Aegon Ltd. Q1 FY2024 earnings call

Management Statement and Operational Highlights

• Segment Reporting Change: Transamerica's businesses re-segmented from 2 to 4 segments (Distribution, Savings & Investments, Protection Solutions, Financial Assets) to align with strategy, enhancing transparency.
• Commercial Momentum: Continued momentum in U.S. and Brazil; net inflows at asset manager. Challenges in UK retail business due to macroeconomic environment and net outflows.
• Share Buyback: Completed 92% of EUR1.5 billion share buyback program, planned new EUR200 million share buyback starting July 2024 and completing by end-2024.
• Transformation: Transamerica focused on becoming America’s leading middle market life insurance and retirement company, reducing exposure to financial assets.

Segment Performance

• Distribution: WFG aims to increase licensed agents to 110,000 by 2027. Licensed agents increased by 13% to 76,000 in Q1 2024. Multi-ticket agents (selling >1 life policy in 12 months) rose 12% y-o-y.
• Savings & Investments: Net deposits in mid-size retirement plans totaled $1.2 billion in Q1 2024. Ancillary products like General Account Stable Value and individual retirement accounts saw growth. Assets invested by customers in these products reached $11 billion each.
• Protection Solutions: New life sales increased 5%, driven by higher index universal life sales. WFG accounted for 71% of Transamerica individual life sales, with IRRs exceeding 12%.
• Financial Assets: Operating capital generation from financial assets declined. Capital employed in financial assets decreased to $3.7 billion by end-March 2024. Progress on reducing capital employed in financial assets to ~$2.2 billion by end-2027. Regulatory approvals for $335 million in premium rate increases in long-term care since 2023.

Guidance

• On track to meet 2024 operating capital generation guidance of ~EUR1.1 billion.
• Expect to complete EUR1.5 billion share buyback program by end-June 2024; new EUR200 million share buyback to start July 2024 and complete by end-2024.
• Confident in achieving free cash flow guidance of >EUR700 million in 2024 and ~EUR800 million in 2025, supported by sustainable operating capital generation.

Risks

• UK Retail Challenges: Macro environment and net outflows led to continued net outflows in UK retail channel.
• Distribution Practices: Market concerns over insurance agent distribution practices, but WFG has strong compliance processes.
• Regulatory Uncertainty: Uncertainty around changes like the Department of Labor fiduciary rule, with potential legal actions similar to 2016.

Question and Answer

• **Q: Request for normalized run rate of capital generation and earnings on in-force from Financial Assets in U.S. business.

A: Matt Rider explained normalized run rate adjustments (e.g., unfavorable claims, expense variances) leading to a clean run rate of ~EUR280 million, and that earnings on in-force for Financial Assets are expected to be ~$200 million annually.

• **Q: Follow-up on OCG and distribution risk.

A: Lard Friese discussed WFG's compliance processes, and Matt Rider addressed OCG alignment with 2024 targets.

• **Q: STOLI ambition and share buyback rationale.

A: Matt Rider spoke about STOLI progress (34% of target achieved) and Lard Friese explained share buyback based on capital management policy.

• **Q: M&A strategy and new business strain.

A: Lard Friese talked about M&A criteria (core market alignment) and Matt Rider discussed new business strain drivers (higher sales in Individual Life and Retirement Plans).

• **Q: Complaints data and share buyback timing.

A: Lard Friese addressed complaints tracking (WFG complaints relatively low) and share buyback timing based on cash capital position.

• **Q: U.S. mortality and future outlook.

A: Lard Friese discussed seasonality of mortality as normal claims fluctuation, with no material impact from institutionally owned contracts.