Good morning, everyone, and welcome to Aegon's conference call to update you on the transfer of the legal seat of Aegon N.V. to Bermuda, and the change in our group supervision to the Bermuda Monetary Authority. With me on the call are Lard Friese, Aegon's CEO, and Matt Rider, Aegon's CFO. Lard will say a few words about the news and the expected next steps, and after that, we will continue with the Q&A session with both Lard and Matt. Before we start, I would like to ask you to review our disclaimer, which you can find at the back of today's press release. With that, I would now like to hand over to Lard. Lard, please go ahead.
Thank you, Jan Willem, good morning, everyone. Thank you all for joining us again today. Today, we have announced the transfer of Aegon NV's legal domicile to Bermuda, and the subsequent change in group supervision from the Dutch Central Bank to the Bermuda Monetary Authority, or the BMA. These changes are triggered by the closing of the a.s.r. transaction that we foresee happening in the coming weeks. Following the closing of the transaction with a.s.r., we will no longer have a regulated insurance business in the Netherlands, and under Solvency II rules, the Dutch Central Bank can therefore no longer remain Aegon's group supervisor. After consulting the members of the college of supervisors, the BMA has informed us that they would become our group supervisors if we were to transfer the legal seat of the holding company to Bermuda.
Bermuda hosts many respected international insurance companies, including four of Aegon's subsidiaries. The Bermuda Solvency Framework has been granted equivalent status by the EU and the U.K., and it also has been designated as a qualified jurisdiction by the U.S. National Association of Insurance Commissioners. This enables insurance companies that are regulated by the BMA to easily conduct cross-border business. The BMA has an established, well-recognized regulatory regime that will facilitate the implementation of Aegon's strategy, as outlined at our recent Capital Markets Day in London. Despite the change in group supervision, all regulated insurance entities in the U.S., the U.K., Spain, Portugal, and in the other jurisdictions, will continue to be supervised by their current local regulators.
Aegon will continue to report under IFRS accounting standards, and at the same time, we will be exploring the implementation of U.S., GAAP in the medium term, in addition to IFRS. U.S. GAAP will allow for better comparison against U.S., peers and provide long-term strategic flexibility for the group. The change in group supervision will not have a material impact on Aegon's capital management approach, which will continue to focus on the capitalization of its operating units, cash capital as a holding, and growth financial leverage. Consequently, the financial targets for 2025 we provided at our Capital Markets Day are unchanged, and we reconfirm our intention to initiate a EUR 1.5 billion share buyback program shortly after the closing of the transaction with a.s.r.
Aegon expects its group solvency ratio and surplus under the Bermuda solvency framework to be broadly in line with that under the Solvency II framework during a transition period until the end of 2027. The method to translate Transamerica's capital position into the group's solvency position will also be similar to the current methodology. After the transition period, Aegon will fully adopt the Bermuda solvency framework. Furthermore, we anticipate that our debt instruments that are currently grandfathered under the Solvency II regime will remain so until the end of 2025. In addition, the debt instruments will continue to be subject to existing triggers for mandatory deferral or cancellation of interest payments, or conversion into equity based on the group's solvency ratio. Aegon's future debt structure and refinancing decisions will remain primarily be driven by economic considerations.
As previously announced, our intention is to reduce gross financial leverage by up to EUR 700 million following the closing of the transaction with a.s.r. Upon the change of our legal domicile becoming effective, Aegon N.V. will be converted into Aegon Ltd., a Bermudian entity. We will adjust our company's governance to reflect the change in legal domicile. The new governance includes the implementation of a one-tier board structure comprised of executive and non-executive directors. The move of our legal domicile to Bermuda and the subsequent change in group supervision to the BMA is just one of the steps that we are taking to transform our company. As we explained to you at our Capital Markets Day, we see significant opportunities to create value throughout our transformation.
Our priorities in order to create value are: to number one, complete the transaction with a.s.r. and to execute the associated share buyback program. Number two, increase Transamerica's value through a large-scale capital reallocation effort. Number three, to strengthen our U.K. and fully owned asset management businesses and invest in growing our joint ventures. Number four, creating additional value by deploying our financial flexibility at the holding in value-creating ways. To conclude, we are embarking on Aegon's next chapter and are accelerating our strategy, all with the objective to build leaders in investment protection and retirement solutions and create sustainable shareholder value. While a lot is changing, much also remains the same.
Our head office will stay in the Netherlands, and we will remain a Dutch tax resident. Our shares will remain listed on Euronext Amsterdam and the New York Stock Exchange. We will continue to report under IFRS. All regulated entities in the group will continue to be supervised by their current local regulators, and there's no material change to Aegon's capital management approach. With that, I'd now like to open the call for your questions. Operator, please be so kind as to open the Q&A.
Thank you. To ask a question, you will need to press star one and one on your telephone keypad and wait for your name to be announced. To withdraw your question, please press star one and one again. We will now go to your first question. One moment, please. Your first question comes from the line of Nasib Ahmed from UBS. Please go ahead.
Thanks, morning. Thanks for taking my questions. First question on benefits of moving from a two-tier board to a one-tier board. Are there any benefits from that change? Second is, under BMA solvency, can you get more diversification between geographies, i.e., the U.S., U.K., and Europe, or does it make any of the capital more fungible within the business? Finally, have you explored whether the grandfather notes are going to be eligible under BMA solvency regime? Thanks.
Hi, Nasib, good morning. Thank you for your questions. This is Lard. I'm going to ask Matt to do the second and the third question. I'll do the first one. The one-tier board, the fact that we're moving from a two-tier to a one-tier board structure is a simple consequence of moving our legal domicile to a jurisdiction that has a requirement in corporate law that you have a one-tier board system. That's why we're moving that way.
That's basically what it is. In terms of benefits from that, you know, there is in the way things work today, in the two-tier, one-tier board system, while they're in practice, you know, it's a similar kind of setup. Of course, it's legally different, and therefore, part of the total legal structure, and corporate law structure requirements in Bermuda. But in practice, one-tier, two-tier boards, if they work well, they continue to do the work as they do, as we do it today so far. On the two other questions, Matt Rider?
Yeah. On the, you asked, whether there's going to be more diversification between geographies or more capital fungibility. The short answer is that, we anticipate that we will apply a transition period through 2027, whereby our solvency ratios at the group level are going to be calculated under a very similar way that they are today under Solvency II. We would not anticipate any real change in that respect. We do, and again, with respect to the grandfathered securities, we would anticipate that they would be eligible through 2025, which is exactly the same case as it is today under Solvency II. We would not expect any material change
Perfect. Thank you, Lard and Matt.
Thank you. We will now go to your next question. Your next question comes from the line of David Balmer from Bank of America. Please go ahead.
Yes, good morning. Thank you for hosting this call. My first question, just to come back on the transition period. Matt, can you just explain what's going to happen from now until 2027, and how the holding capital framework will change at that point? That's my first question. Secondly, coming back on debt as well, for the next few years, will you aim to push some of the debt that's currently at the holding to your U.S., holding company, or should we expect the holding to remain the main issuer? Then lastly, on the management actions you flagged at the recent CMD, what's the implication of being based in Bermuda for the EUR 1.2 billion that you talked about a couple weeks ago? Thank you.
Yeah, David, yeah, I'll hand over to Matt for these, but that was last week we talked about it, not a couple of weeks ago, but anyway.
Yeah.
That's a minor point. Matt, over to you.
Yeah. With respect to the transition period, again, our expectation is that you will not notice anything. It's just simply going to be the way that we calculate it today. Again, that is our full expectation. We do not change any, or don't expect any changes to the capital management framework or the way that we manage the company, or really anything of that nature. Your second question was with respect to, would we ever push down some of the debt into the operating co- U.S., or to any of the operating companies? The short answer is that we are going to take any of those decisions on an economic basis over time, taking into account investor preferences and regulators and rating agencies. Again, any change that we would make would be a very
would be a very gradual one, so I would not expect any major seek changes here in that respect. With respect to the management actions that we discussed last week during the Capital Markets Day and the $1.2 billion capital release that we would expect from financial assets in the U.S., again, we would expect this not to interrupt our plans there. In fact, you know, all the stuff that we had disclosed at the Capital Markets Day had taken this change into account. Nothing really changes with respect to our targets or the way that we manage the company.
Thank you. We will now go to your next question. Your next question comes from the line of Marcus Rivaldi from Jefferies. Please go ahead.
Good morning, everybody. Some very, very specific questions on debt, if I may. Obviously, you've highlighted no change to debt treatment up to 2025, so no implications for how your Solvency ratios are stated at the moment. Just very explicitly and clearly, post 2025, will grandfathered securities under Solvency II lose their regulatory capital status under Bermuda rules? Secondly, with regards to instruments that are fully Solvency II compliant today, and that would be expected to be fully compliant after 2025, if you were to remain Solvency II regulated, would anything happen to them in terms of their status under Bermuda rules post 2025? Thank you.
With respect to the grandfathered securities that we currently have, again, we expect no difference between the situation that we're in today versus the one that we were in yesterday. All the grandfathered securities we would expect them to be grandfathered under the Bermuda solvency standard through 2025, and then after that, there'll be an evaluation made. It is at this point unclear whether our currently grandfathered securities would be would apply under the Bermuda solvency standard. Similar kind of answer for the ones that are currently Solvency II compliant. Again, we would expect that there would be similar treatment under Bermuda solvency standard, but that, again, is something that we have to detail out with the BMA as time goes on.
Okay. Thank you.
Thank you. We will now go to our next question. One moment, please. Your next question comes from the line of Michele Ballatore from KBW. Please go ahead.
Yes. Hi, thank you for taking my question. Two questions. First, you mentioned in the press release that this, I mean, this move will facilitate the implementation of your strategy. Can you maybe be a little bit more specific on that? The second question is about the. I read, I mean, Aegon is exploring the implementation of U.S. GAAP in the medium term, in addition to IFRS. Can you maybe clarify a little bit what this means? What is your situation now in terms of accounting regimes and what it's gonna be? Thank you.
Yes. Thank you very much again, and good morning. I'll have the second one goes to you, Matt. I'll take care of the first one. Yes, facilitate the implementation of our strategy. The Bermuda regime is deemed equivalent by the European Union, by the U.K., and has a similar status with respect to the United States. This, of course, aligns and that facilitates, let's say that you are an international company with the international footprint that we have, and as a result, we think that this is a good destination for us and appropriate for us, given the corporate profile that we have post the a.s.r. transactions. Matt?
Yeah, on the U.S., GAAP question, indeed, we did signal that we would begin to explore implementing U.S. GAAP in addition to reporting under IFRS. One thing is quite important here: we do expect that the move to Bermuda for a legal seat is a permanent move. We would do U.S. GAAP as really a means to be able to compare ourselves better with US companies. We wanted to get that information out there, that it's something that we're going to do, but it is really in addition to IFRS.
Okay. Thank you.
Thank you. Once again, if you would like to ask a question, please press star one and one on your telephone keypad. That is star one and one if you would like to ask a question. We will now go to our next question. Your next question comes from the line of Jakub Lichwa from Goldman Sachs. Please go ahead.
Hi there. Thanks for doing this. It's questions about debt securities. Half of them, or, well, less than half really, are fully eligible as capital under the Solvency post and 2025. Thinking a little bit maybe forward, say, 2026, do you think under the new regulatory regime, it'll be beneficial for Aegon to rely on capital instruments as part of the debt structure? Do you think you will more reliant also on, say, senior debt or, some other debt instrument which do not contribute to the group capitalization?
I can pick this one up.
Please.
We have not made any determination yet in that respect, but any, really, any decision that we would make with respect to the debt structure or the structure of individual securities, would be made on a purely economic basis, over time.
Okay. Thank you.
Thank you. There are currently no further questions. I will now hand the call back to Jan Willem for closing remarks.
I'm gonna take the closing remarks. I want to thank everybody for your questions, and thanks again for joining. If you have any further questions, you know where to find our investor relations team. I would also like to mention here the following: This is Jan Willem Bijleveld, our fearless and highly professional Head of Investor Relations, last call before he goes and takes a sabbatical with his family and on a trip across Europe.
I would be remiss if I would not mark this moment to tell him also in, you know, in your presence, how much we have valued his contributions throughout the years, that we will miss him, and that we will wish him all the best. With that, Jan Willem, thanks for this, for this last day, last working day, and then this call this morning, and thanks for everything you've done for the company. Thanks to all of you, and I wish you a very good day. Thank you very much.