By:
Nicholas Tenuta, AIM Student at Marquette University
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.
Summary
• 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.
