Aegon,Consistent execution on strategic initiatives; results impacted by adverse mortality experience

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Beleggingsadvies 11/11/2021 09:03
Net loss of EUR 60 million reflects a EUR 470 million one-time charge as a result of management actions to release capital and increase the predictability of capital generation from the US variable annuity business, in line with prior guidance
Operating result decreases by 16% compared with the third quarter of 2020 to EUR 443 million, as adverse claims experience in the US – with COVID-19 and a higher average claim size as the most important drivers – more than offsets increased fees from higher equity markets and the positive contribution from business growth
Cash Capital at Holding decreases to EUR 961 million, which reflects EUR 192 million dividends to shareholders and EUR 212 million deleveraging in this quarter
The capital ratios of all three main units remain above their respective operating levels; Group Solvency II ratio increases to 209%
Statement of Lard Friese, CEO
"In the third quarter of 2021, we continued to drive our transformation forward by delivering on our financial and strategic commitments. Performance improvements across most of our businesses, supported by the disciplined execution of our operational improvement plan, were offset by elevated mortality in the United States.

This quarter's operating result reflects the benefit from addressable expense savings that we have achieved so far. We remain on track to deliver our target of EUR 400 million expense savings by 2023. To date, we have executed 684 out of 1,200 performance improvement initiatives, with expense initiatives representing the majority thereof. Benefits from implemented growth initiatives can be seen in the results from Strategic Assets and Growth Markets, and our Asset Management business extended its track record of over nine years of positive third-party net deposits.

We remain proactive in the management of our Financial Assets. In the third quarter, we launched the lump sum buy?out program for certain variable annuity policyholders. This was well received by customers, which can be seen by the 8% take-up rate as of the end of September. Moreover, since the end of the third quarter, the guarantees on the remaining variable annuity portfolio are being fully hedged against equity and interest rate risk, reducing our economic sensitivity to financial markets.

In our long-term care business, we have already achieved approval for more than USD 300 million worth of rate increases, and consequently, we have increased our expectations for the rate increase program to USD 450 million; underscoring our track record of actively managing this business. On top of that, we took a series of incremental management actions in the US and the Netherlands to improve our risk profile, maintain a strong balance sheet and increase the value of our portfolio.

While we are making good progress on our strategic and financial commitments, our US Life business experienced adverse mortality in part from the 0ongoing impact of COVID-19. We expect the impact from COVID-19 to abate over time. A higher average claim size also contributed to this quarter’s mortality experience. We are in the process of taking management actions to reduce the volatility in mortality experience in the United States.

Recognizing the role that Aegon plays within our broader society, we continue to progress with our approach to sustainability and responsible investing. Last week, we announced our Group-wide commitment to transitioning our general account to net-zero greenhouse gas emissions by 2050, with an intermediate goal set for 2025. Ahead of COP26, Aegon UK – in partnership with Aegon Asset Management – launched its innovative Global Sustainable Sovereign Bond Fund. The fund invests in those countries that are making the best progress towards the United Nations Sustainable Development Goals, and allows our workplace pensions customers to align their investment objectives with the goal of a fair and sustainable future.

And finally, as we look back at the third quarter, I also want to take a moment to recognize our 22,000 colleagues who are driving Aegon’s transformation. The pandemic has fundamentally changed the way in which we work and the way we interact with our stakeholders. And while the way we interact may have changed, our colleagues remain committed to transforming Aegon into a high-performance organization."

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