Aegon Swings to Quarterly Loss on Hedges, Sale of U.K. Unit

  • Insurer books 628 million euros loss on sale annuity portfolio
  • Aegon lost 378 million euros on interest rate hedges

Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., reported a loss of 385 million euros ($430 million) in the second quarter after the company sold its U.K. annuity business and interest-rate hedges backfired.

The insurer booked a 628 million-euro book loss on the sale of two-thirds of its British annuity portfolio to Rothesay Life Ltd., The Hague-based Aegon said in a statement on Thursday. Aegon had made a profit of 319 million euros in the same period a year earlier.

“We see the results as slightly disappointing due to the persistent high level of below-the-line charges and mounting pressure on the U.S. earnings power,” Matthias de Wit, an analyst at KBC Securities in Brussels, said in a note to clients. He has a hold rating on the stock.

The insurer, which gets two-thirds of its income from Transamerica, in January announced plans to lower expenses in the U.S. and the Netherlands by 200 million euros by 2018. Cost savings will help cover expenses incurred in changing its risk model. The Solvency II ratio, a measure of available capital compared to what’s required to meet obligations toward policyholders, rose to 158 percent from 155 percent at the end of the first quarter.

Aegon dropped as much as 4.1 percent in Amsterdam trading and was down 2.9 percent at 3.76 euros as of 9:51 a.m. The stock is down 28 percent this year, compared with an 18 percent decline in The Bloomberg Europe 500 Insurance Index.

“Aegon reported mixed results mainly due to disappointing operational results, while Solvency II and excess capital position improved, which were worrisome factors in the previous quarter,” SNS Securities analyst Marcell Houben said in a note on Thursday.

The insurer also agreed to acquire the Cofunds investment platform from Legal & General Group Plc for 140 million pounds ($182 million), Aegon said in a separate statement on Thursday. The company expects to make 60 million pounds of annual cost savings by using its technology and removing duplication.

Before it's here, it's on the Bloomberg Terminal.
LEARN MORE