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Investing.com -- Aegon ’s (AS:AEGN) results on Tuesday has once again raised questions about the company’s turnaround progress.
Analysts at BofA Securities said that while the fourth-quarter report disappointed investors, the core fundamentals of Aegon remain largely unchanged.
The brokerage has lowered its price objective for Aegon from €7.40 to €7 but maintains a Buy rating, citing strong capital returns and significant potential for in-force management improvements.
Following the release of its fourth-quarter results, Aegon’s shares fell by 10% compared to the sector.
The market reaction stemmed primarily from the company’s revised earnings guidance, which reflected increased conservatism in its financial outlook.
Aegon moved several items from below-the-line adjustments to its operating results, which contributed to lower reported earnings.
However, BofA analysts argue that this restructuring is part of a broader effort to reinforce the company’s financial resilience rather than a sign of deeper structural issues.
Aegon’s capital return potential remains a key driver of its investment case. BofA analysts project that nearly 40% of the company’s market capitalization could be returned to shareholders between 2025 and 2027 through a combination of dividends and share buybacks.
The company’s financial position supports this outlook, with a healthy cash flow and the potential for additional capital release through asset optimizations.
Despite recent setbacks, analysts still see Aegon as one of the most attractive capital return opportunities in the insurance sector.
One area that continues to present opportunities is in-force management. The U.S. market for managing closed insurance books remains active, particularly in segments such as long-term care and variable annuities, where deals have been gaining traction.
Aegon’s new chief financial officer, Duncan Russell, is expected to take a fresh look at the company’s financial assets and explore ways to further optimize its portfolio.
While these actions may not yield immediate large-scale capital releases, they could help mitigate risks and reduce the cost of equity over time.
The company’s earnings outlook has been revised downward, with BofA reducing its 2025 earnings per share estimate from €0.89 to €0.81.
The estimates for 2026 and 2027 have also been adjusted downward to reflect a more cautious approach.
However, the analysts emphasize that these revisions do not impact Aegon’s free cash flow expectations, reinforcing confidence in the company’s ability to sustain capital returns.
Another point of concern highlighted by BofA is Aegon’s increasing market sensitivity. The company’s U.S. risk-based capital ratio has shown higher sensitivity to market fluctuations, particularly in response to equity and interest rate movements.
While this does not pose an immediate threat to the company’s solvency, it does raise questions about potential capital volatility and its impact on investor sentiment.
Despite these concerns, BofA analysts maintain their “buy” rating on Aegon, emphasizing its strong capital return story and the potential for strategic financial management to unlock further value.