Investing.com — Shares of Aegon (AS:) fell on Thursday after announcing its first-half results.
At 3:48 am (07:48 GMT), Aegon was trading 5.8% lower at €5.476.
The company’s IFRS operating profit for the first half of 2024 was 6% below JP Morgan’s expectations and below consensus estimates, mainly due to negative US claims deviations, lower UK non-insurance results and losses on international treaties.
This resulted in a net loss of 65 million euros. According to Morgan Stanley estimates, a profit of 609 million euros had been expected.
Morgan Stanley and UBS noted that while OCG’s numbers were strong, underlying performance was weaker. UBS particularly highlighted the impact of EUR 312 million in negative fair value items and EUR 403 million in other costs, mainly related to updated mortality assumptions.
However, Aegon reported OCG of €588 million for the second quarter of 2024, beating JP Morgan and Morgan Stanley estimates by 12% and 7% respectively. This result was supported by one-off benefits of around €40 million, including favourable provision releases and capital gains.
Nevertheless, Aegon is maintaining its full-year OCG forecast of €1.1 billion, with JP Morgan noting that the company could exceed that target.
Aegon’s capitalization remained solid, with its US risk-based capital (RBC) ratio at 446 percent, exceeding expectations by 9 percentage points, both JP Morgan and UBS said.
In the UK, the Solvency II ratio (S2) was 189%, slightly below consensus but in line with JP Morgan estimates. Despite a solid capital base, free cash flow was lower than expected, with UBS reporting a 3% decline compared to consensus estimates.
“However, operating profit under IFRS17 (on which Aegon has not obtained consensus) is materially lower than expected, largely due to the negative mortality experience in the US business,” said analysts at JP Morgan.
Morgan Stanley pointed to the divergence between headline numbers and underlying performance, including new business charges and fair value losses, which contribute to the market’s cautious stance.
UBS noted that while some metrics were strong, results were clouded by high write-downs and a difficult market environment. It pointed out that the lack of a significant positive catalyst in the near term further dampened investor sentiment, leading to a reduction in the price target and a muted market reaction.
Aegon reiterated its annual guidance for OCG of €1.1 billion and expects this to increase to €1.2 billion in 2025. The company also maintained its target for free cash flow of over €700 million in 2024 and €800 million in 2025.
Analysts at JP Morgan, Morgan Stanley and UBS have raised concerns about possible downward revisions to IFRS operating profit estimates for 2024. These concerns arise from ongoing market challenges and possible deviations in actual experience from original expectations.
