Aegon Limited

Good day and thank you for standing by. Welcome to the Airgun fourth quarter 2022 results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you will need to press star one and one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one and one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Jan Willem Weidema, Head of Investor Relations. Please go ahead.

Thank you, Operator, and good morning, everyone. Thank you for joining this conference call on Aegon's fourth quarter 2022 results. Before we start, we would like to ask you to review our disclaimer of four looking statements, which you can find at the back of the presentation. With me today are Aegon's CEO, Laert Friese, and CFO, Matt Ryder. who will take you through the results for the fourth quarter and the progress we are making in the transformation of Aegon. After that, we will continue with our Q&A. And on that note, I will give the floor to Lars.

Thank you, Jan-Willem, and good morning, everyone. We appreciate that you're joining us on today's call. I want to start by running you through our achievements on slide number two. The fourth quarter closes out the year in which we accelerated our transformation and the execution of our strategy. During the quarter, we announced a transaction to combine our Dutch businesses with ASR, which was a historic milestone for the company. We are very pleased that we have received broad-based support from our shareholders for this transaction at our EGM in January, and we continue to be on track to close the transaction in the second half of this year. Despite challenging market circumstances, we also made significant progress in further strengthening our balance sheet and in improving our operating performance. At the 2020 Capital Markets Day, we launched our operational improvement plan with more than 1,100 initiatives, together with ambitious but realistic savings and growth targets. The success of this program is evidenced by the fact that the benefit to our operating result has exceeded our target one year ahead of schedule. This year's commercial results underscore the importance of offering a broad range of products to our customers. For example, as a result of the uncertain macroeconomic environment, we saw outflows in asset management and in the UK retail channel. In the U.S. workplace solutions, we experienced net outflows as a consequence of the departure of one large customer. But at the same time, many of our strategic assets are performing well. Our life insurance sales increased in our growth markets and in the U.S., where individual solutions achieved the highest level of quarterly new life sales in the last five years. Furthermore, the workplace business in the UK recorded the highest level of net deposits in the past four years, demonstrating the improvements we are making to our UK franchise. As a result of the progress we have made, both strategically and financially, we will propose a final dividend for 2022 of 12 euro cents per common share at our annual general meeting. This brings the full year dividend to 23 euro cents per common share, compared with the 17 euro cents dividend over 2021. Furthermore, we are announcing a new 200 million euro share buyback program for the first half of 2023, which underscores our disciplined capital management and commitment to return surplus capital to our shareholders. Slide 3 highlights the success of our operational improvement plan since its launch at the 2020 Capital Markets Day. We have now fully implemented almost 1,200 initiatives. This is more than we set out to do, and we continue to implement more. The plan was not only aimed at improving the operating performance and propositions to our customers, but also has fundamentally changed the way we work at AGON. For example, we have embedded a continuous focus on efficiency and operational execution in the organization with accountability clearly assigned, more granular planning, and real-time tracking. The increased operational rhythm has created a culture of transparency and a focus on developing talent to meet future challenges. On slide number four, we show the financial results of the Operational Improvement Plan. When we launched this program, we targeted an operating result uplift of 550 million euros by the end of 2023. As of year end 2022, the operational improvement plan has resulted in an operating result uplift of €627 million, outperforming our expectations and one year earlier than expected. Growth initiatives contributed €262 million to the operating result. This is well above our target and required approximately €60 million less of additional expenses than we originally envisaged. Compared with the base year 2019, we recorded the benefit from the expense savings initiatives of €366 million, or 92% of the savings targeted for 2023. Now, if you combine this with the lower than expected spending on growth initiatives, the operational improvement plan has actually led to a net reduction in addressable expenses of €218 million compared with a target of €250 million communicated at the Capital Markets Day in 2020. Given the overall success of the program and in light of upcoming changes to the group structure and reporting due to this transaction with ASR, we have decided to close out the reporting on the Operational Improvement Program. Now, it goes without saying that improving efficiency and driving commercial momentum remains key focus areas for us going forward. Moving to slide five, we'll zoom in on the progress of our U.S. strategic assets. As you know, in individual solutions, we have the ambition to regain a top five position in selected life products over the coming years. And as you can see, Commercial momentum remains strong in this segment. New life sales increased by 20% in 2022 compared with 2021 and have accelerated during the course of the year. This was supported by the World Financial Group, or WFG as an acronym, distribution channel, where the number of licensed life agents grew 20% compared with 2021. and now stands at a record high of over 62,000 agents in North America. In addition, our market share in this WFG channel has increased from 59% in the fourth quarter of 2021 to 67% this last quarter on the back of improvements made to our customer service experience and continued competitiveness of our products. We recently launched a new Index Universal Life product specifically designed for the brokerage channel, which complements our current product that is successfully marketed through the WFG channel. In the retirement business, Transamerica aims to compete as a top five player in new middle market sales. Written sales were at 7.9 billion US dollars in 2022. This reflects the difficult market circumstances with lower equity markets and higher interest rates negatively impacting plan assets. Net outflows for the middle market segment were driven by one single large multiple employer plan exit and would have been positive for the year excluding this discontinuance driven by strong written sales in previous periods. Turning to slide six for the highlights of the performance of our UK and Dutch strategic assets. So let me start with the UK. On balance, it was a positive year for the platform business. On the one hand, the workplace channel generated the highest level of net deposits on record in 2022. On the other hand, the retail channel recorded outflows on the back of weak investor sentiment in line with what we have seen across the industry. Over the year 2022, net deposits on the platform contributed positively to revenues, but were more than offset by the anticipated gradual runoff of the traditional product portfolio. Despite the unfavorable impact of adverse markets on assets under administration, we were able to keep the efficiency of the platform stable because of the steps we have taken to reduce expenses. Now moving on to the Netherlands. Here we clearly see signs that the housing market is cooling down, leading to lower mortgage sales. Nevertheless, the mortgage's portfolio continues to grow and now amounts to almost 63 billion euros. Our workplace business and bank continue to show consistent growth thanks to the commitment of our Dutch employees who remain dedicated to deliver a high level of service to our customers in the run-up to this transaction with ASR. So let's zoom in on asset management and the growth markets on slide number seven. The challenging market conditions negatively impacted our asset management activities in 2022. Now despite the difficult economic conditions in China, our Chinese asset management joint venture AIFMC delivered another year of net deposits. Third-party net deposits in strategic partnerships amounted to 3.6 billion euros. These were more than offset by third-party net outflows in global platforms of 3.8 billion euros as our customers freed up liquidity in a rising interest rate environment. The operating result from strategic partnership decreased by 29 percent, primarily driven by lower performance fees for AIFMC from elevated levels in 2021. In our growth markets, we continue to invest in profitable growth. New life sales from these markets increased by 15% to 248 million euros in 2022, mostly as a result of business growth in Brazil. Summarizing on slide number eight, We remain focused on executing our strategic agenda and continue to maintain a high pace in transforming AGON. We are closing out the reporting on the successful operational improvement plan. Expense savings initiatives have contributed €366 million to our operating results in 2022. Operating capital generation was solid at €1.5 billion in 2022. above the outlook that we provided a year ago despite difficult market circumstances. Free cash flow amounts to 780 million euros in 2022. In the last two years combined we achieved 1.5 billion euros of free cash flow. This means that we have delivered one year early on our cumulative free cash flow target of 1.4 to 1.6 billion euros for the period 2021 to 2023. Our gross financial leverage is in line with the target we set ourselves two years ago, and we intend to further reduce our leverage by up to 700 million euros using part of the cash proceeds from the ASR transaction. Our proposal for the final dividend brings the total dividend over 2022 to 23 euro cents, and for the full year 23, we target a step up to 30 euro cents per share, well above the level we targeted at the 2020 Capital Markets Day. In addition, we are announcing a new share buyback program of 200 million euros after having just completed last year's 300 million buyback program. On top of this, we still intend to return 1.5 billion euros of the cash proceeds to shareholders once the ASR transaction has closed. This is testimony of our commitment to offer attractive shareholder returns. And finally, before I hand over to Matt, I kindly want to invite you to our Capital Markets Day on June the 22nd in London where we will provide an update on our strategy and targets. The focus of the event will be on our U.S. activities and our path to creating value through profitable growth and active management of the Enforce business. I now hand over to Matt for the financial performance of Agon in 2022.