Aegon shares rise as UBS upgrades stock to ‘buy’, citing capital return potential

Investing.com — Shares of Aegon (AS:) inched up on Tuesday after UBS upgraded its rating on the stock to “buy” from “neutral.” 

The revision comes as UBS analysts expressed optimism about the company’s capital return potential, particularly in light of upcoming share buybacks. 

“We expect Aegon to continue to execute share buybacks over the long-term (UBSe: €300m recurring share buybacks from 2025 onwards),” said analysts at UBS, which would provide an all-in yield of around 9%, in line with Dutch peers but above the broader sector average​.

The brokerage also suggested that there is room for a special buyback program worth around €100 million, which could be announced as soon as the company’s third-quarter results are released on November 15. 

This program would build upon the current €200 million buyback, which is expected to conclude by mid-December.

UBS pointed out that Aegon has flexibility with its excess capital, particularly its stake in ASR, a Dutch insurer in which Aegon holds a 30% share. 

If no compelling deal opportunities arise, Aegon could return this capital to shareholders. 

However, UBS was cautious about a potential sale of the ASR stake to fund a buyback, noting that it might not be accretive based on current valuations.

The potential de-risking of Aegon’s non-core U.S. assets was also highlighted as a factor that could unlock additional shareholder value. 

UBS noted that while U.S. interest rates are lower, which might dampen the valuations of these assets, any move to reduce risk could act as a positive catalyst.

UBS lowered its price target for Aegon slightly to €6.55 from €6.65 due to a downward revision in the valuation of both the ASR stake and U.S. non-core assets. 

Despite this, the analysts remain bullish on Aegon’s long-term prospects and capital return strategy, leading them to recommend buying the stock​.