On Friday, JPMorgan (NYSE:JPM) reiterated its Overweight rating on Aegon NV (AGN:NA) (NYSE: NYSE:AEG) with a steady price target of EUR8.00. The firm's analysts highlighted Aegon (AS:AEGN)'s transformation under its current management, which began in 2020, including significant structural changes such as the sale of its core Dutch insurance business. According to InvestingPro data, analysts maintain a consensus Buy recommendation, with price targets ranging from $6.80 to $7.40. As a result of these changes, JPMorgan views Aegon as a top choice among European insurers.
The analysts at JPMorgan have set their forecasts above the consensus, with predictions of operating profit that is 2%-11% higher and expectations for increased buybacks between 2024E-27E. InvestingPro data reveals that management has been aggressively buying back shares, while maintaining a solid 5% dividend yield with 4 consecutive years of dividend increases. These estimates do not factor in any major alterations to Aegon's capital allocation strategy or business structure, such as the potential sale of its stake in ASR.
According to JPMorgan, Aegon's management is likely to seek additional inorganic growth opportunities to create further value. The firm conducted various "thought experiments" to explore potential disposal and restructuring scenarios that Aegon may consider over the next five years. These scenarios suggest that Aegon could achieve an approximate 5%-15% additional earnings per share (EPS) accretion above JPMorgan's current forecasts.
JPMorgan's analysis indicates a strong belief in Aegon's ability to manage its capital effectively and to explore strategic decisions that could enhance shareholder value. The Overweight rating suggests that the firm views Aegon stock as likely to outperform the average total return of the stocks in the analyst's coverage universe over the next six to twelve months.
The EUR8.00 price target remains unchanged, signaling confidence in the company's current trajectory and potential for future growth.
In other recent news, Aegon has been the subject of critical scrutiny by Spruce Point Capital, expressing concerns about the aggressive sales and recruitment tactics of Aegon's primary distribution arm, World Financial Group (WFG).
The report noted that WFG contributed approximately $161 million in operating profit from distribution activities in 2023, about 25% of Aegon's consolidated operating earnings. The firm also raised concerns about Aegon's reliance on Indexed Universal Life sales for growth and suggested that a significant portion of WFG agents' sales might be to themselves or to their own downline agents.
On a more optimistic note, Morgan Stanley (NYSE:MS) resumed coverage on Aegon with an Overweight rating, projecting a EUR1.00 increase in the price target. The analyst highlighted Aegon's advantageous position in relation to current macroeconomic trends, particularly its strong earnings base in the U.S. The firm also noted Aegon's commitment to reducing cash buffers, which could allow for significant cumulative shareholder distributions.
In addition, UBS upgraded Aegon's stock from Neutral to Buy, forecasting recurring share repurchases starting from 2025, amounting to approximately EUR 300 million annually. UBS also sees the potential for Aegon to announce a special share buyback of around EUR 100 million at the third-quarter 2024 results presentation. However, the firm does not view a share buyback resulting from a potential sale of Aegon's stake in ASR as adding value.
Despite market concerns over mortality risk, Aegon has revised its full-year 2024 operating profit forecast upwards, now expecting an operating profit between EUR800 million and EUR900 million. Amid these developments, Aegon reported a mixed financial picture during its earnings call, with an operating result decrease of 8% compared to the previous year, but an improvement in solvency ratios.
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