Aegon raises capital and forecasts cash flow to boost stocks

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By Elitsa Gadeva and Juliette Portala

(Reuters) – Insurer Aegon raised its forecast for full-year working capital generation and free cash flow for 2021-23 on Thursday after beating quarterly earnings, rising its shares by more than 8% .

The Dutch group, which has significant operations in the United States, expects full-year operating capital generation of around 1.4 billion euros ($1.44 billion), compared to around 1.2 billion before.

It said cumulative free cash flow over the period 2021 to 2023 should be at least 2.2 billion euros, well above its previous target of 1.4 to 1.6 billion.

“We also want to make sure we take into account future uncertainty around credit risk,” Aegon chief financial officer Matt Rider said on a call. “It’s a big problem.”

The upgraded outlook and increased dividend “offer some relief,” KBC Securities analyst Thomas Couvreur wrote in a note as the company raised its interim dividend to 11 cents per common share, based on better than expected free cash flow.

Its shares rose 8.8% at 09:36 GMT, putting it among the top gainers on the pan-European STOXX 600 index.

Since taking office in May 2020, chief executive Lard Friese has sought to end years of underperformance by cutting costs, hedging risk and selling small businesses or volatile returns.

“Operating profit and capital generation are very strong this quarter, but unfortunately completely overshadowed by massive one-off investments and other income, pushing the net result into the red,” KBC’s Couvreur said.

Aegon recorded a net loss of 348 million euros on a one-time charge related to the increase in reinsurance rates in the United States, against an average forecast of a loss of 129 million euros.

The insurer, which earlier this year finalized the sale of its Hungarian branch and said it plans to sell its 50% stake in its joint venture with Liberbank, is currently considering a deal to sell its US variable annuity portfolio to capital intensive.

(Reporting by Juliette Portala and Elitsa Gadeva; Editing by Shri Navaratnam and Alexander Smith)

Copyright 2022 Thomson Reuters.

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