Spruce Point Capital Management Announces Investment Opinion: Releases Report and Strong Sell Research Opinion on Aegon Ltd. (NYSE: AEG, Euronext: AGN)

NOTE TO EDITORS: The Following is an Investment Opinion Issued by Spruce Point Capital Management

Illustrates Why We Believe World Financial Group Operates an Aggressive Multi-Level-Marketing Business but Has Faced Allegations of Being a Pyramid Scheme

Provides Evidence of FTC "Warning Signs" Such as Aggressive Claims in Their Recruiting and Sales Tactics

Questions Management's Choice to Rely on Indexed-Universal Life Insurance Sales for Growth

Expresses Concerns Over an Upstart Competitor Founded by One of World Financial Group's Former Top Producing Agents and the Impact It Could Have On World Financial Group's Recruiting Goals

Estimates That a Sum-of-Parts Illustrative Valuation of Aegon's Business Suggests That the Share Price Could Be Overvalued and Have 25% – 50% Potential Long-Term Downside Risk

Spruce Point Capital Management, LLC ("Spruce Point" or "we" or "us"), a New York-based investment management firm that focuses on forensic research and short-selling, today issued a detailed report entitled, "Insuring Against An Aggressive MLM", that outlines why we believe and estimate that shares of Aegon Ltd. (NYSE:AEG, Euronext: AGN)) ("Aegon" or the "Company") face up to 25% – 50% potential long-term downside risk, or €2.99 – €4.67 ($3.14 – $4.91) per share. Download and view the report and its Full Legal Disclaimer by visiting www.SprucePointCap.com for additional information and exclusive updates.

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Spruce Point Report Overview

Aegon is a global financial services company specializing in life insurance, pensions, and asset management. The Company offers a range of financial products and services for both individuals and businesses, including retirement planning, investment solutions, employee benefits, and life insurance policies. Founded in the Netherlands, Aegon operates in over 20 countries, including the United States, where it operates under the World Financial Group ("WFG") and Transamerica brands. Through its WFG brand, the Company distributes life insurance products to low and middle-income households across North America. As of the trailing 12 months ended June 30, 2024, the Company reported €18,641 million and €1,471 million of revenues and operating income, respectively.

The concerns we outline in our report include:

• We believe that WFG generates a significant portion of Aegon's results and that WFG is operating an aggressive multi-level-marketing ("MLM") business that exposes Aegon to risk.
  • A recent lawsuit alleges that WFG operates as an MLM, with one case going so far as to allege it is a "massive pyramid scheme". In response, WFG even recently addressed concerns about the legitimacy of its business to dispel the notion that it is a pyramid scheme on its website.
  • MLM business models are fraught with risk and frequently fail due to recruitment pressures to sustain growth and high agent turnover.
  • While MLMs are legal, pyramid schemes are not. The Federal Trade Commission ("FTC") provides warning signs to look for in identifying a pyramid scheme such as extravagant promises made by promoters about earnings potential, encouragement to buy the products, and playing on emotions or using high pressure tactics.
  • We estimate that WFG may be responsible for generating as much as 35% of Aegon America's operating income, equating to roughly 25% of Aegon's consolidated operating income.
    
    
    
    
• Our research found evidence of high-pressure tactics and failure to highlight product downside risks, which is consistent with some recent FTC complaints uncovered from a Freedom of Information Act ("FOIA") request.
  • FTC complaints document a range of concerns such as high-pressure tactics, higher ups getting paid bonuses to recruit, failure to highlight product downside risks, and cult-like behavior. In our research process, we sent someone through the recruitment process who was told, "our biggest product is this business opportunity here. And of course, if you take advantage of the business opportunity, the first thing you want to do is put the mask on yourself. And take advantage of the products that we have to offer."
  • Moreover, WFG is highly dependent on the sale of Index Universal Life ("IUL") policies, which we estimate are 60%-70% of its new life product sales. IULs have come under fire as controversial insurance products due to their complexity and high fees, which makes them incredibly difficult for the average person to understand. WFG recruiters used highly aggressive language by making claims about IULs such as "…Because there's a guarantee that you won't lose any money," and "…It works as an investment on steroids. You get up to 13, 14, sometimes 20, 25, 30% interest," and "I-U-L remember, I told you to write down index universal life. If you can qualify for that baby, your future is brighter than the sun. You need sunglasses to see your future because it's so bright."
  • The recruiter also provided illustrations that indicated monthly earnings potential of $4,320 through four sales per month, when in reality agents make just 0.4 sales per month and the average agent makes approximately $6,500 per year, which does not include costs. The recruiter also used emotionally charged language suggesting that they were "at war" against financial issues, while multiple Elite Circle groups for higher level agents make use of questionable military and ideological symbolism in training programs.
  • Ultimately, we believe WFG is an aggressive MLM, and we call for WFG to implement more conservative practices and better oversight of agents to dispel allegations in the market that it is a pyramid scheme.
    
    
    
    
• We believe an upstart competitor founded by one of WFG's former top producers may pose a threat to WFG's recruiting goals.
  • Global Financial Impact ("GFI") is a financial services platform recently founded by Eric Olson, who was at one point among WFG's top three producing agents. In roughly a year, GFI claims to have signed 26K new agents, with some being long-tenured top producers for WFG. By comparison, WFG aims to grow its agent force from ~82K today, to 110K by 2027. However, we believe GFI's early momentum may act as a major headwind to this goal.
  • In fact, the number of WFG multi-ticket agents declined on a sequential basis in Q3'24, which could be an indicator that Olson's GFI is having an impact. Moreover, website traffic data from Similarweb indicates that GFI has strong momentum year-to-date while WFG's traffic data has been declining.
    
    
    
    
• We believe Aegon's sell-side analysis do not properly account for the structural risks that exist in the Company's North American WFG business.
  • Furthermore, with analysts projecting just 7% upside to consensus price targets, we do not believe there is a favorable risk / reward in owning shares given elevated regulatory risks for MLMs and growing competitive forces. Based on our sum-of-parts potential valuation, we estimate a long-term share price range of approximately €2.99 – €4.67 ($3.14 – $4.91) per share (25% – 50% downside risk).
  • We expect Aegon to underperform the insurance sector along with the broader equity market.

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Please note that the items summarized in this press release are expanded upon and supported with data, public filings and records, and images in Spruce Point's full report. As a reminder, our full report, along with its investment disclaimers, can be downloaded and viewed at www.SprucePointCap.com.

As disclosed, Spruce Point and/or its clients have a short position in Aegon Ltd. (NYSE:AEG, Euronext: AGN)) and owns derivative securities that stand to net benefit if its share price falls. Following publication of the report, we intend to continue transacting in the securities covered therein, and we may be long, short, or neutral at any time hereafter regardless of our initial opinion. For additional important information, please review the "Full Legal Disclaimer" contained in the report.

About Spruce Point

Spruce Point Capital Management, LLC is a forensic fundamentally-oriented investment manager that focuses on short-selling, value and special situation investment opportunities.

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