Aegon Ltd. Q4 FY2023 earnings call

Management Statement and Operational Highlights

• 2023 was a transformational year: completed ASR transaction, initiated share buyback, reduced gross financial leverage, moved legal setup to Bermuda.
• Second half 2023: Operating capital generation before holding funding and operating expenses 16% higher than 2022; earnings on in-force rose 16%; IFRS operating result decreased to EUR681 million; shareholder's equity per share stable; capital ratios strong; cash capital at holding EUR2.4 billion.
• U.S. business strong: WFG licensed agents up 18%, individual life sales up 13%, retirement plans midsized plans sales up 72%.
• UK progress: Workplace channel net deposits strong, retail channel affected by macroeconomic conditions.
• Growth markets: New life sales and non-life premium production up; International operating capital generation up.
• Asset Management: Global Platforms improved in second half; Strategic Partnership affected by market conditions.

Segment Performance

• Americas:
  • U.S. Individual Solutions (WFG): Licensed agents increased 18% to nearly 74,000 by year-end 2022; multi-ticket agents up 12%; Transamerica market share of life insurance products sold by WFG in the U.S. remained 64%. Individual Life Insurance: New life sales up 13%, new business stream up 10%, earnings on in-force up 31% vs full year 2022. U.S. Workplace Solutions Retirement Plans: Written sales in midsized plans rose 72% in 2023, net deposits $1.2 billion; earnings on in-force decreased due to higher expenses.
• United Kingdom: Workplace channel net deposits in 2023 were GBP1.8 billion (excluding a single large low-margin scheme, would have been GBP2.7 billion); retail channel had net outflows of GBP3.1 billion in 2023 due to macroeconomic environment.
• Growth Markets: New life sales up 18% vs 2022; non-life new premium production up 15%; operating capital generation in International segment excluding TLB up 8% in 2023.
• Asset Management: Global Platforms had net outflows in first half 2023 but negligible in second half; benefited from new asset management joint venture with ASR; Strategic Partnership had net outflows in 2023 due to market conditions in China and other factors.

Guidance

• 2023 operating capital generation before holding funding and operating expenses nearly EUR1.3 billion, 14% higher than 2022, above guidance.
• 2024 operating capital generation expected around EUR1.1 billion, driven by new business stream growth.
• Final dividend for 2023 proposed at EUR0.16 per share, bringing full year to EUR0.30 per common share, on track to EUR0.40 per share by 2025.
• Share buyback program: 76% completed, aiming to return EUR1.5 billion.

Risks

• Macroeconomic conditions impacting UK Retail business and Asset Management.
• Unfavorable mortality experience variance in U.S. due to COVID-19 aftermath.
• Market conditions affecting Asset Management, particularly in Strategic Partnership segment.

Question and Answer

Q: On operating capital generation, how much conservatism is built into the 2024 guidance?

A: Matt Rider discussed that the 2024 guidance of EUR1.1 billion is driven by new business stream growth, with tailwinds from equity markets and clean U.S. results offset by some factors.

Q: On remittances for the U.S., what's the trajectory?

A: Matt Rider mentioned mid-single digit growth in U.S. remittances, with focus on allowing business units to invest for growth.

Q: On the Bermuda Reinsurance entity, plans for third-party solutions?

A: Matt Rider explained that the reinsurance entity in Bermuda was set up to align capital framework for fixed deferred annuities, reducing potential capital volatility, with further management actions anticipated.

Q: On the increase in expenses in U.S. Retirement Plans, plans to grow the business?

A: Matt Rider noted higher expenses related to employee and technology investments, with focus on leveraging budgeting process and strategic asset growth to drive profitability in the U.S. Retirement Plans business.