Dutch insurer AEGON has announced plans to cut costs by divesting operations that are capital intensive and offer relatively low returns.
The aim is to lower costs by €400m ($484.5m) in 2023 compared with 2019 and reinvest €150m of the savings in growth.
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The firm expects associated one-time investments of nearly €650m between 2021 and 2023.
It aims to achieve cumulative free cash flows of €1.4-€1.6bn between this period.
In the near future, Aegon intends to focus on the core markets of the Netherlands, US and the UK, growth markets of Spain, Portugal, China, and Brazil, as well as one global asset manager.
It will eye cost savings and have a “bias to exit” in small markets or markets with sub-scale or niche positions.
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By GlobalDataIn the core markets, the insurer has decided to split its operations into Financial Assets and Strategic Assets.
Financial Assets are those operations that are closed for new sales, costly and yield low returns.
Businesses offering an attractive return on capital and well positioned for growth will come under Strategic Assets.
The insurer plans to release capital in Financial Assets and re-allocate capital to Strategic Assets and growth markets.
In the US, “variable annuities with significant interest rate sensitive living and death benefit riders, stand-alone individual long-term care, and fixed annuities” will fall under Financial Assets.
Workplace Solutions along with select life and investment products that are part of Individual Solutions will fall under Strategic Assets in the US.
The Dutch insurer will stop providing new defined benefit group pension products and individual life products, except direct annuities, in its home market.
It will remain focused on its digital growth in the UK. The firm’s asset management business will deploy a new global operating platform, with aim to grow third-party assets.
Aegon CEO Lard Friese said: “We are narrowing our strategic focus to selected core and growth markets and, within these, have made choices that allow us to focus on those areas where we believe that Aegon is well positioned to create value.
“We have developed an ambitious plan comprised of detailed initiatives designed to improve the operating performance of our business by reducing costs, expanding margins and growing profitably.
“We are simplifying our capital framework, and continuing to strengthen our balance sheet, in part by further deleveraging. In addition, we are taking proactive risk management actions to improve our risk profile and reduce the volatility of our capital ratios.”
