Delta Lloyd NV fell the most on record after interest-rate hedging and declines in bonds spurred a first-half loss, raising concern the Dutch insurer may need to raise capital.
The shares fell 20 percent to 13.17 euros at 5:30 p.m. in Amsterdam, the biggest drop since an initial public offering in 2009 and wiping 748 million euros off its market value. Delta Lloyd said on Tuesday it made a loss of 533 million euros ($588 million) after a profit of 295 million euros a year earlier.
Chief Executive Officer Hans van der Noordaa, who took over in January, is seeking to bolster the company’s balance sheet as it prepares for stricter capital rules next year, known as Solvency II. The first-half result comes a week after chief financial officer Emiel Roozen and supervisory board chairman Jean Frijns said they were stepping down over the firm’s mis-use of central-bank information for trading purposes in 2012.
“We believe Delta Lloyd has to take more action to increase the solvency level,” Cor Kluis, an analyst at Rabobank, said in a report on the earnings to clients. “We cannot exclude that they will do an equity raise.”
The group solvency ratio, a measure of available capital compared to that required to meet obligations toward policyholders, fell to 179 percent at the end of June from 183 percent at the end of last year, the company said.
Delta Lloyd strengthened its capital in March, raising 338 million euros by selling 19.9 million new shares at 17 euros apiece.
Van der Noordaa said “enormous market volatility” had a substantial negative impact on first-half earnings. He didn’t provide further details on a conference call with journalists. Delta Lloyd makes about two-thirds of its revenue from life insurance, which requires the company to invest capital in assets such as bonds and shares to pay policyholders.
As part of an effort to more easily meet Solvency II requirements, Delta Lloyd also completed a second longevity swap with Reinsurance Group of America on June 26, protecting liabilities of 12 billion euros from the risk of pensioners living longer than expected.
“We know they’re walking a thin line on capital, and now they’re falling over it a bit,” said JanWillem Knoll, an analyst at ABN Amro Bank NV in Amsterdam, who has a buy rating on the stock.