Regulatory News:
At today’s Capital Markets Day, Aegon CEO Lard Friese
announces the company’s new strategy and financial targets for the
period 2021 to 2023.
Financial Targets 2021 – 2023
- Reduce gross financial leverage to EUR 5.0 to 5.5
billion
- Implement expense savings program of EUR 400
million
- Achieve cumulative free cash flows of EUR 1.4 to 1.6
billion
- Grow dividend per share to around EUR 0.25 per share over
2023
Aegon’s CEO, Lard Friese will be joined by Matt Rider, Chief
Financial Officer, Duncan Russell, Chief Transformation Officer and
Allegra van H�vell-Patrizi, Chief Risk Officer, to outline the
planned transformation of Aegon, and to discuss the steps taken to
strengthen the business as well as how these actions will create
value for Aegon’s customers and shareholders.
“We are taking significant steps to transform Aegon in order to
change our performance trajectory and create value for our
customers and shareholders”, commented Lard Friese, CEO of Aegon.
“We are narrowing our strategic focus to selected core and growth
markets and, within these, have made choices that allow us to focus
on those areas where we believe that Aegon is well positioned to
create value. We have developed an ambitious plan comprised of
detailed initiatives designed to improve the operating performance
of our business by reducing costs, expanding margins and growing
profitably. We are simplifying our capital framework, and
continuing to strengthen our balance sheet, in part by further
deleveraging. In addition, we are taking proactive risk management
actions to improve our risk profile and reduce the volatility of
our capital ratios. We are building a high-performance culture,
investing in talent development and focusing on delivery. We intend
to build on our strengths: our brands, our base of 29 million
customers, and our deep expertise in designing solutions, managing
assets, and creating distribution networks. We are excited about
the opportunities we have to better reach our customers and to help
them achieve a lifetime of financial security.”
Highlights of Aegon’s new strategy include:
- Going forward, we will focus on three core
markets (the United States, the Netherlands, and the United
Kingdom), three growth markets (Spain & Portugal, China, and
Brazil) and one global asset manager. In small markets or markets
where we have sub-scale or niche positions, we will manage capital
tightly and have a bias to exit. The recently announced sale of our
Central & Eastern European businesses and Stonebridge in the UK
are good examples of actions we are taking to increase our focus.
Additionally, we have decided to separate the businesses in our
core markets into Financial Assets and Strategic Assets, each
requiring specific skillsets and possessing different opportunities
to create value. Financial Assets are blocks of business which we
have closed for new sales, and which are capital intensive with
relatively low returns on capital employed. Strategic Assets are
businesses with a greater potential for an attractive return on
capital, where we are well positioned for growth. We aim to release
capital in Financial Assets over time, and re-allocate capital to
Strategic Assets and growth markets.
- In the United States, several product lines
are considered to be Financial Assets. These are variable annuities
with significant interest rate sensitive living and death benefit
riders, stand-alone individual long-term care, and fixed annuities.
We have taken the decision to stop new sales for these products. We
are reviewing the potential to implement a dynamic hedging strategy
for variable annuities with income and death benefit riders.
Subsequently, we will consider a broad range of options for this
block of business. Furthermore, we will take actions to reduce the
interest rate sensitivity of our US business through
asset-liability management and other management actions.
- Strategic Assets in the United States are
comprised of Workplace Solutions and select life and investment
products that are part of Individual Solutions. In Individual
Solutions, we will leverage our affiliated distribution channels to
increase sales momentum and aim to regain top-5 positions in key
individual life-insurance markets. We will also continue to sell
select mutual funds and individual retirement products, like
accumulation variable annuities with limited interest rate
sensitivity. In Workplace Solutions, we will leverage our leading
position in the small and mid-sized retirement market, and further
modernize our platform proposition aimed at profitable growth.
- In the Netherlands, we will no longer offer
new defined benefit group pension products and individual life
products, with the exception of direct annuities, while we support
employers in their transition towards defined contribution
solutions. We consider the existing defined benefit group pensions
and individual life insurance portfolios to be Financial Assets. We
are taking actions to reduce the volatility of the Dutch Solvency
II capital ratio, and have implemented a new capital management
policy that allows for quarterly remittance payments to the Group.
We aim for profitable growth in defined contribution workplace
solutions and mortgage origination, and to maintain our leadership
positions in those segments. We will also expand our niche position
with our bank, Knab, which will serve as a digital gateway to
individual retirement solutions.
- In the United Kingdom, we will continue to
invest in our market-leading platform to improve the digital
experience for customers, advisers and employers, and return to
profitable growth as we aim to increase our margins in both the
retail and workplace businesses.
- The retirement platforms in all three core
markets provide a great opportunity to offer our asset management
solutions to our customers, enabling them to achieve attractive
investment returns. Our asset management business will implement a
new global operating platform, allowing the business to maximize
synergies, and grow in third-party assets. In addition, we aim to
increase the share of our proprietary investment solutions amongst
the assets that we administer.
- We have developed a rigorous and granular
operating plan aimed at materially improving our performance. We
will operate within a stricter and more disciplined governance
framework with clear accountabilities, and increase the
organizational rhythm to realize our transformation ambition. We
are implementing an expense savings program aimed at reducing
expenses by EUR 400 million in 2023 compared with 2019,
representing 13% of the addressable expense base. Of this saving,
EUR 150 million will be reinvested in growth. Associated one-time
investments are expected to be around EUR 650 million over the
period 2021 to 2023, and will be booked as Other charges.
- Throughout our transformation, we will
ensure that we maintain sufficient capital in our business units
and at the Holding so that we can focus our time and energy on
increasing return on capital, and distributing capital to
shareholders. As part of a new capital management policy, we will
manage the capital positions of our business units to their
operating levels over time, and maintain them above their minimum
dividend payment levels. For our business in the United States the
operating level is set at an RBC ratio of 400%. For our main
insurance entities in the Netherlands and in the United Kingdom,
the operating levels are set at a Solvency II ratio of 150%. The
minimum dividend payment level is an RBC ratio of 350% in the US,
and a Solvency II ratio of 135% for our main insurance entities in
the Netherlands and in the United Kingdom. The Cash Capital at
Holding operating range is set at EUR 0.5 to 1.5 billion, and is
available to cover holding expenses, near-term dividends and
contingencies. To reduce our risk profile and strengthen our
balance sheet, we will target a reduction on our gross financial
leverage from EUR 6.6 billion on June 30, 2020, to EUR 5.0 to 5.5
billion by 2023.
- By improving our performance and installing
more disciplined capital management, we expect to grow capital
generation over the plan period and translate this into increasing
free cash flows. We expect total free cash flows to amount to EUR
1.4 to 1.6 billion, cumulatively over the period 2021 to 2023.
Dividends are expected to grow in line with free cash flows while
allowing us to execute on our planned deleveraging, and providing
room to undertake our planned management actions to improve and
de-risk the company. As a result, we aim to grow our dividend per
share to around EUR 0.25 over 2023, barring unforeseen
circumstances. Should there be surplus free cash flow above and
beyond that, then we would expect that to be returned to
shareholders, most likely via share buybacks, unless we invest it
in value-creating opportunities.
Lard Friese: “Today, we have announced several important
strategic choices to transform Aegon and have laid out a road map
on how we will achieve our goals. We have an experienced management
team with a track record of managing large and cash-generating
balance sheets and creating value for shareholders. And with our
talented and dedicated employees, we are confident that we have
what it takes to successfully execute our plans. We are excited
about the opportunities ahead of us and are determined to make this
transformation a success.”
Capital Markets Day details
The Capital Markets Day presentations are available at 7.00 am
CET on www.aegon.com. The conference will commence at 9.00 am CET
and will be livestreamed via a link on the corporate website. A
replay will be available later today.
About Aegon
Aegon’s roots go back more than 175
years – to the first half of the nineteenth century. Since then,
Aegon has grown into an international company, with businesses in
the Americas, Europe and Asia. Today, Aegon is one of the world’s
leading financial services organizations, providing life insurance,
pensions and asset management. Aegon’s purpose is to help people
achieve a lifetime of financial security. More information on
aegon.com.
Forward-looking statements
The statements contained in this document that are not
historical facts are forward-looking statements as defined in the
US Private Securities Litigation Reform Act of 1995. The following
are words that identify such forward-looking statements: aim,
believe, estimate, target, intend, may, expect, anticipate,
predict, project, counting on, plan, continue, want, forecast,
goal, should, would, could, is confident, will, and similar
expressions as they relate to Aegon. These statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions that are difficult to predict. Aegon undertakes no
obligation to publicly update or revise any forward-looking
statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which merely reflect company
expectations at the time of writing. Actual results may differ
materially from expectations conveyed in forward-looking statements
due to changes caused by various risks and uncertainties. Such
risks and uncertainties include but are not limited to the
following:
- Changes in general economic and/or governmental conditions,
particularly in the United States, the Netherlands and the United
Kingdom;
- Changes in the performance of financial markets, including
emerging markets, such as with regard to:
– The frequency and severity of defaults by
issuers in Aegon’s fixed income investment portfolios;
– The effects of corporate bankruptcies
and/or accounting restatements on the financial markets and the
resulting decline in the value of equity and debt securities Aegon
holds; and
– The effects of declining creditworthiness
of certain public sector securities and the resulting decline in
the value of government exposure that Aegon holds;
- Changes in the performance of Aegon’s investment portfolio and
decline in ratings of Aegon’s counterparties;
- Lowering of one or more of Aegon’s debt ratings issued by
recognized rating organizations and the adverse impact such action
may have on Aegon’s ability to raise capital and on its liquidity
and financial condition;
- Lowering of one or more of insurer financial strength ratings
of Aegon’s insurance subsidiaries and the adverse impact such
action may have on the written premium, policy retention,
profitability and liquidity of its insurance subsidiaries;
- The effect of the European Union’s Solvency II requirements and
other regulations in other jurisdictions affecting the capital
Aegon is required to maintain;
- Changes affecting interest rate levels and continuing low or
rapidly changing interest rate levels;
- Changes affecting currency exchange rates, in particular the
EUR/USD and EUR/GBP exchange rates;
- Changes in the availability of, and costs associated with,
liquidity sources such as bank and capital markets funding, as well
as conditions in the credit markets in general such as changes in
borrower and counterparty creditworthiness;
- Increasing levels of competition in the United States, the
Netherlands, the United Kingdom and emerging markets;
- Catastrophic events, either manmade or by nature, including by
way of example acts of God, acts of terrorism, acts of war and
pandemics, could result in material losses and significantly
interrupt Aegon’s business;
- The frequency and severity of insured loss events;
- Changes affecting longevity, mortality, morbidity, persistence
and other factors that may impact the profitability of Aegon’s
insurance products;
- Aegon’s projected results are highly sensitive to complex
mathematical models of financial markets, mortality, longevity, and
other dynamic systems subject to shocks and unpredictable
volatility. Should assumptions to these models later prove
incorrect, or should errors in those models escape the controls in
place to detect them, future performance will vary from projected
results;
- Reinsurers to whom Aegon has ceded significant underwriting
risks may fail to meet their obligations;
- Changes in customer behavior and public opinion in general
related to, among other things, the type of products Aegon sells,
including legal, regulatory or commercial necessity to meet
changing customer expectations;
- Customer responsiveness to both new products and distribution
channels;
- As Aegon’s operations support complex transactions and are
highly dependent on the proper functioning of information
technology, operational risks such as system disruptions or
failures, security or data privacy breaches, cyberattacks, human
error, failure to safeguard personally identifiable information,
changes in operational practices or inadequate controls including
with respect to third parties with which we do business may disrupt
Aegon’s business, damage its reputation and adversely affect its
results of operations, financial condition and cash flows;
- The impact of acquisitions and divestitures, restructurings,
product withdrawals and other unusual items, including Aegon’s
ability to integrate acquisitions and to obtain the anticipated
results and synergies from acquisitions;
- Aegon’s failure to achieve anticipated levels of earnings or
operational efficiencies, as well as other management initiatives
related to cost savings, cash capital at Holding, gross financial
leverage and free cash flow;
- Changes in the policies of central banks and/or
governments;
- Litigation or regulatory action that could require Aegon to pay
significant damages or change the way Aegon does business;
- Competitive, legal, regulatory, or tax changes that affect
profitability, the distribution cost of or demand for Aegon’s
products;
- Consequences of an actual or potential break-up of the European
monetary union in whole or in part, or the exit of the United
Kingdom from the European Union and potential consequences if other
European Union countries leave the European Union;
- Changes in laws and regulations, particularly those affecting
Aegon’s operations’ ability to hire and retain key personnel,
taxation of Aegon companies, the products Aegon sells, and the
attractiveness of certain products to its consumers;
- Regulatory changes relating to the pensions, investment, and
insurance industries in the jurisdictions in which Aegon
operates;
- Standard setting initiatives of supranational standard setting
bodies such as the Financial Stability Board and the International
Association of Insurance Supervisors or changes to such standards
that may have an impact on regional (such as EU), national or US
federal or state level financial regulation or the application
thereof to Aegon, including the designation of Aegon by the
Financial Stability Board as a Global Systemically Important
Insurer (G-SII); and
- Changes in accounting regulations and policies or a change by
Aegon in applying such regulations and policies, voluntarily or
otherwise, which may affect Aegon’s reported results, shareholders’
equity or regulatory capital adequacy levels.
This document contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
of the EU Market Abuse Regulation (596/2014). Further details of
potential risks and uncertainties affecting Aegon are described in
its filings with the Netherlands Authority for the Financial
Markets and the US Securities and Exchange Commission, including
the Annual Report. These forward-looking statements speak only as
of the date of this document. Except as required by any applicable
law or regulation, Aegon expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in Aegon’s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201209006087/en/
Media relations Dick Schiethart +31(0) 70 344 8821
dick.schiethart@aegon.com Investor relations Jan Willem
Weidema +31(0) 70 344 8028 janwillem.weidema@aegon.com
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