 will be 30 eurocents, in line with our target and up 30% compared with 2022.
I am very proud of everything the teams have achieved in 2023, and I am grateful for all their work during another transformational year. We will continue to work hard executing our strategy in 2024. Our strong commercial performance, together with the important steps we took to realign our company, have given us a solid foundation on which to sustainably grow our dividend per share. We also look forward to presenting the strategy for our UK business in more depth during a teach-in session on June 25 this year.”
Strategy
Aegon’s ambition is to build leading businesses that offer customers investment, protection and retirement solutions. Its portfolio of businesses includes wholly owned subsidiaries in the US and UK, and a global asset manager. In addition, Aegon has partnerships in Spain & Portugal, Brazil, and China, which create value by combining the strength of local partners with Aegon’s international expertise. In the Netherlands, Aegon generates value via a strategic shareholding in a market leading insurance and pensions company. Aegon is taking significant steps to improve its performance and create sustainable value for all of its stakeholders.
Aegon’s businesses in the US have been divided into Financial Assets and Strategic Assets. The aim is to reduce Aegon’s exposure to Financial Assets and improve the predictability of capital generation from these assets. Aegon intends to, over time, reallocate capital from Financial Assets to growth opportunities in Strategic Assets, partnerships, and the global asset manager. Exposure to businesses outside of Aegon’s core focus has been largely eliminated over recent years, most recently with the divestment of the business in India, which was completed on February 23, 2024.
Throughout its transformation, Aegon aims to maintain a solid capital position in its business units and at the Holding. Through proactive risk management actions, Aegon is improving its risk profile and reducing the volatility of its capital ratios. This is underscored by the capital strength conveyed in this press release.
The next chapter in Aegon’s strategy is expected to lead to operating capital generation from its units of around EUR 1.2 billion, and of free cash flow of around EUR 800 million by 2025. Aegon aims to grow its dividend per share to around EUR 0.40 over 2025, barring unforeseen circumstances and subject to the necessary approvals. Gross financial leverage is expected to remain at around EUR 5 billion.
Transaction with a.s.r.
On July 4, 2023, Aegon announced the completion of the combination of its Dutch pension, life and non-life insurance, banking, and mortgage origination activities with a.s.r., and the beginning of its asset management partnership with a.s.r. The associated EUR 1.5 billion share buyback program was 54% completed on December 31, 2023, and is expected to be fully executed
by June 30, 2024.
Redomiciliation to Bermuda and change of group supervisor
Following the closure of the transaction with a.s.r., Aegon no longer has a regulated insurance entity in the Netherlands. Under Solvency II rules, Aegon’s former group supervisor, the Dutch central bank, could no longer remain Aegon’s group supervisor. Following discussions in the college of supervisors, the Bermuda Monetary Authority (BMA) informed Aegon that it would become its group supervisor if the company were to move its legal domicile to Bermuda.
On September 30, 2023, Aegon’s Extraordinary General Meeting of Shareholders (EGM) approved the cross-border conversion of Aegon into a Bermuda Limited (Ltd.) company. After the completion of the EGM, the change of Aegon’s legal seat to Bermuda was effectuated and, as a result, the company became a Bermuda entity: Aegon Ltd. On October 1, 2023, the BMA became Aegon’s group supervisor.