Many different activities in many countries, an institutional culture based on poor performance and above all disappointing results. After taking office, new CEO Lard Friesi – who had turned from his rival NN Group – complained without hesitation about the situation at the insurer in The Hague Egon.
Now, exactly a year later, Frisian has clearly left a steady imprint on the new strategy of the stalled multinational for years. Commissioner William Connelly said he was also drawn to this. After five years of successfully leading NN, Friese had a lot of space to rejuvenate Aegon with his “track record”.
This began in the midst of the Corona crisis with “demolition work.” Aegon sold the stunning pyramid-shaped headquarters of its subsidiary Transamerica in San Francisco for more than 550 million euros, disposed of parts in Eastern Europe for 830 million euros in one fell swoop, and slashed dividends. In addition, € 400m of costs must be deducted in three years, half of which is this year.
Analyst Michael Hattner of investment bank Bernberg concludes that this is satisfactory for investors. “The focus is on simplification, with three primary markets and three growing markets, where there were twenty in the past. Investor confidence increased, especially because Frisian is known for its phenomenal execution.”
However, Hotner surprised her interim dividend cut this year, mainly due to size: 60 per cent. This decision may be partly driven by the consequences of the Corona crisis, but it is mainly structural. At over 10 per cent, the dividend yield was so high that investors could expect to cut it. ”
The underlying markets
For Aegon, the primary markets now are the Netherlands, the United Kingdom, and the United States in particular. In the US, the group generates two-thirds of its 28 billion euros in sales through its subsidiary, Transamerica. In contrast: the Dutch branch represents 15 percent. Frisian sees Spain, Brazil and China as developing markets.
Will investors benefit from the downsizing of the global Aegon company? If you find good buyers, says Robin van den Broek, who follows the insurance company on behalf of investment bank Mediobanca. “In Eastern Europe, Egon had a crown jewel for sale, especially in Hungary. That was a good start with a profitable return. We still have to wait and see other foreign properties on display.”
Egon also calls a “model stock moving with the macro economy”. It looks like that looks good for this year. For example, interest rates are rising further due to the massive support package from US President Biden, and the Corona vaccination is underway in countries where Aegon operates. In the US, the company benefits mainly from a 10-year interest rate hike, and in the Netherlands from a 20-year high interest rate on the euro swap, which generates more income.
Van den Broek: “If you want to sell something, it’s nice that the world looks a little better. It’s okay now for Aegon: the share price has doubled since the low of last year.” This is a welcome recovery: Aegon has lost a lot of stock market value in recent years, and thus has not proven to be a good investment for the long-term investor.
Huttner predicts that there will be more in the coming period for the Aegon investor. “I think the new Frisian strategy will lead to renewed growth, especially in Transamerica’s pensions and life insurance policies. Ultimately, higher profits.”
A copy of this article also appeared on nrc.next on March 15, 2021