Aegon Earnings: Mainly on Track to Deliver on 2025 Financial Targets

Aegon AEG has announced what we believe to be a good set of results for the first half of 2023. Financial targets for 2025 include a reduction in its leverage to around EUR 5 billion, an increase in operating capital generation to around EUR 1.2 billion, a growth of free cash flow to around EUR 800 million, and an increase in the annual dividend to around EUR 0.40 per share. With these six-month results, financial leverage now stands at EUR 5.6 billion, a 27.4% gross financial leverage ratio on Aegon’s definition of shareholders equity plus the contractual service margin. Or, 40.7% of shareholders equity plus debt, which is better than our forecast. Further, Aegon has delivered EUR 620 million of operating capital generation, an increase of 13% from the same period last year. The business looks well placed on this 2025 target. The company is lagging a little bit in terms of its targeted free cash flow generation, with EUR 287 million in the first half. This free cash flow has led to the announcement of a EUR 0.14 interim dividend that the stock will trade with an ex-date of Aug. 29. On Sept. 27, this interim dividend will be paid. Consensus estimates as collected by Refinitiv are for a full-year dividend of EUR 0.30 per share. Aegon typically pays a little more, as it’s final. This means, we believe, along with the EUR 1.5 billion buyback that is on target, distributions are on track.

Today, Aegon reported EUR 818 million in operating profit, a 3% rise. We believe this is an important number investors should focus on. Aegon has been persistently plagued by below-the-line impacts on net profit, which the company is working hard to dispel. Our forecast of an operating profit of EUR 1.2 billion for the full year is below what today’s results imply. We maintain our no economic moat rating and our EUR 5.60 per share estimate of fair value.