Berenberg maintained its Buy rating on Aegon NV (AGN:NA) (NYSE: NYSE:AEG) with a steady price target of EUR7.00. Aegon's stock experienced a 5% drop on Wednesday following the disclosure of its first-half 2024 financial results.
This decrease is attributed to investor concerns over the unpredictability of the company's profits, particularly related to mortality risk. Aegon reported a USD73 million impact on its operating capital generation earnings due to mortality, which is understood within the Solvency II framework as a measure of earnings.
The higher mortality costs were due to two main factors: a few high-value insurance policies that led to USD54 million in costs, and an additional USD19 million from increased volatility, primarily within Aegon's Universal Life policies.
Aegon has responded to these mortality costs by bolstering its reserves.
Specifically, the company allocated an additional USD400 million for future U.S. mortality risks, which is expected to reduce mortality costs by USD50 million every half-year under International Financial Reporting Standards (IFRS) operating profit.
Despite the market's concerns regarding mortality risk, Aegon has revised its full-year 2024 operating profit forecast upwards. The company now anticipates an operating profit between EUR800 million and EUR900 million, an increase from the previous estimate of EUR700 million to EUR800 million.
InvestingPro Insights
Aegon NV's (NYSE: AEG) recent market performance reflects the challenges and investor concerns highlighted in their first-half 2024 financial results. The company's management has been proactive in addressing these concerns, as indicated by InvestingPro Tips, which reveal that Aegon has been aggressively buying back shares and maintaining dividend payments for 13 consecutive years. Moreover, Aegon has raised its dividend for 4 consecutive years, showcasing a commitment to shareholder returns even amid profitability concerns.
InvestingPro Data provides further context to Aegon's financial health and market valuation. As of the last twelve months as of Q4 2023, Aegon's market capitalization stands at $9.83 billion, with a negative P/E ratio of -132.63, reflecting the market's sentiment about its past earnings. Despite a downturn in revenue growth by -9.68%, Aegon's gross profit margin remains strong at 39.82%. Furthermore, analysts predict a turnaround for Aegon, expecting the company to be profitable this year, which could help improve the P/E ratio in the future.
Investors considering Aegon's stock will also note the dividend yield, which is currently at an attractive 4.87%. This, coupled with a significant dividend growth of 57.19% in the last twelve months as of Q4 2023, may offer a compelling case for income-focused portfolios. Additionally, the company's liquid assets exceed short-term obligations, indicating a solid liquidity position.
For those interested in a deeper dive into Aegon's financials and market performance, InvestingPro offers 7 additional tips that can provide a more detailed analysis. These insights and more can be found at https://www.investing.com/pro/AEG, which can help investors make an informed decision on whether Aegon's stock aligns with their investment strategy.
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