Aegon N.V. (NYSE:AEG) Q1 2025 Earnings Call Transcript

Aegon N.V. (NYSE:AEG) Q1 2025 Earnings Call Transcript May 16, 2025

Yves Cormier : Good morning, everyone. I would like to welcome you to this conference call on Aegon’s First Quarter 2025 Trading Update. My name is Yves Cormier, Head of Investor Relations. And joining me today to take you through our progress are Aegon’s CEO, Lard Friese; and CFO, Duncan Russell. Before we start, we would like to ask you to review our disclaimer on forward-looking statements, which you can find at the end of the presentation. With that, I would like to give the floor to Lard.

Lard Friese: Thank you, Yves, and good morning, everyone. I will start today’s presentation by running through our strategic and commercial developments before handing over to Duncan, who will update you on our capital results in more detail. So let me begin on Slide #2 with the key messages for the quarter. In Q1 2025, we continued to execute our strategy to grow and transform our businesses. And despite the recent volatility in the financial markets, we are confident in our ability to deliver on our strategy and our targets. Operating capital generation before holding and funding expenses amounted to €267 million, driven by business growth in most strategic assets, which was partly offset by unfavorable mortality experience in our U.S. financial assets.

From a commercial perspective, it was a good quarter. In the U.S., World Financial Group continues to grow its agent base. Life sales increased in both WFG and our Protection Solutions business. In retirement plans, we generated positive net deposits overall and written sales were strong once again although we experienced some outflows in midsized retirement plans. In the U.K., trends remain consistent with the path set out at our teach-in webinar last year. In International, we recorded an 11% year-over-year increase in new life sales after some slower quarters last year. Asset Management generated solid net deposits from third-party clients on its global platforms business, but there were net outflows in our joint ventures. The capital position of our operating units also remained very solid as we entered the period of market volatility at the beginning of April.

Looking forward, we expect to achieve all the group financial targets for 2025 as set out at our last Capital Markets Day in 2023. Consistent with our plan to reduce our cash capital at holding to around €1 billion by the end of 2026, we also announced today a planned new share buyback program of €200 million. This program is set to commence at the beginning of July and is expected to conclude before the end of the year. It follows the €150 million program we are currently executing and demonstrates our ongoing commitment to returning excess capital to shareholders unless we can invest it in value-creating opportunities. Let’s now move to Slide #3 to discuss the recent commercial performance of the Americas. In the first quarter of 2025, we continue to grow Transamerica’s business, which is focused on middle-market America.

Starting with World Financial Group, the number of licensed agents increased by 16% to 88,000 compared with the same quarter of last year. We saw higher activation rates of WFG agents resulting from WFG’s activation program that offers training and various forms of support to help newer agents improve their productivity. While this has not yet resulted in an increase in the number of multi-ticket agents, Transamerica’s market share in WFG increased to 66% from higher agent productivity in selling Transamerica’s products. Consequently, new life sales in Transamerica’s Protection Solutions segment increased on the back of higher sales by WFG. Furthermore, within Protection Solutions, we continue to see growth in the RILA product, thanks to further improvements of our wholesale distribution productivity.

We have established ourselves now as a top 10 player in this field in terms of sales in the U.S. market. In the Savings & Investments segment, we recorded higher net deposits in our retirement plan business compared with last year, driven by large market plans. In midsized plans, we recorded net outflows of $283 million during the period due to lower gross deposits and elevated participant withdrawals. Written sales remained strong this quarter, which we see as a positive indicator for future growth in this segment. Within the Retirement Plans business, we saw further growth in the general accounts stable value product and in IRAs as we work to increase profitability and diversify revenue streams. Let’s move on to an update on our other businesses on Slide #4.

At Aegon U.K., we remain on the path set out at our strategy teach-in in June last year. Commercial momentum in the Workplace platform business remains strong. In the Adviser platform, we continue to see the adverse impact of ongoing consolidation in nontarget adviser segments as well as elevated levels of withdrawals. In the International segment, higher new life sales were generated in our joint ventures in Brazil and China. Both new life sales as well as non-life sales improved in our joint ventures with Santander in Spain and Portugal, while TLB is setting out on a path for profitable growth with the opening of a new representative office in Dubai. Our Asset Management business experienced positive third-party net deposits during the period.

In the Global platforms business, this decrease was attributed to higher net deposits in the first quarter of previous year due to the onboarding of a large client. In Strategic Partnerships, net outflows occurred as clients withdraw money from mutual funds in China. With that, I will now hand over to Duncan to discuss our financial performance in more detail.

Duncan Russell: Thank you, Lard. Good morning, everyone. Let me start with an overview on Slide 6. Operating capital generation before holding, funding and operating expenses was €267 million, an increase of 4% year-on-year. Free cash flow amounted to €34 million in the period, and mainly reflected a remittance from a joint venture in international as well as €19 million of proceeds from ASR share buyback program. Cash capital at holding stood at a very healthy €1.6 billion at the end of March. Gross financial leverage amounted to €5.1 billion, consistent with our target level. I’m moving now to Slide 7, where we address operating capital generation or OCG. OCG increased by 4%, reflecting overall business growth. OCG from the U.S. increased by 3% as business growth was partly offset by unfavorable claims experience.

The first quarter was impacted by unfavorable mortality claims experience, part of which was expected from seasonality. The claims experience largely occurred in Universal Life, a financial asset where we saw a higher number of claims, especially from old age policies. We continue to expect a quarterly OCG run rate for the Americas of $200 million to $240 million for the remainder of the year. In the U.K., operating capital generation benefited year-on-year from markets and improved underwriting experience. In the International segment, positive underwriting experience at TLB resulted in an increase of OCG to €33 million. In the first quarter of 2024, OCG from Asset Management benefited from a favorable nonrecurring expense item. Excluding this item, Asset Management’s contribution to OCG increased.

Finally, we confirm our target of around €1.2 billion operating capital generation for 2025. And I will now turn to Slide 8 for an update of our capital position. In the first quarter, the capital positions of our business units remained robust and above their respective operating levels. The U.S. RBC ratio decreased by 7 percentage points compared with the end of December to 436%. Market movements and onetime items, including management actions, both respectively, had a 5 percentage points negative impact on the ratio. The payment of a dividend from an operating company to our U.S. intermediate holding to prefinance the planned half year remittance to the group had a further 3 percentage points negative impact. Operating capital generation contributed 6 percentage points to the RBC ratio.

With respect to recent developments, the financial markets were very volatile in April, but during that period, our hedging programs performed as intended. In the U.S., this higher volatility resulted in an additional impact from hedging rebalancing and cross effects, which is expected to have a single-digit negative impact on the U.S. RBC ratio in the second quarter. Consequently, the impact of the market movements in the second quarter could be estimated using the newly published sensitivities in the back of the presentation and adjusting for the onetime negative impact from market volatility I just referred to. In the U.K., the solvency ratio of Scottish Equitable increased by 3 percentage points to 189% driven by the operating capital generation.

I now turn to Slide 9 to give you an update of our discussions with the BMA. In 2023, Aegon’s group supervision was transferred from the Dutch Central Bank to the BMA and the transition period was agreed upon, which ends in December 2027. We announced today that Aegon will apply an aggregation approach to calculate its group solvency ratio under the Bermuda solvency framework after the transition period. This is a very similar approach to the one that is currently taken by Aegon. And consequently, the impact on the group’s solvency ratio from the updated calculation method will be minimal. Furthermore, the BMA has concluded its review of the eligibility of Aegon’s capital instruments. Aegon’s Solvency II compliant instruments will continue to be eligible under the Bermuda solvency framework in the corresponding tiers under Solvency II and without further limitations.

The €1 billion Junior Perpetual Capital Securities, which were treated as Grandfathered Restricted Tier 1 until January 1, 2026, under Solvency II, will now be eligible as Tier 2 Ancillary Capital following that date and until the end of 2029. Subject to review in 2029, this eligibility may be extended. The €423 million perpetual capital subordinated bonds will lose capital eligibility as of January 1, 2026, consistent with current grandfathering treatment. On a pro forma basis, taking into account the upcoming end of the eligibility for the perpetual capital subordinated bonds, Aegon’s group solvency ratio would have been 6 percentage points lower compared with the group solvency ratio of 188% at the year-end 2024, if this updated capital instrument eligibility have been applied at that time.

With that, I will now move to Slide 10 to talk about our cash position. Cash capital at holding has barely changed over the period and remains extremely healthy. We returned €102 million of capital to shareholders through share buybacks, part of which will be used to share-based compensation plans. Free cash flow amounted to €34 million. Consistent with our capital management framework and our objective to reach the midpoint of the operating range for cash capital at holding at the end of 2026, we today announced a planned new share buyback program of €200 million. The program is to start at the beginning of July 2025 and is expected to be completed before year-end. To wrap up on Page 11, taking into account both our performance in the first quarter of 2025 and the recent macroeconomic developments, we remain well on track to achieve all of our financial targets for 2025.

With that, I would now like to open the call for questions. Please limit yourself to 2 questions per person.

Q&A Session

Operator: [Operator Instructions] We will now go to our first question. And our first question comes from the line of David Barma from Bank of America.

David Barma : Firstly, I wanted to ask about your commitment to reduce holding cash. So you’ll now be buying back €200 million worth of shares in the second half, which still leave you considerably above the €1 billion target by the time we get the full year ’25 results. And this gives the impression that the deploying capital towards maybe M&A might now be higher on your priority list than returning it to shareholders. So can you talk about your views on this and how to balance the two? And I’ll pause here and ask my second question after.

Lard Friese: Yes. Thank you, David. I’ll hand over to Duncan. Duncan? .

Duncan Russell: Sure. David. No, the commitment to reducing our cash capital from what is currently €1.6 billion, i.e., above our target range of €0.5 billion to €1.5 billion to the €1 billion by the end of 2026 is firm. So there’s no change in that commitment at all. And we’ve always said that there are three means by which we could do that. The first is reducing leverage, which with the current portfolio, we don’t think we need to do. The second is investing in growth opportunities organically or inorganically. And the third is returning that money back to shareholders. And today, the announcement of €200 million is a step forward in that direction, but the commitment is that by the end of ’26, which is not that far away, we’ll be back down to the €1 billion of holding cash capital.

If I take a step back because I think you’re asking why only €200 million and et cetera. Internally, we looked at three things. The first question we ask ourselves is how much capital do we need to utilize in order to bridge from where we are today to the €1 billion at the end of the period. The second is how will we get down there. So what is the form in which we’ll do it. And as I mentioned, that could either be investing in growth opportunities or returning it to shareholders, either share buyback or special dividends. And the third is then how quickly do we do it. And as I pointed out, between now and the end of 2026, is not that long a period of time. And then our preference is to spread it over that period in order to take into account potential volatility in financial markets and to manage through that.

David Barma : Secondly, I wanted to ask about in-force management because we’ve seen a real pickup in activity in the U.S. recently with transactions taking place across most of the types of business that you have in your financial assets. Are you looking to participate in this market? Or do you not see good enough opportunities at the moment to do third-party transactions?

Lard Friese: Yes, you can take that. Yes.

Duncan Russell: There’s no real change there. So I think it’s fair — your point is fair that compared to when we started this and classified a large part of our balance sheet as financial assets several years ago, the depth in the market from a demand perspective has definitely increased, and we’ve seen a lot of transactions happening. We’ve always said that there are three ways again, here where we can reduce our required capital. First is by taking unilateral actions, actions we can just take ourselves. Second is bilateral, where we discuss and liaise with either customers or regulators around management actions. And the final one is third-party transactions. And we have undertaken some third-party transactions over the recent past, albeit of a fairly small magnitude. I’d say that we continue to look at that. We continue to engage. And if something turns out which makes sense and meets our criteria, we would definitely explore that.

Operator: Your next question comes from the line of Farooq Hanif from JPMorgan.

Farooq Hanif : My first question coming back on the buyback. Are you basically saying from a buyback perspective, there will not be any more this year? Or is that open depending on market circumstances and your circumstances? Just a clarification there. Secondly, on OCG on the guidance that you gave of the €1.2 billion, which you reiterated this year. There’s two parts to the second question. So doesn’t that guidance look conservative in light of the nonrecurring items that you highlighted in 1Q. So if you could explain that, given the underlying OCG looks a little bit better. And then related to that, can you confirm or talk about any bridge to IFRS from these variances? My understanding was that OCG obviously does not see as much of an update to assumptions because of the U.S. regime and therefore, is more exposed to variances. So what comment can you — if you can make any on IFRS variances?

Lard Friese: Okay. So why don’t I take all those three. Now on the share buyback, what we said is that we anticipate completing this announced share buyback, which will launch at the beginning of July before the year-end. And nothing else is off the table. The commitment is that we’ll get down to €1 billion by the end of 2026. That then entails us having to decide how much capital we need to return, what our alternative options are in terms of investment in growth and then the form by which we do that. But no, there’s no — nothing else is off the table other than we’re committed to getting down to €1 billion by the end of 2026. In terms of the latter one on IFRS versus OCG, you’re right, there are differences in reserving basis, et cetera.

And we don’t publish IFRS on a quarterly. So I prefer not to go into any detail on that. The only thing I’d guide you towards is the — or point you towards is the guidance we gave at the end of last year in terms of the run rate we expect to see both in the U.S. and the group IFRS operating profit. And then finally, on the OCG run rate. Well, what I said at the full year was that we had several units, which I think are trending quite well, the U.S., the U.K. Asset Management versus the original targets in 2023. And then we were facing a bit of a headwind in international, mostly due to the lower interest rates in China. And I think that remains the case. If you take our adjusted OCG or let’s say, the OCG adding back the variances we witnessed in the first quarter, you’re getting to a number of around €321 million for the group.

Indeed, multiplying that by 4 would get you just below €1.3 billion, €1.284 billion precisely, which is above the [EUR1.200 billion]. But if I add the run rate time 3 plus the first quarter, you’re getting just above the — pretty much in line with the €1.20 billion we previously guided to.

Operator: Your next question comes from the line of Nasib Ahmed from UBS.

Nasib Ahmed : Firstly, on the financial assets in the U.S., you’ve still got about €1.4 billion to go to get it down to €2.2 billion over the next 2.5 years. How much of the €1.4 billion can you get through just natural runoff? And how much would need some like you described, Duncan? And then the second question is around the dividend, €0.40 intact, but you’ve done quite a lot of buybacks since you set out that number. What’s your kind of capital return policy? You’re talking about buybacks, but could you also increase the dividend per share to get the holding company cash down to the €1 billion?

Duncan Russell: So on the dividend, the dividend policy, I think, is fairly clear, the €0.40 to €0.40, and we’ll aim to grow the dividend in line with our free cash flow. So that’s a structural topic. The cash capital in the holding is excess capital because we target a range of €500 million to €1.5 billion and we want to get down to €1 billion. So I don’t think we’ll deal with that excess capital through a run rate dividend increase versus our dividend policy. That will be instead dealt with either through share buybacks, special dividends or investing in growth. On the financial assets, you’re right that we still have quite a move to go in terms of the current position versus the targeted end position. In 1Q, we had some impacts from market movements, which increased the required capital on variable annuities on our variable annuity book.

I go back to the original Capital Markets Day, there is a natural runoff in the portfolio. which varies by portfolio. So the variable annuity book runs off fairly steadily. Other parts of the book, for example, long-term care take a lot longer just because the way the reserving works there. So we are dependent and we do need to put in place management actions to hit the target. Those actions could be, again, the unilateral or bilateral actions, which don’t rely on transactions, but do still require effort on our part to get down there and/or through third-party deals. I think it’s likely that if we will need to do some third-party actions in order to get the target.

Operator: Your next question comes from the line of Iain Pearce from Exane BNP Paribas.

Iain Pearce : The first one is if you could just touch on the hedging program and how that performed in the market volatility that we’ve seen sort of post quarter end? And also if there’s been any learnings or anything you’ve seen in the performance of that hedging program that you’ve been able to implement or improve going forward? And the second one was just on the new business. Pleasing to see a return to a positive trend there. Just trying to understand if you see this as a base on which we’re now expecting to see a return to the rates of growth you were seeing previously? And if you view the sort of performance in H2 last year as just a blip or if you’re still seeing improvements in productivity embedded to come?

Lard Friese: Yes. Thanks, Iain, for your questions. Let me take the new business question. And then Duncan, it’s maybe good to you to talk about the hedging program and how it performed. On the new business, so if you take a step back and you look at the overall trading update we’re giving today, first, we’re basically seeing commercial momentum across all our business lines apart from the Adviser platform in the U.K., which, by the way, was to be expected, and I’ll comment on that in a minute. And we saw a slightly lower growth in third-party assets. They were positive to net flows, but they were less positive than they were in the same period last year. So if I — that’s the overall picture. If you look at the U.S. more specifically, in the U.S. and especially WFG, we have seen a growth of the agency sales force to 88,000 now, 16% up for the same period last year.

We aim to continue to grow to the 100,000 to 110,000 actually that we aim to achieve in the coming years, and we are well on the curve to get there. When it comes to the life insurance sales, so what you noticed is that we saw a subdued sales profile in the fourth quarter. This quarter, that’s materially different. So WFG has increased its life sales and not only WFG, but also we’ve launched a new solution on the life insurance product in the broker channel, which has also latched on quite well. And as a result, you see a 7% increase in the sales volumes, which we believe is a result of a lot of attention that our teams have worked with WFG to bring new agents to the place that they are learning on how to produce and that you grow very fast with an agency channel, you have sometimes some time lag as to when agents start to truly produce, et cetera.

And we see those efforts taking effect in a good way, and that’s, I think, a good boding well for the remainder of the year. In RILA sales, we are now one of the top 10 players in RILA. And if you look over the last quarters and this quarter is no different. And also RILA sales have been strong, which I believe is also a good momentum. And then on the retirement side, we noticed overall net growth in our deposits, some outflows of €238 million in the mid-market plans, but quite buoyant written sales profile. So these are sales of plans that of which the assets will come into our books in the coming periods. We have now seen a number of quarters of quite strong written sales. So that means that in the coming periods, we need to see those assets coming in and that is again more of a — that needs to happen in the coming quarters.

You’ve seen the international profile with Brazil growth getting — returning back to growth, which is good. An uptick in China, which quite frankly was — in China, there’s, of course, the environment that sales have been subdued for quite a while, and it’s a bit choppy there. Iberia, Spain and Portugal, we are continuing to move on with our successful joint ventures with Banco Santander. And in the U.K. to round it off. We saw a continuation actually of the pattern that we’ve seen over the last quarters, which is that the Workplace business is doing very well and is very strong. The Adviser platform is still in a period of having to be improved. We’ve had quite an extensive program outlined at our Capital Markets teach-in in June last year.

So that will take time to evolve. Duncan, hedging.

Duncan Russell: The hedging program performed exactly as we would have expected. So we were happy with it, to be honest. If we mentioned the single-digit impact on the RBC ratio, the variable annuity book had a modest drag from higher rebalancing costs. Basically, that realized vol was higher than our implied vol assumption. And then we had, again, some — a modest drag from unhedged exposures on IUL and RILA books of business. In terms of lessons learned in terms of the VA book, we — actually, we were very satisfied. And that reflects the extensive work, which has gone on over the past years and our deep understanding of that book. As IUL and RILA gets larger, we’ll look to adapt our hedging programs also to fit that.

Operator: Your next question comes from the line of Michele Ballatore from KBW.

Michele Ballatore : So the first question is about the holding cash. Can you remind us if there is any potential debt reduction impact over the next 2 years that may affect the level of holding cash? And the second question is about the long-term care, especially the factor that you showed, the net present value of the rate increases there. I mean, I think it’s going well versus your target. Can you remind me if there is any impact on the — from these metrics on the capital employed or capital generation in general?

Duncan Russell: Okay. So on the holding company cash and on the debt level specifically, we’ve said consistently that the broad level of debt we have, which is around €5 billion, we’re satisfied with given the current portfolio mix, and we’d only look to review that structurally if the portfolio changed. There can always be tidying up bits and bobs around the margin, which we can do. So I’m not going to rule that out. But structurally, we don’t need to reduce leverage, and we don’t need to use cash capital materially to reduce leverage. In terms of the second question was on long-term care. No, the way we deal with that book is that as the cost — as our estimate of the cost of liability changes due to whatever reason, we look to implement premium rate increases to offset that.

And we said previously that our target there was to keep the local cash flow test of PDR in a positive area, which means that we didn’t want to impact our capital from the long-term book over the medium term. So no, it doesn’t impact our cash generation or anything like that. It’s a means of offsetting increases in the cost of liability.

Operator: Your next question is a follow-up from David Barma from Bank of America.

David Barma : Just a few follow-ups, please. Firstly, on the capital generation in the U.S., if I adjust Q1 for the various items that you flagged, it seems like it’s quite a bit better than the underlying over the last few quarters and above the run rates that you mentioned at the start of the call, Duncan. So can you just explain what the drivers are for this good underlying performance in the U.S.? And then secondly, on new business, sorry, Lard, I couldn’t quite get your answer about RILA’s earlier. So pardon me, but I’m just going to ask this again. So when we spoke at Q4, you suggested that the benefits from higher interest rates and were being reinvested in growth in RILA and stable value. And I’m not quite sure how to see that in the data you’re giving in Q1.

So could you maybe give us a bit of color on the commercial performance in both? And then lastly, on the equity sensitivity in the U.S. So that’s gotten better with lower equity markets. But is there anything that can be done to reduce the VA flooring issue? I think some of your peers have measures to do that, or is it just something that we need up to deal with and that will just depend on the level of equity markets?

Lard Friese: David, yes, so just on RILA, sales are up in the quarter, and that’s what I meant to say. And if you look at — since we’ve launched that product, the registered index-linked annuities, RILA. Since we launched the product line, I think, 1.5 years ago, we’ve been consistently growing it. And also this quarter, we grew it. So more sales that’s what I meant to say.

Duncan Russell: Okay. David, let me take the other two questions. On the U.S. OCG, no, you’re right. That’s consistent with what I said that several of our business units were running ahead of the — or were trending well versus the original 2023 targets, of which the U.S. is one. Indeed, if you take the normalized OCG for the first quarter and annualize that, you’re at a good level compared to the 800 million target we gave in 2023. There’s multiple reasons for that. Business. The business is growing well. We’ve been able to reinvest at good rates from an interest rate perspective, and we’ve obviously had equity markets trending up over time, offset by the — some of the assumption changes we made last year. But indeed, we are trending pretty well versus the original target on the U.S.

David Barma : Sorry, it’s also significantly better than the underlying of the last few quarters. You were running around $205 million, $210 million max during 2024. On an underlying view in the U.S., you’re now closer to $240 million, $250 million. Is that mostly the interest rate effect?

Duncan Russell: So we have a range for the year of $200 million to $240 million. We were $224 million in 1Q for an underlying basis. I think in 4Q last year, we were $213 million. So we are trending again as markets help us, and we have some commercial momentum. So I think we’re still within the range, David, to be honest. On the other question was the VA slowing, okay. We haven’t taken any actions on that in the first quarter. So what I indicated at the year-end was that we had this slowing was hitting us, and we had these sensitivities, which to simplify whichever market direction tends to be a negative for us. Given our RBC ratio, we felt comfortable with that because we are very healthy compared to our operating target of around 400%.

And that remains the case today. Markets moved in the first quarter. So the slowing position did change, and you do see that in our sensitivities, particularly in the plus or minus 10%, which has now become more normal. We haven’t taken any action. It’s something we’ll continue to explore. And if we feel we need to take action and we can do that in a way, which doesn’t take — doesn’t cost very much, that’s certainly something we’ll look at.

Operator: Your next question comes from the line of Michael Huttner from Berenberg.

Michael Huttner : One question is on the operating capital generation for 2025. And the other one is on the cost of the hedging. So on the guidance, so I work out 1,220 or something would be 320 x3 plus Q1. But there is seasonality in mortality, right, which I think you put in the slide. So then you would be getting to closer to 1,250, 1,260. Is your caution here that you don’t quite know why U.S. mortality was worse in Q1 and that this could be a feature going forward? Or is it just normal conservatism? And the second is the RBC hedging costs. Clearly, it’s not in operating capital generation. So I’m just asking where would these costs — the thing you mentioned the single-digit impact in RBC to come in Q2 from the extra hedging costs in April. Where would these costs come through?

Duncan Russell: Michael, so the latter one is easy, that’s considered markets for us because it’s driven by market movements. And so we put that in non-OCG and you’ll see it just in the movement of the RBC. So when we starting RBC plus OCG plus market impacts.

Michael Huttner : But may I just interrupt, it is your decision to — I understood from speaking to one of your colleagues earlier that it was your decision to add to hedging. That is not a market impact if you buy more hedging, is it?

Duncan Russell: No, I don’t think that’s what happened to be honest. So we have a clear — we have exposures we hedge, which we basically immunize. Most market exposures on our variable annuity book, for example, we immunize. We don’t tend to hedge out. And then we have a fixed implied vol assumption in the pricing of our guarantees. And so the most simple way to think about this is that when actual volatility is higher than we have a priced in our valuation, we have a drag, and we don’t hedge that out. We can day-to-day tactically move our hedge positions. But as a matter of principle, we don’t hedge that out. And that’s the drag you saw in April, where I think intraday volatility was quite extreme. So there’s no change in our hedging approach in the quarter.

And your second question was OCG. You’re saying are we being consistent? Well, the guidance is for around €1.2 billion. So around €1.2 billion. And I think the numbers you’re quoting are around €1.2 billion. So I’d say it’s pretty consistent with our guidance. There’s always quarterly volatility by nature, but the guidance for around €1.2 billion is where we are. And I think the numbers you’re quoting are around €1.2 billion.

Michael Huttner : And are you — in my question, I was kind of asking is also if you are — sorry, it’s the third question really. How you see U.S. mortality given this older age variance in Q1? Have you changed your view here? Or would you see it just as normal volatility?

Duncan Russell: We have not changed our view. So probably the best way — the way I assess it as least as I look at our IFRS actual to estimates, actual to expected mortality variance. As you know, we had some — we had a positive half year last year. And I think at the time on the call, I said that was two positive quarters. This quarter, we’ve had elevated mortality, mostly due to, as you point out, in the financial assets, higher frequency in older age lives. It’s not a surprise that we get quarterly volatility. These are large numbers. So it’s a lot of large numbers. So it’s not a surprise to me, and I don’t see any reason to change our view of what we’ve seen since we made the assumption update in 2Q last year.

Operator: We have no further questions. I would like to hand the call back over to Yves Cormier for closing remarks.

Yves Cormier : Thank you, operator. This concludes today’s Q&A session. Should you have any remaining questions, please get in touch with us at the Investor Relations team. On behalf of Lard and Duncan, I would like to thank you for your attention. Thanks again, and have a good day.