Michael Huttner

Michael Huttner requested a detailed breakdown of Aegon's underlying Operating Capital Generation (OCG) for Q4 2025 and sought insights into any underlying trends contributing to the observed improvement in mortality variances.

Answer

CFO Duncan Russell provided a waterfall analysis, stating the clean Q4 OCG was approximately EUR 294 million, with positive impacts from U.S. favorable items (EUR 47 million, including EUR 36 million from claims experience, mostly mortality), offset by higher new business strain (EUR 34 million) and elevated release of required capital (EUR 45 million). Mr. Russell noted favorable mortality severity in younger and very old ages, expressing satisfaction with performance against best estimates since updates 1.5 years ago.

Michael Huttner requested a detailed waterfall breakdown of Aegon's underlying Operating Capital Generation (OCG) for the year. He also inquired about the observed improvement in mortality, asking if there are any underlying trends or factors, such as GLP-1s, influencing this positive variance.

Answer

CFO Duncan Russell provided a breakdown, noting Q4's clean OCG was around EUR 294 million, with positive U.S. impacts from favorable claims experience (mostly mortality), offset by higher new business strain and elevated required capital release. He stated that Q4 saw favorable mortality severity, particularly in younger and very old ages, and Aegon is satisfied with mortality performance against best estimates since recent updates.

Michael Huttner of Berenberg asked about the implications of starting U.S. GAAP preparations, the size of a specific large 'pool plan' deposit, details on new business strain, and the capital benefit from the new VA hedge. In a follow-up, he inquired about the specifics of the unfavorable U.S. mortality claims experience.

Answer

CEO Lard Friese confirmed the large pool plan deposit in the retirement business was €1.9 billion. CFO Duncan Russell stated it was too early to guide on the impact of a U.S. GAAP transition and noted the capital benefit from the new VA hedge would be small. Regarding new business strain, he said it was roughly €6 million higher than the guided run rate. On mortality, Mr. Russell clarified that the overall U.S. mortality experience in Q2 was slightly positive and in line with best estimates, expressing comfort with their assumptions.

Michael Huttner inquired about the current solvency ratio in China, the potential impact of using spot interest rates, and the risk of a capital injection. He also asked for key metrics to track improving US mortality trends.

Answer

CFO Duncan Russell stated that China's Q4 comprehensive solvency ratio was 228%, well above the regulatory threshold. He acknowledged a drag on OCG from amortizing the difference between the regulatory and market interest rate curves but noted they are exploring management actions. For mortality, he advised focusing on IFRS experience variances, which were positive in H2 2024.

Michael Huttner from Berenberg Bank questioned the mechanics of reducing cash capital to the €1 billion midpoint by 2026, asking if it implies a straightforward €600 million in buybacks. He also inquired about the portion of the new buyback allocated to share-based compensation and requested a breakdown of capital allocated to financial assets like universal life and variable annuities.

Answer

CFO Duncan Russell clarified that the reduction to the cash capital midpoint by 2026 will follow the capital management framework, considering deleveraging (unlikely), strategic investments, or shareholder returns. He specified that approximately €40 million of the new buyback is for share-based compensation. He also detailed the capital allocation in financial assets, noting Long-Term Care is the largest at $1.2B, while Variable Annuities has reduced to the smallest at $500M.

Michael Huttner from Berenberg sought clarification on the large-claims mortality miss, asking if it's recurring noise and how it relates to the buyback of institutionally owned policies. He also asked if there's a structural offset where negative mortality is balanced by positive reserve releases in long-term care (LTC).

Answer

CFO Matt Rider acknowledged that mortality volatility will continue but stated the recent assumption update should reduce it going forward. He attributed the H1 miss to an unusual number of high face-amount claims. He clarified there is no direct offset with LTC; assumption updates in the UL book (which is onerous) hit the P&L, while in the LTC book (which has a large CSM), they are largely absorbed by the CSM.

Asked about potential COVID-19 claim impacts on protection margins, sought clarification on real estate revaluations and occupancy rates, and inquired about the future outlook for DC business net inflows.

Answer

COVID-19 is not a concern for protection margins. Real estate saw a 6% negative revaluation in H1, with more expected in H2 but at a slower pace; a low office occupancy figure was temporary due to a new building. DC net inflows are expected to remain positive, supported by high retention and pension reforms, maintaining the €32B AUM target for 2025.