Aegon Limited

Good morning, everyone. Thank you for joining this conference call on our first quarter 2024 trading update. My name is Yves Cormier, Head of Investor Relations. Joining me today are Egon C. Ollard-Frieser and CFO Matt Ryder to take you through our results. After that, we will continue with a Q&A session. But before we start, we would like to ask you to read your disclaimer on forward-looking statements, which you can find at the back of the presentation. And now I would like to give the floor to Lars.

Yes, thank you Yves and good morning everyone and thank you for joining us today. I will start today's presentation by running you through our strategic and commercial developments before handing over to Matt to address our first quarter results in more detail. So let's all move to slide number two to review the highlights of the quarter. The beginning of the year was marked by continued commercial momentum in the US and Brazil, as well as net inflows at our asset manager. In the first quarter of the year, we reported 256 million euros of operating capital generation and included seasonally higher mortality in the US. We remain on track to meet our guidance of around 1.1 billion euros for 2024. The capital ratios of our main units in the US and the UK remain healthy and well above their respective operating levels. Furthermore, cash capital at the holding amounts to 2 billion euros, well above the operating level, despite making good progress executing the 1.5 billion euro share buyback program. At the end of last week, we had completed 92% of this program. As we indicated earlier, we expect to complete the share buyback program by the end of June. Today, we are announcing a planned new share buyback program of 200 million euros, which we expect to start at the beginning of July and to complete by the end of 2024. Commercially, the first quarter of 2024 saw AGON maintain commercial momentum. The U.K. workplace business and our business in Brazil are performing well, and we recorded net deposits in both segments of our asset manager. At the same time, we continue to see challenges in our U.K. retail business. The U.S. business again performed well. We continue to execute on our strategy to transform Transamerica into America's leading middle market life insurance and retirement company, while continuing to reduce exposure to financial assets. Before discussing the commercial results, I would like to address the changes we have made to segment reporting in order to better reflect Transamerica's strategy and business model on slide number three. We have decided to regroup Transamerica's businesses from two to four business segments that are fully aligned with our strategy. To reflect the importance of the World Financial Group, or WFG, for our strategy, we have created the distribution business segment. The business segment savings and investments includes the asset-based businesses, retirement plans, mutual funds, and stable value solutions. The third strategic assets business segment is protection solutions, which consists of the insurance products, including indexed annuities. This is a central focus area for further growth in the U.S. middle market. Finally, all financial assets have now been grouped together in one reporting segment. This includes variable annuities, fixed annuities, including single premium group annuities, the Legacy Universal Lifebook, and long-term care. This resegmentation provides more transparency on our growth areas while presenting the results of financial assets separately. Finally, the new business segments also take into account the applicable IFRS accounting standards with the insurance businesses included in protection solutions and financial assets, and the non-insurance businesses grouped into distribution and savings and investments. Let's move now to slide number four to discuss the recent commercial performance. Starting with WFG, Our ambition is to increase the number of WFG agents to 110,000 by 2027, while at the same time improving agent productivity. We remain on track with the number of licensed agents increasing by 13% compared with the end of March last year to 76,000. Agent productivity also continues to improve thanks to the measures WFG has taken. The number of multi-ticket agents, which are agents selling more than one life policy over the last 12 months, increased by 12% compared with a year ago. Within the savings and investment segment, let me zoom in on our progress in mid-size retirement plans. Here, net deposits amounted to $1.2 billion in the first quarter of 2024, an increase compared with the same period of last year. Net deposits in the reporting period were amplified by a large full plan sale that we wrote in the first quarter of last year. In this segment, we also recorded continued growth in ancillary products, such as the general account stable value product, as well as in individual retirement accounts. In each of these products now, $11 of assets are invested by our customers. In the protection solution segment, we are investing in both product manufacturing capabilities and in the operating model in order to position the individual life insurance business for further growth. New life sales increased by 5%, largely driven by higher index universal life sales, partially offset by lower traditional life sales. WFG represented 71% of total Transamerica individual life sales in this quarter. And we continue to right this business with attractive IRRs in excess of 12%. So let's move now to the United Kingdom on slide number five. In the UK workplace channel, we continue to see solid levels of inflows driven by new schemes and net deposits on existing schemes. Net deposits in the first quarter of 2024 amounted to 546 million pounds and were slightly lower than the same period last year due to outflows related to the exit of a single low margin scheme. In the retail channel, we continue to see net outflows as investor sentiment across the industry remains weak due to the macroeconomic environment. Annualized revenues lost in net deposits amounted to 5 million pounds over the reporting period And this was driven by the gradual runoff of the traditional product portfolio and the net outflows in the retail channel. Combined, these more than offset the revenues gained on net deposits in the workplace channel. On slide number six, I want to address the progress of the international segment with our joint ventures in China, Brazil, and the Iberian Peninsula, as well as the TLB businesses in Singapore and Hong Kong. New life sales decreased by 15% compared with the first quarter of 2024. While we recorded continued good growth in Brazil, this was more than offset by weaker sales in China and Spain. Non-life new premium production decreased by 12% with weaker demand in Spain. Operating capital generation in the international segment decreased by 23%, reflecting asset mix changes in China. So let's turn to slide number seven to comment on our asset management business. The global platforms business reported net deposits of 2.6 billion euros in the first quarter of 2024, returning to positive net deposits after recurring net outflows over the last two years. Strong fund performance and a large contract win in our UK fixed income business drove that result. We also recorded good inflows in alternative fixed income products, one of our focus areas. In addition, the global platform segment is benefiting from the asset management partnership with ASR. In the strategic partnership segment, we also recorded positive net deposits over the reporting period, amounting to 2.1 billion euros. This was especially driven by our Chinese joint venture, AIFMC, in part due to a successful collaboration with a consumer finance platform for a money market fund. Operating capital generation increased by 26 million euros compared with the first quarter of 2023 to 43 million euros in the first quarter of this year. This was the result of higher earnings, especially in A, IFMC, our Chinese asset manager, which benefited from a one-time expense item. I will now hand over to Matt to discuss the financial performance of Agon in more detail, which starts in slide number eight.

Thank you, Lauren, and good morning, everyone. Let me start with an overview of our financial performance over the last quarter on slide nine. I want to start with operating capital generation before holding funding and operating expenses, which amounted to 256 million euros in the first quarter of 2024. This is 12% lower than the same quarter of last year, mainly reflecting a one-time benefit in the release of required capital in the prior year period. Free cash flow amounted to 14 million euros during the reporting period, driven by remittances from our international business. Cash capital at the holding stood at 2 billion euros at the end of March 2024. The decrease compared with the balance at year end 2023 was almost fully explained by the progress made during the period on the 1.5 billion euro share buyback program. Gross financial leverage was largely unchanged at 5.1 billion euros and remains at our target level of around 5 billion euros. On slide 10, I want to talk about the capital ratios of our main operating units. The USRBC ratio increased by nine percentage points compared to the end of 2023 to 441% and remains well above the operating level of 400%. Operating capital generation and market movements each contributed six percentage points to the ratio and more than offset a remittance from an operating company to an intermediate holding company. The favorable impact of market movements was primarily due to good equity markets. The solvency ratio of Scottish Equitable, our main legal entity in the UK, increased 192% and is above the operating level. This reflects the positive impact from operating capital generation and some smaller favorable one-time items. Let's now turn to slide 11 to address operating capital generation in more detail. In the first quarter of 2024, operating capital generation before holding, funding, and operating expenses amounted to 256 million euros, a decrease of 12% compared with the prior year period. Lower operating capital generation in the U.S. and international businesses was partly offset by an increase in asset management. Earnings on in-force decreased by 5%. Adverse underwriting experience in the U.K. and higher mortality in the U.S. were partly offset by one-time expense benefits in asset management and at Transamerica. The release of required capital was 25% lower following a one-time capital release in the US in the first quarter of 2023. New business strain increased by 9%. Higher new business strain in the US as a consequence of higher sales and individual life and retirement plans. This is more than offset by lower levels of new business strain in the UK due to the impact of the sale of the protection book to Royal London and in China due to lower sales. With 256 million euros of operating capital generation from the units, reflecting seasonal mortality in the US, we are on track to meet our guidance for 2024 of around 1.1 billion euros. On slide 12, I will elaborate on operating capital generation in our US business. Over the first quarter of 2024, earnings on Inforce in our US businesses amounted to $285 million, an increase of 1% compared with the same period of last year. Earnings unenforced benefited from higher fee revenues in the retirement plans business as favorable equity markets increased account balances. Furthermore, earnings unenforced benefited from the favorable timing of expenses, which is expected to largely reverse over the remainder of the year. This is partly offset by unfavorable claims experience in this quarter compared with the prior year period, mainly from some adverse mortality in the protection solution segment. Earnings on in-force from our financial assets decreased compared with the same period of last year due to a lower lease of voluntary reserves in variable annuities. For the quarter overall, operating capital generation in Transamerica amounted to $165 million a decrease of 27% compared with the first quarter of 2023. This was driven by a lower release of required capital from a non-recurring release of capital in the prior year quarter and from higher new business strain in individual life and retirement plans as we grow our strategic assets. I will now turn to slide 13 for an update on our financial assets. We are steadily progressing toward our goal of reducing capital employed in our financial assets to around $2.2 billion by the end of 2027. At the end of March 2024, capital employed decreased to $3.7 billion driven by favorable market impacts on variable annuities and the earlier expansion of the variable annuities dynamic hedge program to include the lapse in mortality margins of the riders. Operating capital generation from financial assets declined in comparison with the first quarter of 2023, driven by the decrease in earnings on in-course. In variable annuities over the first quarter of 2024, we achieved 99% hedge effectiveness. Annualized net outflows in the reporting period amounted to 9% of the account balance, in line with expectations as the book gradually runs off. In fixed annuities, annualized net outflows as a percentage of the average account balance amounted to 11% as surrender and withdrawal rates increased, although they remained below our long-term best estimates. In long-term care, we have now obtained regulatory approvals for additional actuarially justified premium rate increases worth $335 million since the beginning of 2023. This represents 48% of the target that we announced at the capital markets day. Claims experience continues to track well with assumptions with an actual to expected claim ratio that was mildly unfavorable at 102%. Regarding the universal life portfolio, by 2027, Transamerica aims to have purchased 40% of the $7 billion face value of institutionally owned universal life policies That was enforced at the end of 2021. Progress remained steady, and as of the end of March, we had bought policies for an amount of $1.2 billion, representing 34% of the face value of the targeted policies. I'm now turning to slide 14. Cash capital at the holding amounted to 2 billion euros at the end of the first quarter. The decrease from the beginning of the year of about 400 million euros was driven by the progress we have made on the ongoing share buyback program. Free cash flow during the period amounted to 14 million euros as remittances predominantly from the international businesses were partially offset by holding and funding and operating expenses. To remind you, we received the bulk of our remittances from the units in the second and fourth quarters. The remaining difference is largely explained by the net proceeds of the previously announced sale of Agon's business in India. We expect the current 1.535 billion euro share buyback program to be completed before the end of this quarter. As we are anticipating that our cash capital at holding will remain above the target range of 0.5 to 1.5 billion euros, even after the payment of the dividends in the third quarter, we are announcing a planned new share buyback program of 200 million euros. This new program is expected to start at the beginning of July and to be completed by the end of 2024. Let's now move to slide 15 for a recap of where we stand relative to our financial targets. We are on a good path to achieve our financial targets for 2025. In April, we have called a 700 million euro tier two security and have refinanced this with a $760 million senior unsecured note. This leaves our gross financial leverage relatively unchanged from the 5.1 billion euros at the end of the first quarter and at our target level. Operating capital generation before holding funding and operating expenses this quarter was impacted by seasonally higher claims experience, but remains on track for our guidance of around 1.1 billion euros in 2024. and on a path to achieve our target of around 1.2 billion euros in 2025. We remain confident in achieving our free cash flow guidance of more than 700 million euros in 2024 and our target of around 800 million euros in 2025 on the back of sustainable operating capital generation growth. Finally, the progress we are making on our strategic agenda gives us confidence that we can grow the dividend to our stated target of 40 Euro cents per share over 2025. And with that, I hand the floor back to you, Lard, for your concluding remarks.