管理層發言
Good morning, everyone. I would like to welcome you to this conference call on Aegon's First Quarter 2025 Trading Update. My name is Yves Cormier, Head of Investor Relations. And joining me today to take you through our progress are Aegon's CEO, Lard Friese; and CFO, Duncan Russell. Before we start, we would like to ask you to review our disclaimer on forward-looking statements, which you can find at the end of the presentation. With that, I would like to give the floor to Lard.
Thank you, Yves, and good morning, everyone. I will start today's presentation by running through our strategic and commercial developments before handing over to Duncan, who will update you on our capital results in more detail. So let me begin on Slide #2 with the key messages for the quarter. In Q1 2025, we continued to execute our strategy to grow and transform our businesses. And despite the recent volatility in the financial markets, we are confident in our ability to deliver on our strategy and our targets. Operating capital generation before holding and funding expenses amounted to €267 million, driven by business growth in most strategic assets, which was partly offset by unfavorable mortality experience in our U.S. financial assets. From a commercial perspective, it was a good quarter. In the U.S., World Financial Group continues to grow its agent base. Life sales increased in both WFG and our Protection Solutions business.
In retirement plans, we generated positive net deposits overall and written sales were strong once again although we experienced some outflows in midsized retirement plans. In the U.K., trends remain consistent with the path set out at our teach-in webinar last year. In International, we recorded an 11% year-over-year increase in new life sales after some slower quarters last year. Asset Management generated solid net deposits from third-party clients on its global platforms business, but there were net outflows in our joint ventures. The capital position of our operating units also remained very solid as we entered the period of market volatility at the beginning of April. Looking forward, we expect to achieve all the group financial targets for 2025 as set out at our last Capital Markets Day in 2023. Consistent with our plan to reduce our cash capital at holding to around €1 billion by the end of 2026, we also announced today a planned new share buyback program of €200 million.
This program is set to commence at the beginning of July and is expected to conclude before the end of the year. It follows the €150 million program we are currently executing and demonstrates our ongoing commitment to returning excess capital to shareholders unless we can invest it in value-creating opportunities. Let's now move to Slide #3 to discuss the recent commercial performance of the Americas. In the first quarter of 2025, we continue to grow Transamerica's business, which is focused on middle-market America. Starting with World Financial Group, the number of licensed agents increased by 16% to 88,000 compared with the same quarter of last year. We saw higher activation rates of WFG agents resulting from WFG's activation program that offers training and various forms of support to help newer agents improve their productivity. While this has not yet resulted in an increase in the number of multi-ticket agents, Transamerica's market share in WFG increased to 66% from higher agent productivity in selling Transamerica's products.
Consequently, new life sales in Transamerica's Protection Solutions segment increased on the back of higher sales by WFG. Furthermore, within Protection Solutions, we continue to see growth in the RILA product, thanks to further improvements in our wholesale distribution productivity. We have established ourselves now as a top 10 player in this field in terms of sales in the U.S. market. In the Savings & Investments segment, we recorded higher net deposits in our retirement plan business compared with last year, driven by large market plans. In midsized plans, we recorded net outflows of $283 million during the period due to lower gross deposits and elevated participant withdrawals. Written sales remained strong this quarter, which we see as a positive indicator for future growth in this segment. Within the Retirement Plans business, we saw further growth in the general accounts stable value product and in IRAs as we work to increase profitability and diversify revenue streams.
Let's move on to an update on our other businesses on Slide #4. At Aegon U.K., we remain on the path set out at our strategy teach-in in June last year. Commercial momentum in the Workplace platform business remains strong. In the Adviser platform, we continue to see the adverse impact of ongoing consolidation in nontarget adviser segments as well as elevated levels of withdrawals. In the International segment, higher new life sales were generated in our joint ventures in Brazil and China. Both new life sales as well as non-life sales improved in our joint ventures with Santander in Spain and Portugal, while TLB is setting out on a path for profitable growth with the opening of a new representative office in Dubai. Our Asset Management business experienced positive third-party net deposits during the period. In the Global platforms business, this decrease was attributed to higher net deposits in the first quarter of the previous year due to the onboarding of a large client. In Strategic Partnerships, net outflows occurred as clients withdrew money from mutual funds in China. With that, I will now hand over to Duncan to discuss our financial performance in more detail.
Thank you, Lard. Good morning, everyone. Let me start with an overview on Slide 6. Operating capital generation before holding, funding and operating expenses was €267 million, an increase of 4% year-on-year. Free cash flow amounted to €34 million in the period, and mainly reflected a remittance from a joint venture in international as well as €19 million of proceeds from the ASR share buyback program. Cash capital at holding stood at a very healthy €1.6 billion at the end of March. Gross financial leverage amounted to €5.1 billion, consistent with our target level. I'm moving now to Slide 7, where we address operating capital generation or OCG. OCG increased by 4%, reflecting overall business growth. OCG from the U.S. increased by 3% as business growth was partly offset by unfavorable claims experience. The first quarter was impacted by unfavorable mortality claims experience, part of which was expected from seasonality.
The claims experience largely occurred in Universal Life, a financial asset where we saw a higher number of claims, especially from old age policies. We continue to expect a quarterly OCG run rate for the Americas of $200 million to $240 million for the remainder of the year. In the U.K., operating capital generation benefited year-on-year from markets and improved underwriting experience. In the International segment, positive underwriting experience at TLB resulted in an increase of OCG to €33 million. In the first quarter of 2024, OCG from Asset Management benefited from a favorable nonrecurring expense item. Excluding this item, Asset Management's contribution to OCG increased. Finally, we confirm our target of around €1.2 billion operating capital generation for 2025. And I will now turn to Slide 8 for an update of our capital position. In the first quarter, the capital positions of our business units remained robust and above their respective operating levels.
The U.S. RBC ratio decreased by 7 percentage points compared with the end of December to 436%. Market movements and one-time items, including management actions, both respectively, had a 5 percentage points negative impact on the ratio. The payment of a dividend from an operating company to our U.S. intermediate holding to pre-finance the planned half year remittance to the group had a further 3 percentage points negative impact. Operating capital generation contributed 6 percentage points to the RBC ratio. With respect to recent developments, the financial markets were very volatile in April, but during that period, our hedging programs performed as intended. In the U.S., this higher volatility resulted in an additional impact from hedging rebalancing and cross effects, which is expected to have a single-digit negative impact on the U.S. RBC ratio in the second quarter. Consequently, the impact of the market movements in the second quarter could be estimated using the newly published sensitivities in the back of the presentation and adjusting for the one-time negative impact from market volatility I just referred to.
In the U.K., the solvency ratio of Scottish Equitable increased by 3 percentage points to 189% driven by the operating capital generation. I now turn to Slide 9 to give you an update of our discussions with the BMA. In 2023, Aegon's group supervision was transferred from the Dutch Central Bank to the BMA and the transition period was agreed upon, which ends in December 2027. We announced today that Aegon will apply an aggregation approach to calculate its group solvency ratio under the Bermuda solvency framework after the transition period. This is a very similar approach to the one that is currently taken by Aegon. And consequently, the impact on the group's solvency ratio from the updated calculation method will be minimal. Furthermore, the BMA has concluded its review of the eligibility of Aegon's capital instruments. Aegon's Solvency II compliant instruments will continue to be eligible under the Bermuda solvency framework in the corresponding tiers under Solvency II and without further limitations.
The €1 billion Junior Perpetual Capital Securities, which were treated as Grandfathered Restricted Tier 1 until January 1, 2026, under Solvency II, will now be eligible as Tier 2 Ancillary Capital following that date and until the end of 2029. Subject to review in 2029, this eligibility may be extended. The €423 million perpetual capital subordinated bonds will lose capital eligibility as of January 1, 2026, consistent with current grandfathering treatment. On a pro forma basis, taking into account the upcoming end of the eligibility for the perpetual capital subordinated bonds, Aegon's group solvency ratio would have been 6 percentage points lower compared with the group solvency ratio of 188% at the year-end 2024 if this updated capital instrument eligibility had been applied at that time. With that, I will now move to Slide 10 to talk about our cash position. Cash capital at holding has barely changed over the period and remains extremely healthy.
We returned €102 million of capital to shareholders through share buybacks, part of which will be used to share-based compensation plans. Free cash flow amounted to €34 million. Consistent with our capital management framework and our objective to reach the midpoint of the operating range for cash capital at holding at the end of 2026, we today announced a planned new share buyback program of €200 million. The program is to start at the beginning of July 2025 and is expected to be completed before year-end. To wrap up on Page 11, taking into account both our performance in the first quarter of 2025 and the recent macroeconomic developments, we remain well on track to achieve all of our financial targets for 2025.
分析師問答
We will now go to our first question. Our first question comes from David Barma from Bank of America.
Firstly, I wanted to ask about your commitment to reduce holding cash. So you'll now be buying back €200 million worth of shares in the second half, which still leaves you considerably above the €1 billion target by the time we get the full year '25 results. And this gives the impression that deploying capital towards maybe M&A might now be higher on your priority list than returning it to shareholders. So can you talk about your views on this and how to balance the two? And I'll pause here and ask my second question after.
Yes. Thank you, David. I'll hand over to Duncan. Duncan?
Sure. David. No, the commitment to reducing our cash capital from what is currently €1.6 billion, i.e., above our target range of €0.5 billion to €1.5 billion to the €1 billion by the end of 2026 is firm. So there's no change in that commitment at all. And we've always said that there are three means by which we could do that. The first is reducing leverage, which with the current portfolio, we don't think we need to do. The second is investing in growth opportunities organically or inorganically. And the third is returning that money back to shareholders. And today, the announcement of €200 million is a step forward in that direction, but the commitment is that by the end of '26, which is not that far away, we'll be back down to the €1 billion of holding cash capital. If I take a step back because I think you're asking why only €200 million, et cetera, internally, we looked at three things.
The first question we ask ourselves is how much capital do we need to utilize in order to bridge from where we are today to the €1 billion at the end of the period. The second is how will we get down there. So what is the form in which we'll do it. And as I mentioned, that could either be investing in growth opportunities or returning it to shareholders, either share buyback or special dividends. And the third is then how quickly do we do it. And as I pointed out, between now and the end of 2026, is not that long a period of time. And then our preference is to spread it over that period in order to take into account potential volatility in financial markets and to manage through that.
Secondly, I wanted to ask about in-force management because we've seen a real pickup in activity in the U.S. recently with transactions taking place across most of the types of business that you have in your financial assets. Are you looking to participate in this market? Or do you not see good enough opportunities at the moment to do third-party transactions?
Yes, you can take that. Yes.
There's no real change there. It's fair to say that compared to when we first classified a large part of our balance sheet as financial assets several years ago, the market demand has significantly increased, and we are witnessing many transactions. We have always mentioned three ways to reduce our required capital. The first is through unilateral actions that we can initiate ourselves. The second involves bilateral discussions with either customers or regulators regarding management actions. The third option is third-party transactions. We have engaged in some third-party transactions recently, although they have been relatively small in scale. We continue to explore this area and will engage further if we identify suitable opportunities that align with our criteria.
Your next question comes from the line of Farooq Hanif from JPMorgan.
My first question is about the buyback. Are you saying that there won't be any more buybacks this year, or is that still open depending on market conditions and your situation? Just a clarification on that. Secondly, regarding the guidance of €1.2 billion for OCG that you reiterated this year, doesn't that seem conservative considering the nonrecurring items you mentioned in the first quarter? If you could explain that, since the underlying OCG appears to be somewhat better. Additionally, can you confirm or discuss any bridge to IFRS regarding these variances? My understanding is that OCG does not see much update in assumptions due to the U.S. regime and is therefore more affected by variances. What can you comment on IFRS variances?
Sure. Let me address all three points. Regarding the share buyback, we expect to complete the announced buyback that will start at the beginning of July before the end of the year. We're committed to reducing our capital to €1 billion by the end of 2026, but we still need to evaluate how much capital we should return and assess our investment options for growth, as well as the method for doing so. As for IFRS compared to OCG, there are indeed differences in the basis for reserving, and we do not release IFRS quarterly, so I won’t go into detail on that. I would direct you to the guidance provided at the end of last year regarding the expected run rate for both U.S. and group IFRS operating profit. Lastly, concerning the OCG run rate, I mentioned at the full year that certain units, particularly in the U.S. and U.K. Asset Management, are performing well compared to our initial 2023 targets, while we are facing some challenges internationally, mainly due to lower interest rates in China, which still stands.
If we adjust the OCG by adding back the variances from the first quarter, we arrive at approximately €321 million for the group. Multiplying that by 4 gives us just under €1.3 billion, specifically €1.284 billion, exceeding €1.200 billion. However, if we add the run rate times 3 along with the first quarter results, we reach just above what we initially guided at €1.20 billion.
Your next question comes from the line of Nasib Ahmed from UBS.
Firstly, on the financial assets in the U.S., you've still got about €1.4 billion to go to get it down to €2.2 billion over the next 2.5 years. How much of the €1.4 billion can you get through just natural runoff? And how much would need something like you described, Duncan? And then the second question is around the dividend, €0.40 intact, but you've done quite a lot of buybacks since you set out that number. What's your kind of capital return policy? You're talking about buybacks, but could you also increase the dividend per share to get the holding company cash down to the €1 billion?
So on the dividend, the dividend policy, I think, is fairly clear, the €0.40 to €0.40, and we'll aim to grow the dividend in line with our free cash flow. So that's a structural topic. The cash capital in the holding is excess capital because we target a range of €500 million to €1.5 billion and we want to get down to €1 billion. So I don't think we'll deal with that excess capital through a run rate dividend increase versus our dividend policy. That will be instead dealt with either through share buybacks, special dividends or investing in growth. On the financial assets, you're right that we still have quite a move to go in terms of the current position versus the targeted end position. In 1Q, we had some impacts from market movements, which increased the required capital on variable annuities on our variable annuity book. I go back to the original Capital Markets Day, there is a natural runoff in the portfolio, which varies by portfolio.
So the variable annuity book runs off fairly steadily. Other parts of the book, for example, long-term care, take a lot longer just because the way the reserving works there. So we are dependent and we do need to put in place management actions to hit the target. Those actions could be, again, the unilateral or bilateral actions, which don't rely on transactions, but do still require effort on our part to get down there and/or through third-party deals. I think it's likely that if we will need to do some third-party actions in order to get the target.
Your next question comes from the line of Iain Pearce from Exane BNP Paribas.
The first one is if you could just touch on the hedging program and how that performed in the market volatility that we've seen sort of post-quarter end? And also if there's been any learnings or anything you've seen in the performance of that hedging program that you've been able to implement or improve going forward? And the second one was just on the new business. Pleasing to see a return to a positive trend there. Just trying to understand if you see this as a base on which we're now expecting to see a return to the rates of growth you were seeing previously? And if you view the sort of performance in H2 last year as just a blip or if you're still seeing improvements in productivity embedded to come?
Thank you, Iain, for your questions. I'll address the new business aspect first. Overall, in our trading update today, we are seeing encouraging momentum across nearly all our business lines, with the exception of the Adviser platform in the U.K., which we anticipated. We've noticed a slight decline in growth for third-party assets, which had positive net flows but were not as strong as the same period last year. Looking specifically at the U.S., particularly with WFG, we've grown our agency sales force to 88,000, a 16% increase from last year. We plan to continue growing this to between 100,000 and 110,000 in the upcoming years, and we're making good progress toward that goal. In terms of life insurance sales, there was a subdued profile in the previous quarter, but this quarter is significantly different. WFG has increased its life sales, and we have introduced a new solution in the broker channel that has also been well received.
Consequently, we are experiencing a 7% increase in sales volumes, which we believe results from significant efforts by our teams at WFG to onboard new agents who are learning to produce. Growth can sometimes take time to materialize as agents become more effective. We're seeing the impact of these efforts positively, which is promising for the future. In RILA sales, we are now among the top 10 players, and we've demonstrated strong sales again this quarter, which is encouraging. Regarding retirement plans, we saw overall net growth in our deposits despite outflows of €238 million in mid-market plans. However, we maintain a solid written sales profile, reflecting strong performance in recent quarters. This indicates that we expect those assets to come in over the coming periods. Internationally, growth is returning in Brazil, which is positive, and we are seeing a slight uptick in China, even though the sales environment has been challenging there for some time.
In Iberia, our joint ventures with Banco Santander continue to progress successfully. Finally, in the U.K., we see the Workplace business performing very well, although the Adviser platform still requires improvement as per the extensive program we outlined at our Capital Markets event last June. Now, Duncan, over to you for the hedging update.
The hedging program performed as we expected, and we were pleased with its outcome. We noted a single-digit impact on the RBC ratio, and the variable annuity book experienced a slight setback due to increased rebalancing costs. Essentially, the realized volatility exceeded our assumed implied volatility. Additionally, there was a modest drag from unhedged exposures in our IUL and RILA business segments. Regarding the VA book, we felt very satisfied, which reflects the substantial work conducted over the past years and our thorough understanding of that area. As our IUL and RILA segments grow, we will adapt our hedging strategies accordingly.
Your next question comes from the line of Michele Ballatore from KBW.
So the first question is about holding cash. Can you remind us if there is any potential debt reduction impact over the next two years that may affect the level of holding cash? The second question is about long-term care, especially the net present value of the rate increases you mentioned. I believe it's progressing well compared to your target. Can you remind me if these metrics have any impact on capital employed or capital generation in general?
We are comfortable with our current debt level of around €5 billion, considering our portfolio mix, and would only consider changing that if the portfolio were to change significantly. We can make minor adjustments, but we do not need to reduce leverage structurally or use cash to do so. Regarding long-term care, we adjust premium rates as our estimates of liability costs change in order to offset those costs. Our goal is to maintain positive cash flow from the long-term book without impacting our capital over the medium term, so there is no effect on our cash generation; it merely serves to offset rising liability costs.
Your next question is a follow-up from David Barma from Bank of America.
Just a few follow-ups, please. Firstly, on the capital generation in the U.S., if I adjust Q1 for the various items that you flagged, it seems like it's quite a bit better than the underlying over the last few quarters and above the run rates that you mentioned at the start of the call, Duncan. So can you just explain what the drivers are for this good underlying performance in the U.S.? And then secondly, on new business, sorry, Lard, I couldn't quite get your answer about RILA's earlier. So pardon me, but I'm just going to ask this again. So when we spoke at Q4, you suggested that the benefits from higher interest rates and were being reinvested in growth in RILA and stable value. And I'm not quite sure how to see that in the data you're giving in Q1. So could you maybe give us a bit of color on the commercial performance in both? And then lastly, on the equity sensitivity in the U.S. So that's gotten better with lower equity markets. But is there anything that can be done to reduce the VA flooring issue? I think some of your peers have measures to do that, or is it just something that we need to deal with, and that will just depend on the level of equity markets?
David, yes. In regard to RILA, sales have increased this quarter, which is what I intended to convey. Since we introduced the registered index-linked annuities product line about 1.5 years ago, we have seen consistent growth, and this quarter continued that trend. So, there have indeed been more sales, and that’s my main point.
Okay. David, let me address the other two questions. Regarding the U.S. OCG, you are correct. This aligns with what I mentioned earlier about several of our business units performing better than our original 2023 targets, and the U.S. is included in that. If we annualize the normalized OCG for the first quarter, it meets a favorable level compared to the €800 million target we set for 2023. There are various reasons behind this. The business is performing well, we've managed to reinvest at advantageous interest rates, and we've seen equity markets gradually improving, although some changes we made in our assumptions last year have impacted this. However, we're currently exceeding our original target in the U.S. Additionally, it is significantly better than the underlying figures from the last few quarters, where you were seeing around €205 million to €210 million during 2024. Now, the underlying figure in the U.S. is closer to €240 million to €250 million.
Is that primarily due to the interest rate impact? So we have a range for the year of $200 million to $240 million. We were $224 million in 1Q for an underlying basis. I think in 4Q last year, we were $213 million. So we are trending again as markets help us, and we have some commercial momentum. So I think we're still within the range, David, to be honest. On the other question was the VA slowing. Okay. We haven't taken any actions on that in the first quarter. So what I indicated at the year-end was that we had this slowing hitting us, and we had these sensitivities, which to simplify whichever market direction tends to be a negative for us. Given our RBC ratio, we felt comfortable with that because we are very healthy compared to our operating target of around 400%. And that remains the case today. Markets moved in the first quarter. So the slowing position did change, and you do see that in our sensitivities, particularly in the plus or minus 10%, which has now become more normal.
We haven't taken any action. It's something we'll continue to explore. And if we feel we need to take action and we can do that in a way, which doesn't cost very much, that's certainly something we'll look at.
Your next question comes from the line of Michael Huttner from Berenberg.
One question is regarding the operating capital generation for 2025, and another pertains to the costs associated with hedging. In terms of guidance, I estimate that it would be around €1.220 billion, which comes from €320 million multiplied by three, plus Q1. However, there is a seasonal aspect to mortality, as you indicated in your slide. Therefore, it seems that the figure could be closer to €1.250 billion or €1.260 billion. Are you cautious because you are uncertain about the reasons behind the worse U.S. mortality in Q1, and whether this might be a trend moving forward, or is it simply standard conservatism? Additionally, concerning the RBC hedging costs, it's clear that these do not factor into operating capital generation. I'm curious about where these costs, which you mentioned would have a single-digit impact on RBC due to the additional hedging costs in April, would be reflected.
Michael, so the latter one is easy, that's considered markets for us because it's driven by market movements. And so we put that in non-OCG and you'll see it just in the movement of the RBC. So when we started RBC plus OCG plus market impacts.
But may I just interrupt, it is your decision to add to hedging. That is not a market impact if you buy more hedging, is it?
No, I don't think that's what happened, to be honest. We have exposures that we hedge, which we essentially immunize. Most market exposures on our variable annuity book, for example, are immunized. We don't typically hedge out. We have a fixed implied volatility assumption in the pricing of our guarantees. The simplest way to think about this is that when actual volatility exceeds what we have priced in our valuation, it creates a drag that we do not hedge out. We can adjust our hedge positions tactically on a day-to-day basis. However, as a principle, we do not hedge that out. That was the drag you noticed in April, where intraday volatility was quite extreme. There has been no shift in our hedging strategy for the quarter. Regarding your second question about OCG, you are asking if we are being consistent. The guidance is for around €1.2 billion, and I believe the figures you mentioned are also around €1.2 billion.
So I would say that it is quite consistent with our guidance. There is always some quarterly volatility by nature, but our guidance remains around €1.2 billion, and I think the figures you quoted align with that. We have not changed our view. The way I assess it is by looking at our IFRS actual compared to estimates and the actual to expected mortality variance. We experienced a positive half year last year, and I mentioned on the call that it consisted of two positive quarters. This quarter, however, we have seen elevated mortality, primarily due to a higher frequency in older age lives among our financial assets. Quarterly volatility is not unexpected given the large numbers involved. Therefore, it doesn't surprise me, and I see no reason to alter our perspective based on what we've observed since we updated our assumptions in the second quarter of last year.
We have no further questions. I would like to hand the call back over to Yves Cormier for closing remarks.
Thank you, operator. This concludes today's Q&A session. Should you have any remaining questions, please get in touch with us at the Investor Relations team. On behalf of Lard and Duncan, I would like to thank you for your attention. Thanks again, and have a good day.