Aegon Limited

Good day and welcome to the Agon Q4 2021 Results Conference Call for Analysts and Investors. Today's conference is being recorded. At this time, I would like to turn the conference over to Jan Willem, Head of Investor Relations. Please go ahead, sir.

Thank you, Operator. Good morning, everyone, and thank you for joining this conference call on Agon's fourth quarter 2021 results. We 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, Lars Friese, and CFO, Matt Ryder, who will take you through the key points of this quarter. Let me now hand over to Lars.

Thank you, Jan-Willem, and good morning, everyone. We appreciate that you are joining us on today's call and look forward to updating you on our fourth quarter results. Matt Ryder is also with me today, and he will walk you through the details of our results, our capital position, and the actions we have taken to maximize the value of our financial assets. In my part of the presentation, I will take you through the strategic highlights and the progress we have made on our strategic assets in the last year. So let's turn to slide number two. In the fourth quarter of 2021, we made good progress in achieving our financial and strategic commitments. And I'm encouraged to see this reflected in our results this quarter, but also when I look back at the full year. Our fourth quarter operating result decreased only slightly to 470 million euros, despite adverse claims experience, which was mainly driven by COVID-19. The result was supported by increased fees from higher equity markets and a positive contribution from business growth. Throughout the year, we maintained an intense organizational rhythm to realize our ambition to transform the company. To date, we have executed 844 out of 1,200 performance improvement initiatives with expense initiatives representing the majority. As a result, we remain on track to deliver on our 400 million expense savings target by 2023. We continue to invest in the expansion of our distribution network while simultaneously improving the digital experience for customers, advisors, and employers. This resulted in solid growth in our U.S. life business, record high asset balances in our Dutch mortgage and defined contribution businesses, and net deposits on the core UK platform turning positive. In asset management, we had our 10th consecutive year of positive third-party net deposits. However, there is still more work to be done, for example, in attracting more customers to our U.S. retirement plan business. In the fourth quarter, we again released capital on attractive terms through the extension of the lump sum buyout program for certain variable annuities in the U.S. and the reinsurance of longevity risk in the Netherlands. We have also continued to improve our risk profile through a series of actions designed to reduce the volatility of mortality claims on a block of universal life policies in the United States. The capital ratios of all three of our main units ended the year above their respective operating levels, while the group solvency Q ratios stood at 211%. Active balance sheet management and enhanced performance has allowed the business units to increase remittances through the group, resulting in an increase in free cash flow. The sustainable growth in free cash flow allows us to grow our dividend, and therefore, we will propose a final dividend for 2021 of €0.09 per common share at our 2022 AGM, bringing the full-year dividend to €0.17. Following our announced commitment to net zero carbon emissions for our general account investment portfolio, we updated our exclusion criteria in early 2022 to further align our investments with this commitment. We will continue to do this regularly to reflect the latest scientific findings on climate change in our investment approach. We've done a lot this year, but we knew that to be a company that delivers, We needed to also have people in positions with the right competencies, skills, and the right mindset to do just that. With this in mind, we have made several changes to our management team in the past 18 months. The appointment of Deborah Waters as our new Chief Technology Officer and Astrid Jekyll as our new Chief Risk Officer complete the Management Board. Both appointments bring with them a wealth of experience and different perspectives that will further strengthen EGON's strategic vision for the future. Lastly, we continue to work together with Vienna Insurance Group to close the divestment of our businesses in Central and Eastern Europe, which is still pending local regulatory approvals. As announced in December 2021, we have taken note of the fact that VIG and the Hungarian government are negotiating a potential 45% participation by the Hungarian state in AGON's and VIG's insurance companies in the country. So let me now take a look back over the full year 2021 on slide number three. 2021 was an important year for AGON. We made considerable steps to improve our operational performance, reduce our risk profile, and sharpen our strategic focus. Together with favorable markets, this has resulted in a strong delivery against the guidance we provided for 2021 at our Capital Markets Day. So let me take you through these five items one by one. We are targeting the reduction of our addressable expenses by 400 million euros in 2023 and wanted to achieve half of this by the end of 2021. We are progressing well and have already achieved an expense reduction of 244 million euros. On operating capital generation, we came in at 1.4 billion euros, which is 300 million euros ahead of our guidance as improvements in our operational performance and favorable equity markets more than upset the adverse mortality experience. More than 70% of that was remitted to the group resulting in free cash flow of €729 million, well above our guidance from the Capital Markets Day. As planned, we deployed about €200 million to reduce leverage. And since mid-2020, we have reduced our gross financial leverage by €700 million and now stands at €5.9 billion. So this puts us on track to meet our target of reducing our gross financial leverage to 5 to 5.5 billion euros by 2023. At our capital markets day, we guided for a muted near-term dividend growth. Since then, we've made steady progress in our strategic priorities and financial targets. And this allows us now for more linear growth of the dividend. And as a result, we increased the full-year dividend by 5 cents compared with the last year to 17 cents per share. In summary, I'm very pleased with the progress we have made over the last year, so let me show you where we stand with the execution of our operating plan on slide number four. Our ambitious plan, which now comprises of more than 1,200 detailed initiatives, is designed to improve our operating performance. More than 840 initiatives have now been fully implemented. In the fourth quarter, we completed over 150 initiatives. This underscores that we are transforming AGON and that we're doing this at pace, maintaining an intense execution rhythm. At this point, we have implemented more than 70% of the original 1,100 initiatives embedded in our operational improvement plan. Expense initiatives alone contributed 244 million euros to the operating results in 2021. Additionally, growth initiatives aimed at improving customer service and enhancing user experience and launching new innovative products are well underway, contributing 115 million euros to the operating result of 221. So let's turn to slide five to discuss the progress we have made with respect to our strategic assets. Let me remind you that our priority here is to grow the customer base and expand our margins. And I want to take this opportunity to look back on the full year of 2021 and demonstrate the progress we have made since our capital markets day. In U.S. individual solutions, we have the ambition to regain a top five position in selected life products over the coming years. Last year, new life sales improved by 19% compared with the full year of 2020, mainly driven by indexed universal life and whole life final expense products. We've extended our market share in the distribution channel World Financial Group and strengthened the distribution capacity of this channel by adding 6% more licensed agents over the course of 2021. Sales in World Financial Group are especially benefiting from a funeral benefit available for eligible indexed universal life policyholders. Whole life final expense sales also increased compared with 2020, 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 new middle market sales. This business continued to build momentum with the sixth consecutive quarter of written sales over $1 billion, and in 2021, Britain's sales were, in aggregate, one-third higher than in 2020. Assets under administration in the middle market segment grew by 12% during 2021 to more than $50 billion, which was supported by favorable markets. The improved sales momentum helped reduce the net outflows for the full year. However, we recognize that we have more work to do here. So let's turn to our Dutch strategic assets in slide number six. We are leaders in both mortgage origination and new style defined contribution pensions. We saw continued growth in these businesses throughout the year. Mortgage sales amounted to around 11 billion euros, similar to 2020, as we continue to benefit from our strong origination capabilities. About two-thirds of the origination volume consisted of mortgages intended for third-party investors through our Dutch mortgage funds, on which we earned a fee. In our workplace business, we maintained a high level of net deposits for low-cost defined contribution products. Asset under management for this business surpassed the 6 billion euro mark at the end of the year, underscoring Agon's leading position in this market. The strategy for our online bank, Knopp, is to develop it into a digital gateway for individual retirement solutions. In 2021, Knopp grew its customer base by nearly 17,000 customers. The growth rate was somewhat lower than last year, stemming from our decision to stop offering savings products to non-feet-paying customers as these were loss-making. Moving on to the United Kingdom, asset center administration increased to nearly 215 billion pounds at the end of the year. Over the year, net deposits improved in the workplace and retail business, reflecting stronger investor sentiment as well as the benefits from ongoing investments in the business. Expense savings initiatives and the impact on favorable markets on assets led to an improvement in the efficiency of the platform. This more than offset the revenues lost from the gradual runoff of the traditional portfolio. Let me now turn to our global asset manager and the growth markets on slide number seven. Our asset management business celebrated its 10th consecutive year of positive third-party net deposits. In 2021, both our global platforms and strategic partnerships contributed positively. Global platforms achieved 5 billion euros of net deposits in 2021, a significant improvement versus 2020. The operating margin of global platforms improved by two almost percentage points over the year to nearly 13%. This was driven by higher revenues as a result of favorable markets and net deposits. Our strategic partnerships continue to perform very well. Higher management fees from continued net deposits and favorable equity markets drove the operating results up to 199 million euros for the year, which represents now more than 10% of the group's overall result. In Egon's growth markets, we continue to invest in profitable growth. New life sales increased by 4% over the year to 215 million euros. with successful growth in the bank insurance channel in Spain and Brazil being partly offset by somewhat lower sales in China. This was 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 €107 million in 2021 as a result of sales of new products in Spain and Portugal. We continue to see benefits from the redesign of our digital sales channels through our Spanish bank assurance partners. In summary, we are progressing well on our strategic priorities. We have demonstrated solid growth in our strategic assets and growth markets in the last year, and 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'd like to hand it over to Matt, who will talk about the financial results and update you on our actions regarding financial assets.