UPDATE 1-Aegon warning on accounting changes stokes investor concerns

Thu Aug 14, 2014 7:30am EDT

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Aug 14 (Reuters) - Dutch insurer Aegon NV said it would make changes to its accounting models and expected to set aside more money to take account of U.S. mortality rates, which analysts said could hit third-quarter earnings.

The firm made the announcement after it reported a forecast-beating 7 percent rise in underlying earnings before tax to 514 million euros ($686.8 million) in the second quarter, above a 505-million-euro average expectation in a Reuters poll of analysts.

The company said second-quarter results were boosted by investment gains but negatively affected by accounting model changes at its Dutch and U.S. businesses.

"Aegon will implement further model updates in the third quarter of 2014," it said, adding it expected to make more conservative assumptions about mortality rates in the United States in a review of that business in the period.

Aegon's shares fell as much as 4.5 percent and were down 3 percent by 1040 GMT, lagging a 0.3 percent drop in the STOXX Europe 600 insurance index.

"The group warns that third-quarter numbers will be impacted by 'model updates' and a revision of its U.S. mortality assumptions," KBC analyst Matthias De Wit said in a note to clients.

Societe Generale analyst Nick Holmes said the announced interim dividend of 11 cents per share had also rankled.

"The market seems to have focused on Aegon's flat dividend as disappointing," Holmes said in a research note, adding that the insurer's management had made clear the interim dividend should not be seen as a leading indicator.

Aegon Chief Executive Alex Wynaendts told a conference call: "We want to have a dividend that is sustainably growing."

Wynaendts also said he did not expect further fallout after Britain's Financial Conduct Authority imposed an 8.3 million pound ($13.8 million) fine on Aegon unit Stonebridge International Insurance for failing to treat up to half a million customers across Europe fairly over sales of accident insurance.

"We are making sure that in no other place in our business - and we are reviewing it very thoroughly - there is anything similar," he said.

"The fine ... should close this whole file and we are not expecting anything further from here," he added.

Aegon is expanding its joint-venture with Spain's Banco Santander to include Portugal but said it may take some time to roll out its offer of insurance products to the lender's 2 million customers there.

"It's a very under-penetrated customer base," Wynaendts said.

Aegon also said gross deposits rose 3 percent to 13 billion euros in the second quarter, while the return on equity rose to 8.8 percent.

($1 = 0.7484 euros; $1 = 0.5996 British pounds) (Reporting by Jonathan Gould in Frankfurt and Roshni Menon in Bangalore; Editing by Thomas Atkins and Pravin Char)

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