Regulatory News:
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 2021, representing an
increase of 27% compared with the same period last year. This
increase was supported by contract wins in the Pooled Plan
Arrangements, which is a strategic growth driver. Middle-Market net
deposits in the first quarter amounted to USD 194 million, an
improvement compared with USD 63 million net outflows in the same
period last year. This improvement reflects increased customer
deposits generated through existing advisors following targeted
campaigns.
Aegon is the largest third-party mortgage originator in the
Netherlands, benefiting from its scale, high service levels to
intermediaries and customers, and diversified funding. In the first
quarter of 2021, the company originated EUR 3.0 billion of
residential mortgages, while further increasing its customer
relational NPS scores. This volume was in part driven by the strong
housing market and the increased demand for mortgage refinancing in
light of the current interest rate environment. Two thirds thereof
consisted of fee-based mortgages originated for third-party
investors. On March 31, 2021, Aegon successfully priced a EUR 657
million residential mortgage-backed securitization to further
diversify its mortgage funding. The transaction was oversubscribed
three times by investors.
Net deposits for the Workplace Solutions defined contribution
products (PPI) in the Netherlands increased by 14% to EUR 173
million in the first quarter of 2021. Aegon’s defined contribution
offering is low-cost thanks to the scale of its administration
subsidiary, TKP. Aegon expects its online bank Knab to continue its
development into a digital gateway for individual retirement
solutions. In the first quarter of 2021, the online bank grew its
customer base by 11,000 and over 90% of all its customers are using
the bank’s mobile app.
In the first quarter of 2021, Aegon’s business in the United
Kingdom achieved record gross deposits across the business
excluding the Institutional channel, with significant contributions
from both the Workplace and Retail channels in the platform. Net
deposits in Workplace remained positive at GBP 295 million. There
have been a number of notable Workplace proposition enhancements in
recent months, and downloads of Aegon’s Workplace app surpassed
20,000 following its recent launch. Net outflows in Retail amounted
to GBP 42 million, which is a significant improvement compared with
the first quarter of 2020. This resulted from platform proposition
enhancements and strong investor sentiment. Aegon aims to mitigate
the top-line impact from the gradual run-off of its traditional
product portfolio – which is the driver behind annualized revenues
lost for the first quarter – by profitably growing its platform
business, and by reducing expenses. Expense initiatives and the
favorable impact from market movements on assets have led to an
improvement in efficiency with platform expenses over assets under
administration decreasing by 3 basis points compared with the first
quarter of last year to 22 basis points.
Financial Assets
Financial Assets are blocks of business which have closed or
will be closed for new sales, and which are capital intensive with
relatively low returns on capital employed. Aegon has established
dedicated teams to manage these businesses, who are responsible for
maximizing their value through disciplined risk management and
capital management actions.
In December 2020, Aegon announced that Transamerica would stop
selling variable annuities with significant interest rate sensitive
living and death benefit riders, fixed index annuities, and
stand-alone individual Long-Term Care. At the end of March 2021,
Transamerica had closed the impacted annuity products to new sales
and stopped accepting applications for individual standalone
Long-Term Care policies. Transamerica will continue to serve the
retirement needs of individuals with products like accumulation
variable annuities with limited interest rate sensitivity. To this
end the company recently launched the Transamerica Principal
OptimizerSM rider. This is a product that offers customers
protection of their principal investment combined with the
potential of investment growth.
In the first quarter of 2021, Transamerica continued its
successful track record of dynamically hedging the in-force block
of variable annuity business with guaranteed minimum withdrawal
benefits (GMWB) for equity and interest rate risk, with a hedge
effectiveness of 98%. The company expects to expand the dynamic
hedge program to its legacy variable annuities block with income
and death benefit riders in the second half of 2021.
The primary management action regarding Transamerica’s Long-Term
Care block is a rate increase program with a value of USD 300
million. In the first quarter of 2021, the company obtained
regulatory approvals for rate increases worth USD 112 million.
Furthermore, claims experience developed favorably for the
Long-Term Care business as a result of increased claims
terminations due to the impact of the COVID-19 pandemic, leading to
an actual to expected claims experience of 43% for the first
quarter of 2021. As soon as the impacts of the COVID-19 pandemic
subside, Aegon expects the number of new Long-Term Care claims to
revert to normal levels.
The newly established team that is dedicated to managing the
Dutch Life business is actively managing risks and the capital
positions to enhance the consistency of remittances to the Group.
The business implemented a quarterly remittance policy in the
fourth quarter of 2020, and again remitted EUR 25 million in the
first quarter of 2021. The Solvency II ratio of the Dutch Life
business stood at 149% at the end of the first quarter, which is
around the operating level of 150%.
Growth Markets and Asset Management
In its Growth Markets, Aegon will continue to invest in
profitable growth. In the first quarter of 2021 the market
consistent value of new business (MCVNB) from life products
increased by 21% to EUR 32 million. This was mainly driven by a
more favorable business mix in China. New premium production for
property & casualty and accident & health insurance
increased by EUR 9 million to EUR 29 million as a result of new
products launched in Spain & Portugal.
Aegon Asset Management aims to significantly increase the
operating margin of its Global Platforms by improving efficiency
and driving growth. Third-party net deposits on the Global
Platforms were EUR 0.1 billion in the first quarter of 2021, driven
by strong net deposits on the Fixed income platform, and continues
to build on Aegon’s track record of positive third-party net
deposits. The operating margin of its Global Platforms increased by
4 percentage points compared with the first quarter of 2020. To
reduce expenses and enhance the quality of customer service, Aegon
Asset Management migrated the administration of its fiduciary
business from a dedicated platform to existing systems used in
other parts of its business.
Smaller, niche or sub-scale businesses
In small markets or markets where Aegon has sub-scale or niche
positions, capital will be managed tightly with a bias to exit.
In January 2021, together with its joint venture partner, Aegon
decided to cease funding of GoBear, a digital financial supermarket
in Southeast Asia. Subsequently, GoBear’s brand and e-lending
business have been sold to different strategic buyers so as to
achieve a controlled and swift exit from the business. These
transactions will not have a material impact on the company’s
capital position and results.
On March 1, 2021, Aegon announced the completion of the sale of
Stonebridge, a UK-based provider of accident insurance products, to
Global Premium Holdings group, part of Embignell group. Proceeds of
GBP 35 million were received in the second half of 2020 and GBP 23
million in the first quarter of 2021. The total proceeds are equal
to one times Stonebridge's Solvency II Own Funds at year-end
2019.
On March 31, 2021, Transamerica announced that it had reached an
agreement to sell its portfolio of fintech and insurtech companies
to Swiss-based private equity firm Montana Capital Partners.
Following the transaction, Transamerica will continue to work with
the portfolio companies. The transaction closed on April 27, 2021
and will have a positive impact on Cash Capital at the Holding in
the second quarter of 2021.
Aegon has taken note of an announcement issued by Vienna
Insurance Group AG Wiener Versicherung Gruppe (VIG) on April 7,
2021. The announcement issued by VIG reads as follows: “Acquisition
of the Aegon entities prevented by Hungary for the moment. VIENNA
INSURANCE GROUP AG Wiener Versicherung Gruppe received a decree
yesterday afternoon in which the Hungarian Ministry of the Interior
announced that the intended acquisition by a foreign investor of
the Aegon companies in Hungary is denied. As part of the approval
process, Vienna Insurance Group has been in constructive talks with
the responsible Hungarian Minister of Finance since January 2021.
The decree is in contradiction with the course of the talks to
date. Vienna Insurance Group expects that this issue will be
resolved positively in the near future.” Aegon will continue to
work with VIG to close the transaction.
Strengthening the balance sheet
Aegon aims to continue strengthening its balance sheet, and is
taking proactive management actions to improve its risk profile and
reduce the volatility of its capital ratios.
At the Capital Markets Day on December 10, 2020, Aegon announced
its plans to reduce its economic interest rate exposure in the
United States by one third to one half to lessen its dependency on
financial markets and improve its risk profile. At the end of the
first quarter of 2021, Aegon had already executed more than half of
this plan through management actions, primarily by lengthening the
duration of its asset portfolio. Furthermore, Aegon has taken
advantage of higher interest rates in the United States by
implementing a macro interest rate hedge in the second half of
March 2021 at the prevailing interest rates. This hedge covers part
of Aegon’s remaining economic interest rate exposure, representing
approximately one third of the interest rate exposure associated
with the legacy variable annuity block with income and death
benefit riders. This measure will mitigate the potential capital
impact from the expansion of Aegon’s dynamic hedge to the legacy
variable annuity block, were interest rates to decline from those
levels. Aegon is making good progress on the expansion of the
dynamic hedge. At its second quarter 2021 results, Aegon will
provide an update on the plans for implementation of the expansion
of the dynamic hedge.
Financial highlights
Financial overview
unaudited
Q1
Q1
Q4
EUR millions
Notes
2021
2020
%
2020
%
Americas
163
129
27
259
(37)
The Netherlands
184
154
19
168
10
United Kingdom
39
44
(11)
32
24
International
28
49
(42)
39
(28)
Asset Management
75
38
99
53
41
Holding and other activities
(59)
(56)
(5)
(71)
18
Operating result
1
431
358
20
479
(10)
Fair value items
3
1,377
(100)
(524)
n.m.
Realized gains / (losses) on
investments
31
14
n.m.
76
(59)
Net impairments
16
(59)
n.m.
(23)
n.m.
Non-operating items
50
1,333
(96)
(471)
n.m.
Other income / (charges)
1
(162)
n.m.
368
(100)
Result before tax
482
1,529
(68)
376
28
Income tax
(96)
(258)
63
(105)
9
Net result
386
1,270
(70)
271
43
Net result attributable to:
Owners of Aegon N.V.
383
1,270
(70)
262
47
Non-controlling interests
3
-
n.m.
9
(68)
Operating result after tax
357
310
17
409
(13)
Return on equity
4
8.8%
6.9%
28
10.3%
(14)
Operating expenses
8
954
991
(4)
924
3
of which addressable expenses
691
790
(12)
711
(3)
Americas
11,013
12,402
(11)
7,772
42
The Netherlands
4,488
3,728
20
6,168
(27)
United Kingdom
4,061
2,994
36
174
n.m.
International
11
87
(87)
82
(86)
Asset Management
39,778
32,706
22
30,402
31
Total gross deposits
9
59,351
51,917
14
44,597
33
Americas
(3,609)
(1,514)
n.m.
(5,406)
33
The Netherlands
204
119
71
911
(78)
United Kingdom
686
(217)
n.m.
(4,149)
n.m.
International
6
38
(83)
38
(83)
Asset Management
3,119
613
n.m.
3,157
(1)
Total net deposits / (outflows)
9
407
(960)
n.m.
(5,449)
n.m.
Americas
98
88
11
97
1
The Netherlands
21
26
(21)
22
(4)
United Kingdom
8
12
(35)
7
10
International
54
81
(33)
52
4
New life sales (recurring plus 1/10
single)
2,9
181
208
(13)
178
2
New premium production accident &
health insurance
55
74
(25)
31
80
New premium production property &
casualty insurance
25
36
(30)
32
(21)
Market consistent value of new
business
3
166
100
67
101
64
Note: In 2021, the result of Central &
Eastern Europe has been reclassified from operating result to Other
income following the announced divestment of the business.
Aegon N.V.
unaudited
Leverage
Quarterly
Q1
Q1
Q4
2021
2020
2020
Gross financial leverage (EUR
millions)
6,080
6,708
5,969
Gross financial leverage ratio (%)
26.7%
26.6%
27.9%
Aegon N.V.
unaudited
Cash Capital at Holding
Quarterly
EUR millions
Q1
Q1
Q4
2021
2020
2020
Beginning of period
1,149
1,192
1,555
Americas
17
16
29
The Netherlands
25
100
75
United Kingdom
49
-
-
International
24
-
29
Asset Management
-
-
14
Holding and other activities
-
-
20
Gross remittances
115
116
167
Funding and operating expenses
(41)
(56)
(105)
Free cash flow
75
61
61
Divestitures
21
153
-
Capital injections
(50)
(21)
(3)
Capital flows from / (to) shareholders
-
-
(59)
Net change in gross financial leverage
-
-
(411)
Other
(4)
(7)
7
End of period
1,191
1,379
1,149
Aegon N.V.
unaudited
Capital ratios
March 31,
March 31,
Dec. 31,
Notes
2021
2020
2020
US RBC Ratio
428%
376%
432%
NL Life Solvency II ratio
149%
231%
159%
Scottish Equitable plc (UK) Solvency II
ratio
158%
151%
156%
Aegon Bank Core Tier-1 ratio
Eligible Own Funds
18,810
18,414
18,582
Consolidated Group SCR
9,676
8,858
9,473
Aegon N.V. Solvency II ratio
10, 11
194%
208%
196%
Eligible Own Funds to meet MCR
7,869
8,871
7,888
Minimum Capital Requirement (MCR)
2,274
2,138
2,326
Aegon N.V. MCR ratio
346%
415%
339%
Capital generation
unaudited
Q1
Q1
Q4
EUR millions
Notes
2021
2020
%
2020
%
Earnings on in-force*
218
210
4
367
(41)
Release of required
239
259
(8)
227
5
New business strain
(234)
(230)
(2)
(212)
10
Operating capital generation*
223
238
(6)
381
(41)
One time items*
107
232
(54)
(115)
n.m.
Market impacts
(358)
343
n.m.
25
n.m.
Capital generation*
(28)
813
n.m.
291
n.m.
*Please note capital generation (earnings
on in-force, operating capital generation, one-time items and
capital generation) for 2020 has been restated to smooth the impact
of the annual lowering of ultimate forward rate and Holding funding
cost.
Capital generation
unaudited
Q1
Q1
Q4
EUR millions
Notes
2021
2020
%
2020
%
Americas
115
175
(34)
251
(54)
The Netherlands*
37
58
(36)
28
32
United Kingdom
44
48
(7)
56
(22)
International
42
16
n.m.
72
(41)
Asset Management
49
18
n.m.
30
62
Holding and other activities*
(66)
(76)
(14)
(57)
15
Operating capital generation*
223
238
(6)
381
(41)
*Please note capital generation (earnings
on in-force, operating capital generation, one-time items and
capital generation) for 2020 has been restated to smooth the impact
of the annual lowering of ultimate forward rate and Holding funding
cost.
Operating result
Aegon’s operating result increased by 20% compared with the
first quarter of 2020 to EUR 431 million. This was mainly driven by
expense savings and the benefit from higher equity markets, which
were only partly offset by adverse claims experience in the
Americas, adverse currency movements and reclassifying the result
of Central & Eastern Europe from operating result to Other
income following the announced divestment of the business. Adjusted
for this reclassification and on a constant currency basis, Aegon’s
operating result increased by 32% compared with the first quarter
of 2020.
The operating result from the Americas increased by 27%, or 38%
on a constant currency basis, compared with the first quarter of
2020 to EUR 163 million. The main drivers were favorable equity
market performance – especially in Variable Annuities and
Retirement Plans – and lower addressable expenses in all lines of
business. In addition, better than expected morbidity experience,
mainly in Long-Term Care, contributed EUR 65 million. This was
offset by EUR 138 million adverse mortality experience in Life,
which was EUR 81 million worse than the first quarter in 2020.
Aegon estimates that EUR 79 million of claims in the first quarter
of 2021 can be directly attributed to COVID-19 as the cause of
death. Aegon believes that the remaining adverse mortality
experience is, to a large extent, attributable to the pandemic as
well.
Aegon’s operating result in the Netherlands increased by 19%
compared with the first quarter of 2020 to EUR 184 million. This
was driven by higher investment margins in the Life business,
growth in Mortgages and better claims experience in Workplace
Solutions.
The operating result from the United Kingdom decreased by 11%
compared with the first quarter of 2020 to EUR 39 million, driven
by lower results from Aegon’s protection and distribution
businesses. Fee revenues were broadly stable, as the favorable
impact from higher equity markets was offset by net outflows in
recent quarters.
The operating result from International decreased by 42% to EUR
28 million in the first quarter of 2021, reflecting the
reclassification of the result of Central & Eastern Europe from
operating result to Other income following the announced divestment
of the business. Adjusting for this impact, the operating result
decreased by 6% on a constant currency basis, as business growth
and improved claims experience in Spain & Portugal and China
were more than offset by a lower result in TLB and in the Asian
direct marketing business.
The operating result from Aegon Asset Management nearly doubled
compared with the first quarter of 2020 to EUR 75 million. The
increase was mostly driven by strong performance of Aegon's Chinese
asset management joint venture, Aegon Industrial Fund Management
Company (AIFMC). The operating result from Global Platforms also
increased, mainly due to higher revenues as a result of net
deposits and favorable market movements.
The operating result from the Holding amounted to a loss of EUR
59 million, mainly driven by funding expenses.
Non-operating items
The result from non-operating items amounted to EUR 50 million
in the first quarter of 2021, resulting from realized gains and net
recoveries on investments.
Fair value items
The gain from fair value items amounted to EUR 3 million in the
first quarter of 2021. Losses on hedge programs, a result of higher
equity markets and interest rates, were offset by a reduction in
the Liability Adequacy Test deficit in the Netherlands. The latter
was mostly driven by market movements, including mortgage spread
tightening.
Realized gains on investments
Realized gains on investments amounted to EUR 31 million driven
by normal trading activity.
Net recoveries
Net recoveries amounted to EUR 16 million, as recoveries on
investments – including the unsecured loan portfolio in the
Netherlands and corporate credits in the Americas – more than
offset gross impairments.
Other income
Other income amounted to EUR 1 million, which included the
favorable impact from an update of inflation assumptions in the
Netherlands and a one-time gain in the Americas related to the sale
of a small-sized Individual Retirement Account (IRA) portfolio to a
third party. These offset EUR 83 million of one-time investments
related to the operational improvement plan and EUR 15 million IFRS
9 / 17 project costs in the Holding.
Net result
The income tax expense amounted to EUR 96 million, while the
profit before tax was EUR 482 million, resulting in a net result of
EUR 386 million. The effective tax rate of 20% is below the nominal
tax rate, which is mainly due to tax-exempt income and tax credits
in the Americas.
Expenses
Addressable expenses decreased by 12% compared with the first
quarter of 2020, or 8% on a constant currency basis, to EUR 691
million. This was driven mainly by expense initiatives as part of
the operational improvement plan. Furthermore, expenses benefited
from lower travel, marketing, and sales activities due to the
impact of the COVID-19 pandemic. Addressable expenses in both the
first quarter of 2020 and 2021 exclude expenses related to Central
& Eastern Europe following the announced divestment of the
business.
Operating expenses decreased by 4% compared with the first
quarter of 2020 to EUR 954 million. The decline in addressable
expenses, and lower IFRS 9 / 17 project costs were partly offset by
EUR 83 million one-time investments related to the operational
improvement plan.
Sales
Net deposits for the Group amounted to EUR 0.4 billion in the
first quarter of 2021. This was the result of EUR 3.1 billion
third-party net deposits in Asset Management, mainly from AIFMC.
Furthermore, the United Kingdom contributed EUR 0.7 billion net
deposits driven by the platform business, and the Netherlands
contributed EUR 0.2 billion as a result of continued demand for
defined contribution products (PPI). These were partly offset by
EUR 3.6 billion net outflows in the Americas, which were mainly
attributable to outflows in the large market segment of Retirement
Plans.
New life sales declined by 13% compared with the first quarter
of 2020 to EUR 181 million. This was mainly driven by derecognition
of Central & Eastern Europe new life sales following the
announced divestment of the business. Adjusting for this impact,
new life sales were up 2% on a constant currency basis compared
with the first quarter of 2020. This was mostly driven by higher
sales in the Americas, where Indexed Universal Life sales benefited
from an 18% increase in licensed agents at World Financial Group
(WFG), in addition to a higher market share in this affiliate
distribution channel. This was partly offset by lower sales in the
Netherlands following the decision to classify the Dutch Life
business as a Financial Asset and, over time close most products
for new sales. Furthermore, new life sales in China were down, as a
result of a decline in low-margin single premium sales through the
bank channel.
New premium production for accident & health insurance
decreased by 25% to EUR 55 million. This was mainly due to last
year’s decision to exit the individual Medicare supplement segment
in the Americas and lower market-wide demand for group disability
products in the Netherlands.
New premium production for property & casualty decreased by
30% compared with the first quarter of 2020 to EUR 25 million. This
was mainly driven by derecognition of Central & Eastern Europe
production following the announced divestment of the business.
Adjusting for this impact, sales increased by 47%, mainly as a
result of higher sales in Spain & Portugal driven by the
introduction of a new household insurance product.
Market consistent value of new business
Market consistent value of new business (MCVNB) increased by 67%
compared with the first quarter of 2020 to EUR 166 million. This
was mainly driven by an increase in MCVNB in the Americas resulting
from the repricing of variable annuity riders, as well as higher
volumes and a favorable product mix in Indexed Universal Life.
Shareholders’ equity
Shareholders’ equity excluding revaluation reserves increased by
EUR 1.2 billion during the first quarter of 2021, to EUR 16.7
billion – or EUR 8.03 per common share – on March 31, 2021. The
increase was mainly driven by retained earnings and favorable
currency movements.
Gross financial leverage
Gross financial leverage increased by EUR 0.1 billion in the
first quarter of 2021, leading to gross financial leverage of EUR
6.1 billion per March 31, 2021. This increase was driven by the
strengthening of the US dollar against the Euro.
The gross financial leverage ratio improved from 27.9% on
December 31, 2020, to 26.7% on March 31, 2021, as the increase in
leverage was more than offset by higher shareholders’ equity
excluding revaluation reserves.
Cash Capital at Holding and Free Cash Flow
Aegon’s Cash Capital at Holding position increased from EUR
1,149 million to EUR 1,191 million during the first quarter of
2021, which is in the upper half of the operating range of EUR 0.5
billion to EUR 1.5 billion. Free cash flow to the Holding of EUR 75
million resulted from EUR 115 million gross remittances from the
units and EUR 41 million holding funding and operating expenses.
Additional proceeds of EUR 21 million from the divestment of
Stonebridge were received by the Holding in the first quarter.
These cash inflows were partly offset by EUR 54 million capital
injections and other items, mainly to fund one-time investments
related to the operational improvement plan.
Capital ratios
Aegon’s Group Solvency II ratio decreased from 196% to 194%
during the first quarter of 2021, and the capital ratios of its
three main units were around or above their respective operating
levels at the end of the quarter. Capital generation after holding
expenses amounted to EUR (28) million for the first quarter of
2021. Market movements totaled EUR (358) million and were mainly
driven by the impact of interest movements in the Netherlands.
One-time items amounted to EUR 107 million, as management actions
in the United Kingdom as well as several other smaller items across
the Group more than offset the impact of the reduction of the
ultimate forward rate by 15 basis points in the Netherlands.
Operating capital generation amounted to EUR 223 million, despite
being impacted by adverse mortality due to the COVID-19
pandemic.
The estimated RBC ratio in the United States decreased from 432%
on December 31, 2020, to 428% on March 31, 2021, and remained above
the operating level of 400%. Market movements had a slight negative
impact on the RBC ratio, as higher equity markets and significantly
higher interest rates led to flooring of variable annuity reserves.
In addition, dividend payments to the intermediate holding company
reduced the RBC ratio by 8 percentage points. Operating capital
generation had a positive impact, despite being impacted by adverse
mortality as a result of the COVID-19 pandemic.
The estimated Solvency II ratio of NL Life decreased from 159%
on December 31, 2020, to 149% on March 31, 2021, which is around
the operating level of 150%. The decline resulted from the
reduction of the ultimate forward rate by 15 basis points and the
adverse impact from market movements on the ratio, which was driven
by rising interest rates. This is a reflection of the fact that
Aegon hedges on an economic basis. Real estate revaluations also
had a negative impact on the ratio following a change in transfer
tax. There was a partial offset from the tightening of mortgage
spreads. Operating capital generation had a positive impact, which
offset the EUR 25 million dividend payment to Group in the first
quarter.
The estimated Solvency II ratio for Scottish Equitable Plc
increased from 156% on December 31, 2020, to 158% on March 31,
2021, and remained above the operating level of 150%. The increase
was primarily driven by management actions to reduce the equity
risk in the own pension scheme and the interest rate risk in the
general account. In addition, operating capital generation had a
positive impact. These positive impacts more than offset the impact
of dividend payments to the intermediate holding company.
Use this link for the full version of the press
release.
Additional information
Presentation
The conference call presentation is available on aegon.com as of
7.30 a.m. CET.
Supplements
Aegon’s 1Q 2021 Financial Supplement is available on
aegon.com.
Conference call including Q&A
The conference call starts at 9:00 a.m. CET, with an audio
webcast on aegon.com. Two hours after the conference call, a replay
will be available on aegon.com.
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Dial-in numbers for conference call
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Passcode: 1015124
Financial calendar 2021
AGM – June 3
Ex-dividend date final dividend 2020 – June 7
Publication stock fraction final dividend 2020 – June 30
Payment date final dividend 2020 – July 7
Second quarter 2021 results – August 12
Ex-dividend date interim dividend 2021 – August 20
Publication stock fraction interim dividend 2021 – September
10
Payment date interim dividend 2021 – September 17
Third quarter 2021 results – November 11
All references to the payment of (interim) dividends are subject
to any relevant board or shareholders’ resolution to distribute
such (interim) dividend and barring unforeseen circumstances.
About Aegon
Aegon’s roots go back more than 175 years – to the first half of
the nineteenth century. Since then, Aegon has grown into an
international company, with businesses in the Americas, Europe and
Asia. Today, Aegon is one of the world’s leading financial services
organizations, providing life insurance, pensions and asset
management. Aegon’s purpose is to help people achieve a lifetime of
financial security. More information on aegon.com.
Notes (1 of 2)
1) For segment reporting purposes operating result, operating
result after tax, operating expenses, addressable expenses, income
tax (including joint ventures (jv's) and associated companies),
result before tax (including jv's and associated companies) and
market consistent value of new business are calculated by
consolidating on a proportionate basis the revenues and expenses of
Aegon’s joint ventures and Aegon’s associates. Aegon believes that
these non-IFRS measures provide meaningful information about the
underlying results of Aegon's business, including insight into the
financial measures that Aegon's senior management uses in managing
the business. Among other things, Aegon's senior management is
compensated based in part on Aegon's results against targets using
the non-IFRS measures presented here. While other insurers in
Aegon's peer group present substantially similar non-IFRS measures,
the non-IFRS measures presented in this document may nevertheless
differ from the non-IFRS measures presented by other insurers.
There is no standardized meaning to these measures under IFRS or
any other recognized set of accounting standards. Readers are
cautioned to consider carefully the different ways in which Aegon
and its peers present similar information before comparing them.
Aegon believes the non-IFRS measures shown herein, when read
together with Aegon's reported IFRS financial statements, provide
meaningful supplemental information for the investing public to
evaluate Aegon’s business after eliminating the impact of current
IFRS accounting policies for financial instruments and insurance
contracts, which embed a number of accounting policy alternatives
that companies may select in presenting their results (i.e.
companies can use different local GAAPs to measure the insurance
contract liability) and that can make the comparability from period
to period difficult. Aegon segment reporting is based on the
businesses as presented in internal reports that are regularly
reviewed by the Executive Board which is regarded as the chief
operating decision maker.
Segment information
First quarter 2021
First quarter 2020
EUR millions
Segment total
Joint ventures and associates
eliminations
Consolidated
Segment total
Joint ventures and associates
eliminations
Consolidated
Operating result after tax
357
(19)
338
311
22
333
Tax on operating result
(74)
24
(50)
(47)
15
(33)
Operating result
431
(43)
388
358
8
366
Fair value items
3
19
22
1,377
(20)
1,357
Realized gains / (losses) on
investments
31
(3)
28
14
(4)
10
Net impairments
16
-
16
(59)
-
(59)
Non-operating items
50
16
66
1,333
(24)
1,309
Other income / (charges)
1
3
4
(162)
1
(161)
Result before tax
482
(24)
458
1,529
(15)
1,514
Income tax from certain proportionately
consolidated joint ventures and associates included in income
before tax
24
(24)
-
15
(15)
-
Income tax (expense) / benefit
(96)
24
(72)
(258)
15
(243)
Of which income tax from
certain proportionately consolidated joint ventures and associates
included in income before tax
(24)
24
-
(15)
15
-
Net result
386
-
386
1,270
-
1,270
Segment information
Fourth quarter 2020
EUR millions
Segment total
Joint ventures and associates
eliminations
Consolidated
Operating result after tax
409
36
445
Tax on operating result
(70)
14
(55)
Operating result
479
22
501
Fair value items
(524)
(40)
(564)
Realized gains / (losses) on
investments
76
-
76
Net impairments
(23)
1
(22)
Non-operating items
(471)
(39)
(510)
Other income / (charges)
368
14
382
Result before tax
376
(2)
374
Income tax from certain proportionately
consolidated joint ventures and associates included in income
before tax
2
(2)
-
Income tax (expense) / benefit
(105)
2
(103)
Of which income tax from
certain proportionately consolidated joint ventures and associates
included in income before tax
(2)
2
-
Net result
271
-
271
Notes (2 of 2)
2)
New life sales is defined as new recurring
premiums plus 1/10 of single premiums.
3)
The present value, at point of sale, of
all cashflows for new business written during the reporting period,
calculated using approximate point of sale economics assumptions.
Market consistent value of new business is calculated using a risk
neutral approach, ignoring the investment returns expected to be
earned in the future in excess of risk free rates (swap curves),
with the exception of an allowance for liquidity premium. The Swap
curve is extrapolated beyond the last liquid point to an ultimate
forward rate. The market consistent value of new business is
calculated on a post tax basis, after allowing for the time value
financial options and guarantees, a market value margin for
non-hedgeable non-financial risks and the costs of non-hedgeable
stranded capital.
4)
Return on equity is a ratio calculated by
dividing the operating result after cost of leverage, by the
average shareholders' equity excluding the revaluation reserve.
5)
Included in Other income/(charges) are
income/charges made to policyholders with respect to income tax in
the United Kingdom.
6)
Includes production on investment
contracts without a discretionary participation feature of which
the proceeds are not recognized as revenues but are directly added
to Aegon's investment contract liabilities for UK.
7)
APE = recurring premium + 1/10 single
premium.
8)
Reconciliation of operating expenses, used
for segment reporting, to Aegon's IFRS based operating
expenses.
Q1
Q1
2021
2020
Employee expenses
490
521
Administrative expenses
376
404
Operating expenses for IFRS
reporting
866
925
Operating expenses related to jv's and
associates
89
66
Operating expenses in earnings
release
954
991
9)
New life sales, gross deposits and net
deposits data include results from Aegon’s joint ventures and
Aegon’s associates consolidated on a proportionate basis.
10)
The calculation of the Solvency II capital
surplus and ratio are based on Solvency II requirements. For
insurance entities in Solvency II equivalent regimes (United
States, Bermuda and Brazil) local regulatory solvency measurements
are used. Specifically, required capital for the regulated entities
in the US is calculated as one and a half times (150%) the upper
end of the Company Action Level range (200% of Authorized Control
Level) as applied by the National Association of Insurance
Commissioners in the US, while the own funds is calculated by
applying a haircut to available capital under the local regulatory
solvency measurement of one time (100%) the upper end of the
Company Action Level range. For entities in financial sectors other
than the insurance sector, the solvency requirements of the
appropriate regulatory framework are taken into account in the
group ratio. The group ratio does include Aegon Bank N.V. As the UK
With-Profit funds is ring fenced, no surplus is taken into account
regarding the UK With-Profit funds for Aegon UK and Group
numbers.
11)
The solvency II capital ratio reflects
Aegon’s interpretation of Solvency II requirements and are not
final until filed with the regulators. The solvency II capital
calculation is subject to supervisory review on an ongoing
basis.
12)
The numbers in this release are
unaudited
Cautionary note regarding non-IFRS-EU measures
This document includes the following non-IFRS-EU financial
measures: operating result, income tax, result before tax, market
consistent value of new business, return on equity and addressable
expenses. These non-IFRS-EU measures, except for addressable
expenses, are calculated by consolidating on a proportionate basis
Aegon’s joint ventures and associated companies. The reconciliation
of these measures, except for market consistent value of new
business and return on equity, to the most comparable IFRS-EU
measure is provided in the notes to this press release. Market
consistent value of new business is not based on IFRS-EU, which are
used to report Aegon’s primary financial statements and should not
be viewed as a substitute for IFRS-EU financial measures. Aegon may
define and calculate market consistent value of new business
differently than other companies. Return on equity is a ratio using
a non-IFRS-EU measure and is calculated by dividing the operating
result after tax less cost of leverage by the average shareholders’
equity excluding the revaluation reserve. Operating expenses are
all expenses associated with selling and administrative activities
(excluding commissions) after reallocation of claim handling
expenses to benefits paid. This includes certain expenses recorded
in Other charges, including restructuring charges. Addressable
expenses are expenses reflected in the operating result, excluding
deferrable acquisition expenses, expenses in joint ventures and
associates and expenses related to operations in CEE countries.
Aegon believes that these non-IFRS-EU measures, together with the
IFRS-EU information, provide meaningful supplemental information
about the operating results of Aegon’s business including insight
into the financial measures that senior management uses in managing
the business.
Local currencies and constant currency exchange rates
This document contains certain information about Aegon’s
results, financial condition and revenue generating investments
presented in USD for the Americas and in GBP for the United
Kingdom, because those businesses operate and are managed primarily
in those currencies. Certain comparative information presented on a
constant currency basis eliminates the effects of changes in
currency exchange rates. None of this information is a substitute
for or superior to financial information about Aegon presented in
EUR, which is the currency of Aegon’s primary financial
statements.
Forward-looking statements
The statements contained in this document that are not
historical facts are forward-looking statements as defined in the
US Private Securities Litigation Reform Act of 1995. The following
are words that identify such forward-looking statements: aim,
believe, estimate, target, intend, may, expect, anticipate,
predict, project, counting on, plan, continue, want, forecast,
goal, should, would, could, is confident, will, and similar
expressions as they relate to Aegon. These statements are not
guarantees of future performance and involve risks, uncertainties
and assumptions that are difficult to predict. Aegon undertakes no
obligation to publicly update or revise any forward-looking
statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which merely reflect company
expectations at the time of writing. Actual results may differ
materially from expectations conveyed in forward-looking statements
due to changes caused by various risks and uncertainties. Such
risks and uncertainties include but are not limited to the
following:
- Changes in general economic and/or governmental conditions,
particularly in the United States, the Netherlands and the United
Kingdom;
- Changes in the performance of financial markets, including
emerging markets, such as with regard to:
– The frequency and severity of defaults by
issuers in Aegon’s fixed income investment portfolios;
– The effects of corporate bankruptcies
and/or accounting restatements on the financial markets and the
resulting decline in the value of equity and debt securities Aegon
holds; and
– The effects of declining creditworthiness
of certain public sector securities and the resulting decline in
the value of government exposure that Aegon holds;
- Changes in the performance of Aegon’s investment portfolio and
decline in ratings of Aegon’s counterparties;
- Lowering of one or more of Aegon’s debt ratings issued by
recognized rating organizations and the adverse impact such action
may have on Aegon’s ability to raise capital and on its liquidity
and financial condition;
- Lowering of one or more of insurer financial strength ratings
of Aegon’s insurance subsidiaries and the adverse impact such
action may have on the written premium, policy retention,
profitability and liquidity of its insurance subsidiaries;
- The effect of the European Union’s Solvency II requirements and
other regulations in other jurisdictions affecting the capital
Aegon is required to maintain;
- Changes affecting interest rate levels and continuing low or
rapidly changing interest rate levels;
- Changes affecting currency exchange rates, in particular the
EUR/USD and EUR/GBP exchange rates;
- Changes in the availability of, and costs associated with,
liquidity sources such as bank and capital markets funding, as well
as conditions in the credit markets in general such as changes in
borrower and counterparty creditworthiness;
- Increasing levels of competition in the United States, the
Netherlands, the United Kingdom and emerging markets;
- Catastrophic events, either manmade or by nature, including by
way of example acts of God, acts of terrorism, acts of war and
pandemics, could result in material losses and significantly
interrupt Aegon’s business;
- The frequency and severity of insured loss events;
- Changes affecting longevity, mortality, morbidity, persistence
and other factors that may impact the profitability of Aegon’s
insurance products;
- Aegon’s projected results are highly sensitive to complex
mathematical models of financial markets, mortality, longevity, and
other dynamic systems subject to shocks and unpredictable
volatility. Should assumptions to these models later prove
incorrect, or should errors in those models escape the controls in
place to detect them, future performance will vary from projected
results;
- Reinsurers to whom Aegon has ceded significant underwriting
risks may fail to meet their obligations;
- Changes in customer behavior and public opinion in general
related to, among other things, the type of products Aegon sells,
including legal, regulatory or commercial necessity to meet
changing customer expectations;
- Customer responsiveness to both new products and distribution
channels;
- As Aegon’s operations support complex transactions and are
highly dependent on the proper functioning of information
technology, operational risks such as system disruptions or
failures, security or data privacy breaches, cyberattacks, human
error, failure to safeguard personally identifiable information,
changes in operational practices or inadequate controls including
with respect to third parties with which we do business may disrupt
Aegon’s business, damage its reputation and adversely affect its
results of operations, financial condition and cash flows;
- The impact of acquisitions and divestitures, restructurings,
product withdrawals and other unusual items, including Aegon’s
ability to integrate acquisitions and to obtain the anticipated
results and synergies from acquisitions;
- Aegon’s failure to achieve anticipated levels of earnings or
operational efficiencies, as well as other management initiatives
related to cost savings, cash capital at Holding, gross financial
leverage and free cash flow;
- Changes in the policies of central banks and/or
governments;
- Litigation or regulatory action that could require Aegon to pay
significant damages or change the way Agon does business;
- Competitive, legal, regulatory, or tax changes that affect
profitability, the distribution cost of or demand for Aegon’s
products;
- Consequences of an actual or potential break-up of the European
monetary union in whole or in part, or the exit of the United
Kingdom from the European Union and potential consequences if other
European Union countries leave the European Union;
- Changes in laws and regulations, particularly those affecting
Aegon’s operations’ ability to hire and retain key personnel,
taxation of Aegon companies, the products Aegon sells, and the
attractiveness of certain products to its consumers;
- Regulatory changes relating to the pensions, investment, and
insurance industries in the jurisdictions in which Aegon
operates;
- Standard setting initiatives of supranational standard setting
bodies such as the Financial Stability Board and the International
Association of Insurance Supervisors or changes to such standards
that may have an impact on regional (such as EU), national or US
federal or state level financial regulation or the application
thereof to Aegon, including the designation of Aegon by the
Financial Stability Board as a Global Systemically Important
Insurer (G-SII); and
- Changes in accounting regulations and policies or a change by
Aegon in applying such regulations and policies, voluntarily or
otherwise, which may affect Aegon’s reported results, shareholders’
equity or regulatory capital adequacy levels.
This document contains information that qualifies, or may
qualify, as inside information within the meaning of Article 7(1)
of the EU Market Abuse Regulation (596/2014). Further details of
potential risks and uncertainties affecting Aegon are described in
its filings with the Netherlands Authority for the Financial
Markets and the US Securities and Exchange Commission, including
the Annual Report. These forward-looking statements speak only as
of the date of this document. Except as required by any applicable
law or regulation, Aegon expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained herein to reflect any change
in Aegon’s expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is
based.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210511006308/en/
Media relations Dick Schiethart +31 (0) 70 344 8821
gcc@aegon.com
Investor relations Jan Willem Weidema +31 (0) 70 344 8028
ir@aegon.com
Conference call including Q&A (9:00 a.m. CET) Audio webcast
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