David Barma

David Barma asked about the conditions required for Aegon's Operating Capital Generation (OCG) to reach the upper end of its quarterly run rate, particularly concerning new business strain, and sought clarification on the deterioration of WFG's results in 2025, including agent productivity, cost-income trends, and the quantification of investment programs.

Answer

CFO Duncan Russell explained that Q4 OCG was strong due to favorable mortality/morbidity, high new business strain from strong life insurance sales, and elevated release of required capital, placing it at the bottom end of the underlying run rate. CEO Lard Friese attributed WFG's lower operating margin to significant investments in leadership, governance, technology, training, compliance, and field support, despite strong sales and productivity growth. Mr. Russell added that U.S. strategic assets are expected to grow by 10% annually, with distribution segment margins remaining at the lower end.

David Barma asked about the conditions required for Aegon's Operating Capital Generation (OCG) to reach the upper end of its quarterly run rate, specifically addressing Q4's new business strain and future expectations. He also sought color on World Financial Group's (WFG) 2025 results, including agent productivity, cost-income trends, and the quantification of its investment program.

Answer

CFO Duncan Russell explained that Q4 OCG benefited from favorable mortality/morbidity variances, high new business strain from strong life sales, and elevated release of required capital. He noted the underlying run rate was at the lower end but confident for 2026/2027 targets. CEO Lard Friese attributed WFG's lower margin to investments in leadership, technology, training, compliance, and field support, aiming for revenue-driven profit growth.

David Barma from Bank of America inquired about the rationale for hedging only 25% of the variable annuity (VA) base fee, asking if this was an initial step. He also questioned the reiterated Operating Capital Generation (OCG) guidance, seeking to understand its reliance on equity markets and business growth given recent drags.

Answer

CFO Duncan Russell explained that the 25% VA base fee hedge is a new tool to stabilize capital and earnings, executed at a time of favorable equity markets. He described the 25% level as prudent, allowing Aegon to monitor its effectiveness with the potential to adjust it in the future. Regarding OCG, Mr. Russell stated the guidance was reiterated because the half-year results and quarterly run-rates support the circa €1.2 billion target. He clarified that Aegon's OCG is not particularly sensitive to equity markets, citing a previously guided sensitivity of only around $40 million for a 10% market move.

David Barma inquired about the progress of portfolio derisking in Nordic Commercial and Industrial lines, the drivers behind the higher Q1 Nordic expense ratio, and the current accident year combined ratio in the U.K. business.

Answer

Morten Thorsrud, an executive, explained that derisking actions are nearly complete but will impact volumes through 2025. He clarified the expense ratio increase was due to including former Topdanmark holding company costs, with underlying development on track. Executive Torbjoern Magnusson and Knut Alsaker added that U.K. margins are meeting targets and are not driven by prior-year reserve releases, which remain stable.

Asked if the mortgage sensitivity dampener is ready for implementation, questioned the drivers behind the low investment result in OCG, and inquired about the impact of slowing mortgage markets on protection sales in Europe.

Answer

The mortgage dampener process is still ongoing and would be implemented in H2 if the decision is made. The lower OCG investment result was driven by lower equity holdings, real estate revaluations, and tightening credit spreads. In Europe, slowing bank mortgage sales reduced high-margin credit insurance sales, but this was partly offset by tied agents, and a market recovery should boost VNB.