Aegon Limited

Good morning, everyone. I would like to welcome you to this conference call on Agon'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 Agon CEO, Lars 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 Lars.

Thank you, Eve, 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 number two 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 euros, 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 midsize retirement plans. In the U.K., trends remain consistent with the path set out in 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 in our last capital markets day in 2023. Consistent with our plan to reduce our cash capital at holding to around 1 billion euros by the end of 2026, we also announced today a planned new share buyback program of 200 billion euros. 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 Euro program we are currently executing and demonstrates our ongoing commitment to returning access capital to shareholders unless we can invest it in value creating opportunities. Let's now move to slide number three 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 of 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 of 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 live sales in Transamerica's protection solution segment increased on the back of higher sales by WFG. Furthermore, within protection solutions, we continue to see growth in the Ryla product thanks to further improvements of 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 and investment segment, we recorded higher net deposits in our retirement plan business compared with last year, driven by large market plans. In mid-size plans, we recorded net outflows of $283 million during the period due to lower gross deposits and elevated participant withdrawals. Written sales remain 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 account 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 number four. At Agon UK, 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 advisor platform, we continue to see the adverse impact of ongoing consolidation in non-target advisor 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 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, Lad. Good morning, everyone. Let me start with an overview on slide six. Operating capital generation before holding funding and operating expenses was €257 million, an increase of 4% year-on-year. Free cash flow amounted to 34 million euros in the period and mainly reflected a remittance from a joint venture in international, as well as 19 million euros of proceeds from ASR's share buyback program. Cash capital at holding stood at a very healthy 1.6 billion euros at the end of March. Gross financial leverage amounted to 5.1 billion euros, consistent with our target level. I'm moving now to slide seven where we address operating capital generation or OCG. OCG increased by 4% reflecting overall business growth. OCG from the US 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 to 240 million dollars for the remainder of the year. In the UK, 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 euros. In the first quarter of 2024, OCG from asset management benefited from a favorable non-recurring expense item. Excluding this item, asset management's contribution to OCG increased. Finally, we confirmed our target of around 1.2 billion euros operating capital generation for 2025, and I will now turn to slide eight 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 six 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 UK, the solvency ratio of Scottish Exitable increased by three percentage points to 189% driven by the operating capital generation. I now turn to slide nine 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 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 1st, 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 six percentage points lower compared with the group's 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 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 for 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 holding at the end of 2026, we today announced a planned new share buyback programme of €200 million. The programme 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. With that, I would now like to open the call for questions. Please limit yourself to two questions per person.