Aegon Limited

Good morning, everyone, and thank you for joining this conference call on Aegon's third quarter 2021 results. You would appreciate it if you could take a moment to review our disclaimer on forward-looking statements, which you can find at the back of the presentation. With me today are Aegon's CEO, Lark Friese, and CFO, Matt Ryder, who will take you through the key points for this quarter. Let me now head over to Lark.

Thank you, Jan Willem, and good morning, everyone. We appreciate that you are joining us on today's call, and we look forward to updating you on our third quarter results. In my part of the presentation, I will take you through the strategic highlights and through the progress we have made on our strategic assets. Matt Ryder will then go through the details of the results and our capital position. He will also summarize the actions we have taken to further strengthen our balance sheet and to manage the financial assets. Finally, I will conclude the presentation with a wrap-up after which we will open the call for question and answers. So let's move to slide number two. In the third quarter of 2021, we continued to drive our transformation forward by delivering on our financial and strategic commitments. And I am encouraged to see this reflected in our results. These results are supported by the benefit from expense savings initiatives, and we remain on track to deliver on the three-year target of $400 million expense savings. In our strategic assets and growth markets, we are benefiting from the growth initiatives that we have implemented, and our asset management business extended its track record of over nine years of positive third-party net deposits. We saw an improvement in performance across most of our businesses. This was offset by adverse claims experience in the U.S., with COVID-19 and a higher average claim size being the most important drivers. As a consequence, the operating result decreased by 16%. We expect the impact from COVID-19 to abate over time. In addition, we want to reduce the volatility and mortality experience in the U.S. and are looking at management actions to mitigate this. In the third quarter, we remain proactive in managing our financial assets. We launched a lump sum buyout program for certain variable annuity policyholders, which was well received by customers. Moreover, the guarantees on the remaining variable annuity portfolio are now being fully hedged against equity and interest rate risk. Furthermore, we have almost fully executed our planned management actions to reduce interest rate risk in the U.S., which has led to a significant reduction in our interest rate exposure. In our long-term care business, we have already achieved approval for more than $300 million worth of rate increases, and consequently, we have increased our expectations for the rate increase program to $450 million. This underscores our track record of actively managing this business. Our balance sheet remains strong and in line with our disciplined capital management framework. The capital ratios of all three main units are above their respective operating levels, and our Group Solvency 2 ratio increased to 209%. We've also strengthened Agon's approach towards corporate sustainability. Last week, we announced Agon's group-wide commitment to transitioning our general account investment portfolio to net-zero greenhouse gas emissions by 2050, with an intermediate goal set for 2025. This further underpins our concrete action plans to create lasting value for all our stakeholders. Lastly, we continue to work together with the Vienna Insurance Group to close the divestment of our businesses in Central and Eastern Europe. The IG is continuing its constructive dialogue with the Hungarian Ministry of Finance to clarify possibilities for a positive conclusion of the acquisition. Let me now give you an overview of where we stand with the execution of our operating plan on slide number three. Our ambitious plan that now comprises more than 1200 detailed initiatives is designed to improve our operating performance. We are continuously adding new initiatives to this plan to make up for any delays in existing initiatives and to capture the full potential of our organization. In the third quarter, we completed another 150 initiatives. More than 680 initiatives have now been fully implemented and are contributing to the operating results over time. Expense savings initiatives have so far delivered €248 million of savings, so we remain on track to deliver on the €400 million expense reduction target in 2023. Initiatives aimed at improving customer service, enhancing user experience, and launching new innovative products are also well underway. These growth initiatives contributed €29 million to the operating result this quarter. We intend to continue executing the expense and growth initiatives at pace. Let's now turn to slide four to discuss the progress we have made with respect to our strategic assets. Our priority here is to grow the customer base and expand our margins. In the U.S. individual solutions business, we have the ambition to regain the top five position in selected live products over the coming years. In the third quarter, New life sales improved by 13%, mainly driven by indexed universal life and whole life final expense products. Sales are benefiting from a 24% increase in licensed agents at World Financial Group and from a funeral planning benefit for eligible indexed universal life policyholders. Whole life final expense sales increased following enhancements made both to the product and the application process. In the U.S. retirement business, Transamerica aims to compete as a top five player in the new middle market sales. This business continued to build momentum with the fifth consecutive quarter of written sales of over $1 billion, the third consecutive quarter of positive net deposits. So let's turn to our Dutch strategic assets on slide number five. We are market leaders in both mortgage origination and new style defined contribution pensions, and we saw continued commercial momentum in these businesses in the third quarter. Mortgage sales amounted to 2.7 billion euros as we benefit from our strong origination capabilities. About two-thirds of it all consisted of fee-based mortgages originated for third-party investors through our Dutch mortgage funds. In our workplace business, we saw a 6% increase in net deposits for new specialty fund contribution products. Assets under management for this business increased to 5.6 billion euros at the end of the quarter, underscoring Egon's leading position in this market. As you are aware, we want to develop our online bank Knopf into a digital gateway for individual retirement solutions. In the third quarter of 2021, the online bank attracted 9,000 new fee-paying customers. This was offset by 11,000 customers leaving Knopf, stemming from our decision to stop offering savings products to non-fee-paying customers as they were loss-making. Moving on to the United Kingdom, assets under our administration remained above the 200 billion pounds. Gross deposits increased, reflecting stronger investor sentiment, as well as the benefits from ongoing investments in the business. This led to an improvement in retail net deposits. However, This was more than offset by the termination of a low-margin, investment-only scheme in the workplace segment, which led to net outflows in this business. Expense savings initiatives and the favorable impact from market movements on assets have led to an improvement in the efficiency of the platform. This more than offsets the revenues lost from the gradual runoff of the traditional product portfolio. Let me now turn to our global asset manager and our growth markets on slide number six. In our asset management business, the operating margin of global platforms almost doubled as a result of higher revenues from net deposits and favorable market developments. Third-party net deposits on the global platforms amounted to 2.4 billion euros, driven by inflows on the fixed income platform. Net deposits and strategic partnerships were 1.3 billion euros for the quarter, driven by a joint venture in China. Continued net deposits, together with favorable equity markets, have led to a significant increase in management fees. This was offset by a normalization of performance fees compared with the exceptional levels seen in the same period last year, resulting in a decline in the operating result for strategic partnerships to 44 million euros. To drive further growth, Egon Asset Management's wholly-owned subsidiary in Shanghai has completed its onshore investment advisory registration. This allows us to provide a range of global investment solutions, including those with an ESG focus, to Chinese institutions and high-net-worth investors. In Egon's growth markets, we continue to invest in profitable growth. Sales growth in the bank assurance channel in Spain and Brazil was, however, offset by lower new life sales in China, caused by an industry-wide lower demand for critical illness products. New premium production for property and casualty and accident and health insurance increased to 21 million euros as a result of sales of new products in Spain and Portugal, as we continue to see benefits for sales after the redesign of our digital sales channels through our Spanish bank assurance partners. I am now on page number seven, turning to a topic that is on all our minds. sustainability, and climate change. Our stakeholders in the wider world expect us to act sustainably as an insurer, asset manager, and employer. We recognize the role that Agon plays in society with respect to responsible investing, and we continue to progress with our approach to sustainability. Coinciding with the COP26 conference in Glasgow, we announced Agon's group-wide commitment to transitioning our general account to net zero greenhouse gas emissions by 2050. In this context, AGON has joined the Net Zero Asset Owner Alliance, a United Nations convened group of institutional investors committed to transitioning their portfolios to net zero greenhouse gas emissions. To ensure progress towards this 2050 commitment, AGON has set an intermediate target. By 2025, we aim to reduce the carbon intensity of our corporate fixed income and listed equity general account assets by 25% compared with 2019. On our path to net zero, we will regularly update our group wide exclusion criteria and increase our engagement with the most carbon intensive companies in our investment portfolio to achieve real world carbon emission reductions. Next to our group wide initiatives, our local units are taking additional actions and are working to meet the demand for ESG products from our customers. For instance, Agon Asset Management has joined the Net Zero Asset Managers Initiative, and our Dutch business will commit to an extended 2050 Climate Action Plan to include separate account assets and off-balance sheet investments in addition to general account assets. Ahead of COP26, Agon UK, in partnership with Agon Asset Management, launched its innovative Global Sustainable Sovereign Bond Fund. The fund invests in those countries that are making the best progress towards the United Nations Sustainable Development Goals and allows our workplace pension customers to align their investment objectives with the goal of a fair and sustainable future. In summary, we continue to deliver on our strategic priorities and are making steady progress in growing our strategic assets and growth markets. We will continue to drive efficiencies while at the same time investing in products and services that better serve our customers in our various core businesses. And with this, I would like to hand it over to Matt, who will talk about the results for the quarter and update you about our actions on the financial assets.

Thanks a lot, and good morning, everyone. Let me start with the financials on slide nine. Our operating result decreased compared with the third quarter of 2020 to 443 million euros. Increased fees from higher equity markets and positive contributions from growth were more than offset by adverse claims experience in the U.S., which was mainly attributable to COVID-19 and a higher average claim size. Our balance sheet remains strong with the capital positions of all our three main units above their respective operating levels and the Group Solvency II ratio at 209%. Cash capital at the holding decreased to €961 million as anticipated and now sits in the middle of the operating range. The decrease reflects the payment of dividends and the use of cash for additional deleveraging. Since mid-2020, our gross financial leverage has reduced by 700 million euros and now stands at 5.9 billion euros. This puts us on track to meet our target of reducing our gross financial leverage to 5 to 5.5 billion euros. We have also made good progress on the reduction of our economic interest rate exposure in the U.S. We have now almost fully executed the interest rate reduction plan that we announced at the Capital Markets Day by lengthening the duration of our asset portfolio and expanding the forward starting swap program. Together with the expansion of the dynamic hedging program for variable annuities and favorable market movements, this has led to a 75% reduction in the targeted interest rate risk since the third quarter of 2020. Let me now turn to slide 10 to go into more detail on the expense savings. In the last four quarters, we reduced addressable expenses by 253 million euros compared with 2019. 248 million euros of these savings are driven by expense initiatives that are part of our operational improvement plan. This level of expense savings is comparable to what we had achieved through the second quarter. The benefit of the additional cost savings initiatives implemented this quarter was offset by higher one-time employee expenses. Our progress makes us confident that we will be able to achieve our expense savings target of 400 million euros by 2023. When we created our operational improvement plan, we took into account the nature and complexity of the underlying initiatives. Most of the initiatives that we have implemented so far were relatively straightforward and led to savings coming through with a short lead time. Let me give you an example. We have implemented changes in our ways of working. For instance, in our risk and communications departments, we found ways for the holding and Aegon the Netherlands to work more closely together with shared processes, enabling a reduction in overall headcount. Another example is in our individual solutions business in the United States, where we have reduced the number of software subscriptions. In the coming quarters, we expect to see a more gradual delivery of expense savings. While we will continue to execute on our expense savings initiatives, we also need to absorb expense inflation and other upward pressures on expenses. In addition, some of the larger initiatives are still in progress and will take some time to fully execute. An example is Agon Asset Management's migration to a new technology platform for its global operations that will drive expenses down and make the business more scalable and client-focused. Next to the expense savings, we benefited again from lower travel and marketing activities due to the impact of the COVID-19 pandemic. These benefits have started to fall compared with previous quarters, and we expect them to go to zero over time. Furthermore, we aim to profitably grow our business by improving customer service, enhancing user experience, and launching new innovative products. These growth initiatives resulted in 30 million euros of expenses in the last four quarters. Let me now turn to slide 11. In the third quarter of 2021, our operating result amounted to 443 million euros, a decrease of 16% compared with the same period last year. The apples-to-apples decrease is 13% at constant currencies when adjusted for the reclassification of the operating result of our CEE businesses to other income. The decrease in the operating result was driven by adverse claims experience in the U.S., which amounted to 93 million euros. deaths that were directly attributable to COVID-19 were in line with our expectations relative to U.S. population deaths. Furthermore, we saw a higher number of claims due to respiratory diseases this quarter. While the death certificates did not attribute all of these benefits to COVID-19, we believe that some of them are related to the virus. of the adverse claims experience. About a quarter of the adverse mortality experience related to a higher average claim size. In line with our aim to improve our risk profile, we want to reduce the volatility and mortality experience, and we're in the process of exploring management actions to achieve this. The remaining adverse mortality was from increased frequency in line with what we have seen in the wider industry this quarter. The adverse mortality experience was partly offset by 23 million euros of favorable morbidity experience in the long-term care book, which included a 14 million euro release of the incurred but not reported reserve. In the Netherlands, the operating result increased by 8% to 190 million euros. All lines of business contributed to the higher result. supported by the benefits of expense savings, business growth, and favorable disability claims experience. In the UK, the operating result increased by 47% to 51 million euros, driven by higher fee revenues as a consequence of favorable equity markets. The operating result from international decreased by 17% to 36 million euros. However, on an apples-to-apples basis and at constant currencies, the operating result increased by 18%. This reflects business growth and favorable claims experience in Spain and Portugal and a reduction in crediting rates at Transamerica Life Bermuda. Finally, the operating result from asset management remains stable at 58 million euros. Higher management fees offset a normalization in performance fees from Agon's Chinese Asset Management Joint Venture compared with last year's exceptional level. Let us now turn from operating result to net result on the next slide. As you can see on slide 12, the net loss amounted to 60 million euros for the third quarter of 2021. Non-operating items contributed to a gain of 9 million euros before tax. Realized gains on investments of €132 million and net recoveries of €7 million more than offset a loss from fair value items of €130 million. The latter resulted from an increase in the fair value of liabilities in the Netherlands. This was driven by an increase in inflation expectations and to a decrease in the own credit spread used to discount certain liabilities. Other charges of 559 million euros were largely driven by a 470 million euro charge relating to the expansion of the variable annuity dynamic hedging program in the United States, as well as to the lump sum buyout program in line with prior guidance. One-time investments related to the operational improvement plan amounted to 64 million euros. I'm now turning to slide 13 to go through the capital positions of our main units. The capital ratios of our three main units ended the quarter above their respective operating levels. The US RBC ratio increased by two percentage points during the quarter to 446%. The RBC ratio was adversely impacted by negative separate account returns in the variable annuity business. Interest rate movements during the quarter result in a loss on the macro interest rate hedge that was scaled up in anticipation of the expansion of the dynamic hedge program. The capital release from the lump sum buyout program was offset by the impact of expanding the dynamic hedge program. This led to a combined negative impact of two percentage points on the RBC ratio in line with prior guidance. In the Netherlands, the Solvency II ratio of the Dutch LIFE unit remained stable at 172%. Negative market impacts from rising inflation expectations and credit downgrades more than offset positive impacts from real estate revaluations, mortgage spread tightening, and a flattening of the interest rate curve. Operating capital generation had a positive impact, which more than offset the €25 million dividend payment to the group in this quarter. Scottish Equitable, our main legal entity in the UK, increased its solvency ratio to 171%. Strong operating capital generation had a positive impact, and there were some benefits from a number of smaller one-time items. Let us now turn to the development of cash capital at holding on the next slide. As anticipated, cash capital at the holding decreased during the quarter to around the middle of the operating range. In the third quarter, gross remittances amounted to 99 million euros. These were in part driven by capital released as a result of winding down both our Irish corporate insurance entity and our internal reinsurer, Blue Square Re. These remittances contributed to free cash flows to the holding, which were 62 million euros this quarter. This brings year-to-date free cash flows to 312 million euros and puts us in a good position to exceed the 2021 free cash flow guidance that we provided at our capital markets day. These cash inflows were more than offset by the payment of dividends and previously announced redemption of 250 million US dollar perpetual capital securities. Capital injections amounted to 53 million euros and were mainly driven by an injection into our Brazilian joint venture that we had flagged last quarter. Other items led to a cash outflow of 29 million euros, driven by the previously announced share buyback in the context of variable compensation plans. Let me now turn to our financial assets, starting with the U.S. variable annuities business on slide 15. We are taking both bilateral and unilateral actions to maximize the value of our U.S. variable annuities business. Last quarter, I highlighted two of them, the lump sum buyout program and the expansion of our dynamic hedging program. The lump sum buyout program was launched in July. This program was made available to certain variable annuity policyholders with guaranteed minimum income benefit riders. The program reduces Transamerica's economic exposure at a favorable price, reduces hedge costs for the remaining variable annuity portfolio going forward. At the end of the third quarter, the take-up rate of the program amounted to 8%, which is encouraging and exceeds those of similar programs run by Transamerica in the past. We have decided to extend the program to the end of January 2022 to allow customers more time to consider the offer. We expect the take-up rate by the end of January 2022 to exceed the original expectation of 15%. In the third quarter of 2021, Transamerica also scaled up the existing macro hedges in anticipation of the transition to a dynamic hedge program for all remaining legacy variable annuity policies. The dynamic hedging program was expanded in the first week of October and now covers the interest rate and equity risks embedded in the guarantees of our entire variable annuity portfolio. This builds on the dynamic hedging program that we have operated for policies with guaranteed minimum withdrawal benefits, where the hedge effectiveness for the targeted risks amounted to 98% year-to-date. Dynamic hedging stabilizes cash flows and reduces our sensitivities to changes in equity markets and interest rates on an economic basis. The combined impact of extending the dynamic hedging to the full portfolio of variable annuities, together with the execution of the lump sum buyout program, was in line with prior guidance, with a 2 percentage points negative impact on the RBC ratio. Another action that was implemented in the third quarter was an increase in rider fees on part of the variable annuity portfolio. Certain contracts allow policyholders to elect a step-up of the guaranteed base on a policy's rider anniversary if the policy's account value exceeds the guaranteed base. Transamerica will increase the fees to the contractually allowed maximum when a step-up is elected. This is a good example of our ongoing commitment to actively manage this financial asset. In short, unilateral and bilateral actions to maximize the value of our variable annuity portfolio are well underway. Therefore, we have begun allocating internal resources to investigate our options for potential third-party solutions. We will update the market on our progress in this respect in the first half of 2022. Let's now go to slide 16. We have progressed well on the enforced management of our long-term care books. In the third quarter of 2021, Transamerica obtained regulatory approvals for additional rate increases of $133 million, bringing the value of approvals achieved year-to-date to $309 million. This means that we have already achieved the expected 300 million U.S. dollar benefit from this program, which underscores our track record of achieving actuarially justifiable rate increases. Based on these better-than-expected results to date, we have increased our expectations for the benefit from the current rate increase program from 300 million to 450 million U.S. dollars. Long-term care claims from the third quarter came in at an actual to expected ratio of 83%. The level of new claims has returned to pre-pandemic levels. The claims experience reflects a $16 million U.S. dollar release of the incurred but not reported reserve that was previously set up for delayed long-term care claims. Excluding this release, the actual to expected claims experience for the third quarter of 2021 would have amounted to 95%, reflecting increased claims terminations due to the impact of the COVID-19 pandemic. Let me now turn to slide 17. Our aim for the Dutch Life business is to turn it into a low-risk cash generator paying predictable regular dividends. the Dutch Life Business again remitted €25 million to the group in the third quarter, in line with its quarterly remittance policy. The Solvency II capital ratio of the Dutch Life Business remained unchanged this quarter at 172% and was again above the operating range. In the second half of October, the Dutch Life Business implemented an expense-inflation hedge to further reduce the volatility of its capital ratio. To summarize, we continue to actively manage our risk and our capital position. To name a few examples, we've nearly completed the interest rate risk reduction plan in the U.S. We extended the dynamic hedging program to our legacy variable annuities. We expect to exceed our original expectation of a take-up rate of more than 15% for the lump sum buyout program. We increased our expectation for the long-term care rate increase programs to $450 million U.S. dollars. And we remain on track to achieve our expense savings target. And we will continue to take actions to improve our risk profile. With that, I pass it back to you, Laura, for the report.