Aegon Expects Lower Interest Rates in U.S. to Decrease Profit Through 2011

Aegon NV, the bailed-out Dutch insurer and owner of Transamerica Corp., said a slide in interest rates in the U.S. may reduce earnings next year.

The company expects a “negative impact” of $20 million pretax each quarter, Chief Executive Officer Alex Wynaendts said yesterday at an investor conference in New York. “Most of Aegon’s interest-rate exposures are in the U.S.”

Aegon is seeking to reduce reliance on the U.S. by expanding in faster-growing markets such as China and India. Insurers, which invest premiums in fixed-income securities before paying claims, are facing lower returns on new holdings amid monetary easing by the Federal Reserve and the decline in bond yields this year. The yield on 10-year Treasuries fell to 3.13 percent yesterday from 3.84 percent on Dec. 31.

“We felt our exposure to the credit market in the U.S. was too big,” Wynaendts said. “We want to reduce our exposure to financial markets.”

MetLife Inc., the biggest U.S. life insurer, said in September that lower rates would hurt profit.

Wynaendts is cutting costs at Aegon’s U.K. life and pension operations to boost return on capital. Aegon is reorganizing Asian businesses and named Douglas Henck CEO of the region, working out of Hong Kong. In the U.S., Wynaendts is considering selling Aegon’s Transamerica Reinsurance unit.

“We’re pleased by the strong interest,” Wynaendts said of efforts to find a buyer for the life reinsurer. “When we have something more specific to share with you, I will do so.”

Aegon took 3 billion euros ($4 billion) of aid from the Dutch state in 2008. Repaying the state by the end of June “remains a priority,” Wynaendts said. The company still owes 1.5 billion euros.

To contact the reporters on this story: Andrew Frye in New York at afrye@bloomberg.net; Jurjen van de Pol in Amsterdam at jvandepol@bloomberg.net.

To contact the editors responsible for this story: John Fraher at jfraher@bloomberg.net; Dan Kraut at dkraut2@bloomberg.net.

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