Aegon reports first quarter 2021 results

Rhea-AI Summary

Aegon N.V. reported strong first-quarter results for 2021, with a net result of EUR 386 million and a 20% increase in operating results to EUR 431 million. Key drivers included effective expense savings totaling EUR 136 million and improved equity markets, though these were partially offset by adverse claims linked to COVID-19. Cash capital at Holding stands at EUR 1.2 billion, maintaining solid capital ratios across all main units. Free cash flow rose to EUR 75 million from EUR 61 million a year earlier. Aegon is on track for EUR 400 million in expense savings by 2023 and aims to enhance its risk profile through strategic initiatives.

Positive

• Operating result increased by 20% to EUR 431 million.
• Expense savings of EUR 136 million achieved in the first quarter.
• Free cash flow rose to EUR 75 million, up from EUR 61 million in Q1 2020.
• Cash capital at Holding amounts to EUR 1.2 billion, within target range.
• Strong performance in US Individual Solutions with new life sales up 27%.

Negative

• Adverse claims experience in the United States due to COVID-19.

Strong progress on expense savings program and plans to improve risk profile

• Net result of EUR 386 million in the first quarter of 2021 reflects increased operating result and benign credit environment
• Operating result increases by 20% to EUR 431 million, mainly driven by expense savings and higher equity markets, partly offset by adverse claims experience in the United States mostly due to COVID-19
• Cash Capital at Holding amounts to EUR 1.2 billion, in the upper half of Aegon’s target range; capital ratios of all three main units are around or above their respective operating levels
• Free cash flow of EUR 75 million in the first quarter of 2021 compared with EUR 61 million in the first quarter of 2020
• Significantly reduced interest rate risk in the United States. On track to expand dynamic hedge to the US legacy variable annuity block in the second half of 2021

Statement of Lard Friese, CEO

“We have made early progress toward delivering on our strategic priorities, and I am encouraged to see this reflected in our first quarter results. Despite the pandemic, our employees remain committed to support our customers and business partners. I continue to be deeply impressed by the energy that they bring to transform Aegon into a more focused, high-performance company.

The first quarter of 2021 saw an increase in the operating result driven by improvements in the United States, the Netherlands and Asset Management. So far, we have reduced the addressable expense base across the Group by EUR 136 million and are on track to deliver half of our 2023 target of EUR 400 million expense savings by the end of 2021. Our balance sheet remains strong, with the capital ratios of all three main units and the Holding around or above their operating levels.

We have made solid progress on our plans to transform Aegon. During the first quarter, we further increased our strategic focus by divesting the Transamerica Ventures fund and closing the sale of Stonebridge.

In our Strategic Assets, we continue to invest in new products, product distribution and customer service. In the first quarter, we gained momentum from improved sales performance in each of our core markets. A prime example is in the US Individual Solutions business, where we grew the number of licensed agents in our main distribution channel by 18%, and saw increases in our market share there as a consequence of new product introductions.

We have also taken concrete actions to improve our risk profile, already executing on more than half of our plan to reduce interest rate risk in the United States. Furthermore, we took advantage of higher interest rates to implement a new interest rate hedge as an important step towards expanding the dynamic hedge to our legacy variable annuity block in the United States.

We have made steady progress managing our Financial Assets during the first quarter. In our US business, we reduced the sensitivity of our Variable Annuities business to interest rates, and so far have achieved one third of the targeted Long Term Care rate increases.

While ongoing global uncertainty remains, we've also begun to see the successful rollout of vaccination programs in most of the markets in which we operate, giving renewed hope to many, as we continue on the path out of the pandemic. Our hearts especially go out to our colleagues, customers, business partners and the broader communities in India and Brazil that are struggling with the devastating challenges of COVID-19. Looking to the future, I am confident in the strength of our business, our strategy, and the unwavering commitment of our employees to continue delivering on our plans.”

Note: All comparisons in this release are against 1Q 2020, unless stated otherwise. See page 7 of this press release for a full financial overview.

Strategic highlights

Aegon N.V.									unaudited
Strategic highlights - Focus. Execute. Deliver.
Key performance indicators
			Q1	Q1							Q4
			2021	2020			%				2020			%
Addressable expenses ¹			2,852	3,066			(7)				2,911			(2)
Change compared to FY 2019			(203)	10			n.m.				(144)			(41)
Strategic Assets
Americas Individual Solutions - Life, US
New business strain (USD million)			73	75			(2)				87			(16)
New life sales (USD million)			83	66			27				83			-
MCVNB (USD million)			68	37			83				60			13
Americas Workplace Solutions - Retirement Plans Middle-Market
Net deposits (USD million)			194	(63)			n.m.				(428)			n.m.
Written sales (USD million)			1,124	887			27				1,181			(5)
The Netherlands
Mortgage origination (EUR million)			3,031	2,540			19				2,835			7
Workplace Solutions net deposits (EUR million)			173	152			14				310			(44)
Net growth Knab customers ('000s of customers)			10.7	5.2			n.m.				8.2			30
United Kingdom
Platform expenses / AuA			22 bps	25 bps							23 bps
Annualized revenues gained/(lost) on net deposits (GBP million)			(2)	(2)			24				(4)			60
Workplace net deposits (GBP million)			295	410			(28)				(486)			n.m.
Retail net deposits (GBP million)			(42)	(262)			84				(310)			87
Growth Markets (Spain & Portugal, China, Brazil)
New life sales (EUR million)			65	70			(8)				45			42
MCVNB (Life) (EUR million)			32	26			21				32			(2)
New premium production (P&C and A&H) (EUR million)			29	20			46				28			3
Asset Management - Global Platforms
Operating margin (%)			12.6%	8.7%			45				16.2%			(22)
Net deposits (EUR million)			(592)	3,303			n.m.				4,763			n.m.
of which third party (EUR million)			138	(1,671)			n.m.				997			(86)
Annualized revenues gained/(lost) on net deposits (EUR million)			-	-			n.m.				2			n.m.
Financial Assets
Americas - Variable Annuities
Capital generation (USD million)			76	(1,649)			n.m.				567			(87)
Dynamic hedge effectiveness ratio (%)			98%	100%			(2)				98%			-
Americas - Long-Term Care
Capital generation (USD million)			79	24			n.m.				36			n.m.
Actual to expected claim ratio (%) (IFRS)			43%	85%			(50)				70%			(39)
NPV of rate increases approved since end-2020 (USD million)			112	n/a							n/a
The Netherlands - NL Life
Operating capital generation (EUR million)			27	46			(41)				13			n.m.
Remittances to Aegon NL (EUR million)			25	121			(79)				25			-
Solvency II ratio (%)			149%	231%			(36)				159%			(7)
1. Trailing four quarters in constant currency, EUR million.

Aegon’s strategy

Aegon is taking significant steps to transform the company in order to improve its performance and create value for its customers and shareholders. To ensure delivery against these objectives, a rigorous and granular operating plan has been developed across the Group. Aegon focuses 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. Aegon’s businesses within its core markets have been separated into Financial Assets and Strategic Assets. The aim is to release capital from Financial Assets and from businesses outside its core and growth markets, and re-allocate capital to growth opportunities in the Strategic Assets, growth markets and Asset Management. Throughout this transformation, the company aims to maintain a solid capital position in the 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.

Operational improvement plan

Aegon has an ambitious plan comprised of more than 1,100 detailed initiatives designed to improve the operating performance of its business by reducing costs, expanding margins and growing profitably. In the trailing four quarters, expense savings initiatives have led to a reduction in addressable expenses by EUR 136 million compared with the addressable expenses in the base year 2019. A total of 418 initiatives have been executed between the launch of the operational improvement plan and the end of the first quarter 2021, of which 342 are related to expense savings. Based on the progress to date, Aegon remains on track to deliver half of the 2023 target of EUR 400 million reduction in addressable expenses by the end of 2021. Aegon is also starting to see the benefits from the growth initiatives, which are aimed at improving customer service, enhancing user experience and developing new products. The company will continue at pace in its execution of the expense and growth initiatives.

Strategic Assets

Strategic Assets are businesses with a greater potential for an attractive return on capital, and where Aegon is well positioned for growth. In these businesses, Aegon will invest in profitable growth by expanding its customer base and increasing its margins.

In the US Individual Solutions business, Transamerica’s aim is to achieve a top-5 position in Term Life, Whole Life Final Expense, and Indexed Universal Life through profitable sales growth. New life sales in the first quarter of 2021 amounted to USD 83 million, which represents an increase of 27% compared with the same period last year. This was mainly driven by an increase in new sales of Indexed Universal Life. Transamerica is benefiting from an 18% increase in licensed agents at World Financial Group (WFG) and a higher market share in this affiliate distribution channel from the addition of a funeral planning benefit to Indexed Universal Life products for qualifying life insurance policyholders. Transamerica developed this new benefit to provide grieving beneficiaries valuable resources in helping the insured person’s family plan end-of-life services. The market consistent value of new business for Life increased by 83% compared with the same period last year to USD 68 million in the first quarter of 2021. This was in part driven by a more favorable product mix resulting from the addition of the funeral planning benefit.

In the US Workplace Solutions business, Transamerica aims to compete as a top-5 player in new sales in the Middle‑Market segment of Retirement Plans. Momentum is building here with written sales of USD 1.1 billion in the first quarter of 20

FAQ

What was Aegon's net result for Q1 2021?

Aegon's net result for Q1 2021 was EUR 386 million.

How much did Aegon save in expenses during Q1 2021?

Aegon saved EUR 136 million in expenses during Q1 2021.

What is Aegon's cash capital at Holding as of Q1 2021?

Aegon's cash capital at Holding is EUR 1.2 billion.

What is the target for Aegon's expense savings by 2023?

Aegon targets EUR 400 million in expense savings by 2023.

How much did Aegon's operating result increase in Q1 2021?

Aegon's operating result increased by 20% to EUR 431 million in Q1 2021.