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UPDATE 3-Aegon wary on economic challenges as Q2 profit falls
August 11, 2011 / 6:40 AM / 6 years ago

UPDATE 3-Aegon wary on economic challenges as Q2 profit falls

* Q2 sales down 7 pct at constant currencies

* Q2 underlying pretax profit 401 mln euros, vs 417 mln poll

* Q2 net profit 404 mln euros, vs 313 mln in poll

* Says economic environment poses considerable challenges

* Shares down 7.5 percent, underperform sector index

(Adds CEO comments, details, updates shares)

By Aaron Gray-Block

AMSTERDAM, Aug 11 (Reuters) - Aegon missed second quarter core profit forecasts, hit by dwindling sales and currency fluctuations, and warned that heightened economic uncertainty could affect growth.

Investors said they were disappointed there was no turnaround from a weak first quarter and marked down the Dutch insurer’s shares by 9 percent.

The company posted a 17 percent drop in underlying earnings before tax to 401 million euros ($569 million), below a forecast for 417 million in a Reuters poll.

Sales at constant currencies were down 7 percent and off 15 percent on an adjusted basis, reflecting the strength of the euro.

“After the weak first quarter which was hurt by the longevity accounting impact, the market hoped for better earnings, so this is not enough,” Rabo Securities analysts said.

Chief executive Alex Wynaendts said the economic environment posed “considerable challenges”, and it was too early to predict how this would affect Aegon’s long-term 2015 growth targets.

“We should not be looking at short-term volatility, although it is clearly of a significant impact on the market, to see how this will affect our targets,” Wynaendts said.

Despite worries over France’s credit rating and S&P’s downgrade of U.S. debt last week, Wynaendts said Aegon is not yet planning to reduce its 2.7 billion euro exposure to U.S. Treasuries or the 2 billion euros it holds in French bonds.

REDUCED EXPOSURE

Aegon has reduced its exposure to peripheral euro zone sovereign debt to 866 million euros from about 1 billion euros and might look to buy peripheral debt if opportunities arise.

Aegon received 3 billion euros in state aid in the 2008 financial crisis and repaid the state in full in June, the first bailed-out Dutch firm to do so.

Aegon shares fell 9 percent to 2.70 euros at 1202 GMT, well below the Stoxx European Insurers index off 1.6 percent.

Aegon’s results were hit by a 44 million euro negative currency impact, higher provisioning for longer life expectancy in the Netherlands (23 million euros) and a 14 million euro charge to compensate customers who were found by regulators to have overpaid for British products.

By contrast, Zurich Financial Services on Thursday boosted its shares by beating expectations and saying it would maintain its “attractive and sustainable” dividend policy.

Wynaendts said that while it was “very difficult to see where the world is going” and the outlook for the U.S. dollar was murky, Aegon was well positioned after cutting its exposure to equity and credit markets and interest rate risks.

Aegon’s net profit of 404 million euros beat a forecast of 313 million, and was lifted by 204 million euros in investment gains, after it sold stocks and bought bonds in the Netherlands.

Aegon unveiled several new growth targets in February, such as aiming to lift underlying earnings before tax by 7-10 percent a year on average, from 2010-15.

Wynaendts said Aegon could achieve its targets by organic growth, but would also look for deals. Previously he had said Aegon was interested in Spanish savings banks, and in expanding in Central and Eastern Europe, Asia and Latin America. (Editing by David Cowell)

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