Wednesday, January 2, 2019

An AIM International Equity Holding: Aegon (AEG): “Is it Time to Get Insurance on this Insurance Stock?” By: Nicholas Tenuta, AIM Student at Marquette University

Aegon (AEG-US): “Is it Time to Get Insurance on this Insurance Stock?”
By: Nicholas Tenuta, AIM Student at Marquette University

Image result for aegon logo

Disclosure: The AIM Equity Fund currently holds this position. This article was written by myself, and it expresses my own opinions. I am not receiving compensation for it and I have no business relationship with any company whose stock is mentioned in this article.

Aegon (NYSE:AEG-US) provides the provision of insurance, pensions and asset management services out of the following main segments: Americas, Europe, Asia, Asset Management, and Holdings.
• AEG is continuing their path to be a fully digitalized company to meet the demand for personalized products
• While integrating another online investing platform with their own, technical difficulties locked many of their customers out from their financials for an extended period of time
• While management seems positive about future growth opportunities, term life insurance, their main business segment, is continuing to decline quickly.  
• Management will discuss how simplifying their business plan will accelerate growth at the next investor meeting in New York City.

Key points: The overall consensus on Aegon remains at a neutral level. In the first half of 2018, Aegon accomplished many of their strategic development plans discussed at the prior year’s investor meeting. The stock experienced a major drop after Aegon failed to incorporate their newly acquired online platform, Cofunds, as they once promised would be a smooth transaction. The integration of Cofunds left many customers unable to access their financials for an extended period of time. The news right around their 52-week high $7.48 and the stocks has never fully recovered.

In 2018, Gross deposits increased by 8% to EUR 64 billion, as growth in their Asset Management business offset a volatile currency market. Aegon experienced 10% earnings growth on a constant currency basis in 1H 2018 as operations have become more streamlined and technology based.

The health and life insurance segment of their Americas business was the toughest part of 2018. Term life insurance continues to experience a head wind from the pressures of personalized products via technology channels. While, Aegon is in a position to take advantage of the demand for personalized products through their online platform, decreasing term life insurance plans continue to be detrimental. New premium production for accident and health insurance decreased 48% YoY, driven by lower supplemental health insurance sales in the United States.

The CEO of Aegon is expected to discuss how they intend on simplifying their business plan to create more growth at the next investors conference in New York City.

What has the stock done lately?
In Q2 2018, Aegon stocks reached a 52-week high after announcing a series of acquisitions and strategic plans that would be implemented by 2019. However, after failing to incorporate Cofunds online platform, the stock dropped 21.23%

Past Year Performance: AEG is down 26.13% year-to-date and is down 23.14% over a one-year period. The is likely the result of the of the poor integration of Cofunds, and term life insurance premium production decreasing by 48% in 1H 2018.

Source: Google Finance

My Takeaway
My take away is that Aegon has positioned themselves and is continuing to increase their position to take advantage of the new digital world. They have executed a number of transactions in the past year as the insurance space is continually consolidating overseas. However, the insurance industry right now is a tough industry with low interest rates and less demand for term life insurance and basic pension plans. I feel it is best to sit on this stock at the moment as the whole insurance industry is down. Let’s see if AEG can adapt to their customers new demand for technology driven personalized products. I rate Aegon as a hold.