20-F: Aegon Reports Solid 2024 Performance Amid Transformation, Meets Guidance and Boosts Shareholder Returns

Aegon Ltd. delivered on its 2024 financial guidance, increasing dividends and executing share buybacks, while advancing its strategic transformation focused on growth markets in the US and UK.

Summary

• Aegon Ltd.'s 2024 Annual Report details its performance and strategic progress following its redomiciliation to Bermuda.
• The company focused on transforming its US business, Transamerica, into a leading middle-market life insurance and retirement company, and accelerating the growth of Aegon UK as a digital savings and retirement platform.
• Aegon met its increased guidance for Operating Capital Generation (OCG) at EUR 1.2 billion and generated EUR 759 million in free cash flow.
• The IFRS operating result was EUR 1.5 billion, slightly down from 2023, while the net result improved significantly to EUR 676 million from a loss of EUR 199 million in 2023, mainly due to lower one-time charges and assumption updates.
• Capital returns to shareholders were significant, with a proposed full-year dividend increase of 17% to 35 eurocents per share and the completion of EUR 1.7 billion in share buybacks, with a further EUR 150 million buyback announced for 2025.
• Aegon maintained strong capital ratios in its main units (US RBC at 443%, UK Solvency II at 186%) and Cash Capital at Holding stood at EUR 1.7 billion.
• The company made progress on its sustainability targets, exceeding its 2025 goals for carbon intensity reduction and climate investments, and set new targets for 2030.

Sentiment

Score: 7

Explanation: The report highlights solid performance against guidance, significant capital returns, and strategic progress, creating a generally positive sentiment. However, challenges in certain business areas (UK Adviser platform, International volatility) and a slight dip in operating result temper the overall positivity.

Positives

• The US RBC ratio increased to 443%, remaining above the operating level of 400%.
• The UK Solvency II ratio remained stable at 186%, above the operating level of 150%.
• Strong sales growth was recorded in US Retirement Plans.
• Aegon Asset Management returned to growth, driven by favorable markets and business expansion, including the CLO business and the a.s.r. partnership.
• The company successfully refreshed its brand identity across several units, including Aegon Spain, Aegon UK, and Aegon Asset Management.
• Gross financial leverage remained stable at EUR 5.2 billion.
• The company successfully completed the sale of its stake in its Indian partnership.
• Aegon UK completed the acquisition of Nationwide Building Society's financial planning service, expanding its Advice offering.
• Aegon successfully priced USD 760 million of senior unsecured notes to refinance maturing debt.
• Employee engagement score improved to 79% in 2024 from 77% in 2023.

Negatives

• The overall operating result decreased slightly by 1% to EUR 1,485 million compared to 2023.
• The operating result from the Americas decreased by 4%, mainly due to unfavorable experience in Financial Assets.
• The operating result from the United Kingdom decreased by 7%, impacted by unfavorable claims experience in the divested Protection book and higher expenses.
• The operating result from the International segment decreased by 6%, mainly driven by lower results in TLB.
• Net outflows were experienced in the UK Adviser platform business (GBP 3.5 billion).
• Net outflows were recorded in US Retirement Plans (USD 16.8 billion), mainly due to discontinuing two large, low-margin contracts.
• Net outflows increased in US Mutual Funds to USD 1.8 billion.
• Fair value items resulted in a loss of EUR 208 million, driven by underperformance of alternative investments in the US and hedge revaluations in the UK.
• Net impairments increased significantly to EUR 236 million, primarily due to higher Expected Credit Loss provisions in the Americas.
• Other charges amounted to EUR 245 million, largely due to assumption updates in the US.
• Aegon's share price underperformed the STOXX Europe 600 Insurance Index in 2024 (9% increase vs 18% index increase).

Risks

• Aegon is exposed to financial market risks, including fluctuations in interest rates, equity markets, credit spreads, and currency exchange rates, which can impact profitability, capital, and asset values.
• Rapidly rising or sustained low/negative interest rates pose risks to profitability, liquidity, and the ability to meet guarantees.
• Credit risk exists in Aegon's investment portfolio (debt securities, mortgages, private placements) and with counterparties (derivatives, reinsurance), with potential losses from defaults or rating downgrades.
• Underwriting risks arise from deviations between actual experience (mortality, morbidity, longevity, policyholder behavior, expenses) and assumptions used for pricing and reserving.
• Operational risks include potential failures in IT systems, cybersecurity breaches, data privacy issues, reliance on third-party providers, model inaccuracies, and business disruptions from events like catastrophes or pandemics.
• Political, regulatory, and supervisory risks stem from potential changes in laws, regulations (including capital requirements like Solvency II/Bermuda framework, ICS, R&R frameworks), accounting standards, and tax rules across jurisdictions.
• Legal and compliance risks include potential unfavorable outcomes from litigation, regulatory investigations, non-compliance with laws (e.g., AML, sanctions, anti-bribery), and evolving sustainability standards.
• Competition within the financial services industry remains intense, potentially impacting market share and profitability.
• Difficulties in executing acquisitions or divestments could negatively affect results.
• Changes in distribution channels or relationships could impact product marketing and sales.
• Failure to adapt to emerging technologies like AI could harm Aegon's competitive position.
• Climate change presents physical and transition risks impacting investments, underwriting, and operations.

Future Outlook

Aegon is on track to meet its 2025 financial targets, including approximately EUR 1.2 billion of operating capital generation, around EUR 800 million in free cash flow, and a dividend of around 40 eurocents per common share. Transamerica targets growing WFG agents to 110,000, achieving USD 750 million in annual new life sales, and increasing retirement earnings to USD 275-300 million by 2027, while reducing capital in Financial Assets to USD 2.2 billion. Aegon UK aims to grow platform assets under administration to over GBP 135 billion by 2028.

Management Comments

• CEO Lard Friese stated that Aegon is now a more focused company with improved operational performance, a strong balance sheet, and an enhanced risk profile following recent transformations.
• Mr. Friese expressed satisfaction with meeting all 2024 guidance and being on track for 2025 targets, highlighting the EUR 1.2 billion OCG achievement.
• He noted the proposed 17% dividend increase to 35 eurocents for 2024 and progress towards the 40 cents target for 2025.
• Mr. Friese mentioned the completion of significant share buybacks in 2024 and the announcement of a new EUR 150 million program for 2025.
• He highlighted efforts to enhance customer experience, including bringing functions in-house at Transamerica and launching the Aegon Digital Experience (ADX) in the UK.
• Regarding acquisitions, Mr. Friese emphasized a disciplined approach, considering only opportunities that fit strategically, can be integrated, and make financial sense.
• He confirmed the strategic nature of the a.s.r. stake, stating it will be held until its intrinsic value is reflected or other value-creating opportunities arise.
• Mr. Friese acknowledged the dedication of employees and the strong engagement levels reflected in surveys.
• He welcomed new Executive Committee members Duncan Russell (CFO), Michele Bareggi (CSO), and Shawn C.D. Johnson (CEO Aegon AM), thanking departing members Matt Rider and Bas NieuweWeme.
• Mr. Friese reaffirmed Aegon's commitment to sustainability, noting the achievement of 2025 climate targets and the setting of new 2030 goals.
• He expressed excitement for 2025, focusing on driving growth and building 'champion businesses'.

Industry Context

Aegon's focus on digital platforms in the UK aligns with the broader industry trend towards digitalization in savings and retirement solutions. Its strategy to target the underserved middle market in the US reflects a specific market segmentation approach within the competitive North American insurance landscape. The completed combination with a.s.r. is part of a consolidation trend in the Dutch insurance market.

Comparison to Industry Standards

• Aegon's new remuneration policy uses a peer group comprising eight European insurance companies (e.g., Assicurazioni Generali, Prudential plc, Aviva, Swiss Life, AXA, Gruppo Unipol, Legal & General, Zurich), four Dutch general industry companies with US presence (e.g., Ahold Delhaize, Randstad, Philips, Wolters Kluwer), and four US insurance companies (e.g., Lincoln National, Principal Financial, Prudential Financial, Voya Financial).
• The CEO's target total compensation for 2024 was positioned at the 25th percentile of this peer group.
• Non-Executive Director remuneration for 2024 was generally positioned around the market median of the peer group, with the Chair at the 36th percentile.
• Aegon's share price increased by 9% in 2024, underperforming the STOXX Europe 600 Insurance Index, which gained 18%.

Management Changes

Corporate Governance

Legal Proceedings

• A US subsidiary is defending a putative class action alleging improper failure to pay bonuses on a block of universal life policies.
• A US subsidiary is involved in a pending class action related to increases in monthly deduction rates (MDR) on universal life products.
• Several US-based subsidiaries reached a settlement (subject to court approval) in a putative class action alleging mischaracterization of agents as independent contractors.
• A former subsidiary of Transamerica Corporation was involved in a long-standing contractual dispute with a Nigerian travel broker, currently pending appeal after dismissal.

Related Party Transactions

• Aegon entered into share repurchase agreements with its largest shareholder, Vereniging Aegon, for Vereniging Aegon to participate pro-rata in Aegon's share buyback programs announced in July 2023 and May 2024.
• Aegon repurchased common shares B from Vereniging Aegon in December 2023 and December 2024 to align Vereniging Aegon's voting rights closer to its 32.6% special cause level following share buybacks.
• Vereniging Aegon entered into voting undertaking agreements related to the a.s.r. transaction (October 2022) and the redomiciliation to Bermuda (June 2023), committing to vote its shares in favor of these transactions.

Stakeholder Impact

• Shareholders benefit from increased dividends and significant capital returns via share buybacks, but experienced share price underperformance relative to the industry index in 2024.
• Employees are impacted by the ongoing transformation, potential restructuring, changes in leadership, and efforts to enhance engagement and company culture.
• Customers may experience improved digital services and product offerings tailored to specific markets (e.g., US middle market), but also face changes like the transfer of the UK protection book.
• Bondholders received regular interest payments, and Aegon successfully refinanced maturing debt.
• Regulators engaged with Aegon following its redomiciliation to Bermuda and regarding ongoing supervision.
• Suppliers are subject to Aegon's procurement policies, including increasing focus on ESG performance.
• Communities benefit from Aegon's investments and volunteering activities focused on financial and social empowerment.

Next Steps

• Aegon will commence a new EUR 150 million share buyback program starting January 13, 2025, expected to complete by June 30, 2025.
• The company will focus on achieving its 2025 financial targets for OCG (approx. EUR 1.2 billion), free cash flow (approx. EUR 800 million), and dividend per share (around 40 eurocents).
• Continued execution of the transformation strategy for Transamerica in the US and Aegon UK's digital platform acceleration is planned.
• Aegon will hold its Annual General Meeting on June 12, 2025, where the final 2024 dividend will be proposed.

Key Dates

Keywords

Aegon, insurance, life insurance, pensions, retirement solutions, asset management, Transamerica, Aegon UK, World Financial Group, WFG, capital generation, free cash flow, dividend, share buyback, Solvency II, Bermuda, IFRS 17, risk management, sustainability, 20-F