Aegon Has Fourth Straight Quarterly Profit as Asset Impairments Decline
Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., reported a fourth consecutive quarterly profit as asset writedowns dropped and the rising dollar boosted the value of earnings from its main market.
The insurer fell as much as 3.5 percent in Amsterdam trading after saying the capital in excess of what it needs for Standard & Poor’s AA credit rating declined from the end of last year because of tougher reserve requirements, particularly for bond holdings.
Aegon got 3 billion euros in aid from the Dutch state in 2008 and repaid a third of the money in November. The insurer aims to repay the rest as soon as it’s feasible and responsible to do so, Chief Executive Officer Alex Wynaendts repeated today on a call with reporters. Second-quarter net income was 413 million euros ($532 million), compared with a 161 million-euro loss a year earlier, The Hague-based Aegon said in a statement.
“The decline in excess capital is unfortunate given the repayment obligation towards the Dutch state,” Albert Ploegh, an Amsterdam-based analyst at ING Groep NV, wrote in a note to investors today.
The amount of capital the company has above what S&P requires declined by 700 million euros to 3 billion euros, Aegon said.
The stock slid 15 cents, or 3.4 percent, to 4.38 euros by 10:12 a.m. in Amsterdam. Aegon has declined 3.6 percent this year, valuing the company, whose Pyramid building looms over San Francisco’s financial district, at 7.6 billion euros. That compares with a 1.5 percent decline in the 33-member Stoxx Insurance 600 Index in the period.
Lower Impairments
The insurer’s second-quarter underlying pretax profit, which excludes investment swings, rose to 522 million euros from 415 million euros.
Aegon may sell shares to pay back the rest of the state aid, the Dutch newspaper Het Financieele Dagblad reported Aug. 5, citing analysts. Wynaendts declined to comment on the report. The company said today it expects a decision from the European Commission “soon” on whether or not a viability plan it had to submit after receiving state aid will be approved.
Aegon, which built its U.S. business with takeovers including the 1999 purchase of San Francisco-based Transamerica, aims to reduce its reliance on the country by expanding in faster-growing markets. The insurer posted a 437 million-euro profit excluding some items in the Americas. Asset impairments shrank to 77 million euros from 394 million euros.
“Impairments in our investment portfolio continued their downward trend, reaching their lowest level in two years,” Wynaendts said in the statement.
Transamerica Re
European insurers, including Paris-based Axa SA, are cutting business in developed markets to fund expansion in faster-growing regions such as Asia. Aegon, whose origins date to 1759, said on June 22 it may consider selling its Transamerica Reinsurance unit and plans to cut costs in the U.K., increase the return on capital and withdraw from the country’s bulk annuities market.
Aegon is receiving the level of interest in Transamerica Re that it expected, from both strategic and financial buyers, Wynaendts said.
U.S. rival MetLife Inc., the country’s biggest life insurer, swung to a profit in the second quarter as revenue rose and the company booked an investment gain on derivatives. Prudential Financial Inc., the No. 2 U.S. life insurer, reported its fourth-straight profit increase Aug. 4 as investment results improved.
To contact the reporter on this story: Martijn van der Starre in Amsterdam at vanderstarre@bloomberg.net; Maud van Gaal in Amsterdam at mvangaal@bloomberg.net
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