Mega loss for Aegon, but no reason for negativity

The insurer Aegon suffered a loss of 348 million euros in the second quarter. The insurer announced it today. This was partly due to losses on interest rate hedging in the United States. But it’s not all negative sounds, thinks Aegon CEO Lard Friese.

On the contrary, Aegon is optimistic about the future. “It was a very strong quarter in terms of Aegon’s capital strength. The first half was of course the worst start in 50 years for equity and bond investors, and in this extremely volatile environment, we are posting today very strong capital and free cash flow ratios.

According to Friese, this ensures that Aegon was able to create better prospects in terms of expected free cash flow and capital that can be generated. “We have also increased our interim dividend by 35%. It makes us feel pretty powerful.

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A clear and positive vision of the future, even if that does not explain the loss of 348 million euros. Friese mentions a few reasons for this. “First of all, we have very large hedging and derivatives portfolios with which we actively protect capital positions. These hedging programs also work very well: they offer 98% protection.

However, there is also a flip side to this coin, he says. There are countless accounting noises that come with those same wallets; lose on paper. “However, new accounting rules will be introduced worldwide next year. And then those kinds of things will be a thing of the past, so we won’t be bothered by them anymore. But it was a good quarter in terms of capital and outlook.

Free cash flow

And Aegon’s capital position is strong, as evidenced by the company’s free cash flow headroom. Friese has solid plans for that as well. “So to start, we have increased our interim dividend by 35% to 11 cents per share. So we are on track to achieve our dividend of 25 cents per share for the year 2023, that is the target that we have.

In addition, Aegon is seeking to strengthen its balance sheet through deleveraging, for which a program has been put in place. With success: “We have achieved this goal.

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According to Friese, it is now possible to reward investors. “We would like to maintain our cash position between half a billion and a billion and a half, but we are currently at 1.7 billion,” he said. And that means there’s more capital than Aegon needs to grow or transform the business. Friese: “The position is also beyond our ambitions, so the first priority is to return it to shareholders over time, and this is usually done in the form of share buyback programs.