Aegon posts Q3 loss, shares helped by solid business

* Third-quarter loss of 329 million euros

* 791 million euros in fair value items, impairments

* Shares supported by underlying business, capital base

(Adds CFO comment, share reaction)

AMSTERDAM (Reuters) - Dutch insurer Aegon (AEGN.AS), which is being backed up by 3 billion euros ($3.9 billion) in government capital, reported a steep quarterly loss but shares recovered as investors found signs of a stronger performance and balance sheet.

Aegon's third-quarter loss was 329 million euros, compared with a 541 million euros profit a year earlier. The loss was triggered by a 384 million euros in underperformance of investments and a 407 million euros impairment charge on corporate bonds, most of them stemming from failed U.S. financial institutions Washington Mutual and Lehman Brothers.

Belgian financial group KBC (KBC.BR) also made a loss of 906 million euros. [nL6430606]

Aegon's shares were flat at 4 euros amid volatile trade in Amsterdam at 0930 GMT. Shares initially fell, then rose by 5 percent in early trading. The DJ Stoxx Insurance Index .SXIP was down 3.9 percent.

"Aegon has been doing good in the past few days. They have a strong capital position and the underlying performance was good," said one Amsterdam-based trader.

Aegon has been freeing up capital in addition to the government capital funding, and is expected to have a capital base of around 6 billion euros by year-end.

Analyst Paul Beijsens at Theodoor Gilissen said that the value of new business pulled in by Aegon was also positive. Aegon's value of new business, which measures the income value of newly written insurance business, fell 12 percent to 206 million euros compared with a year earlier.

"That is fine and better than expected," Beijsens said.

Aegon had already released most details of its results on Oct 28, when it tapped into 3 billion euros of government funding to strengthen its capital base. It will have to repay the government at a premium, or pay a steep 8.5 percent interest rate. Aegon also scrapped its year-end dividend payment.

Shares in Aegon are down by more than a half since early September, when the global financial crisis deepened and triggered the nationalisation or capitalisation of financial companies by governments, but are up over 40 percent from 16-year lows just before the government capital injection.

"We are all affected by the turmoil," Aegon Chief Financial Officer Jos Streppel told a conference call. "Two months ago people were still talking about making use of the turmoil (for acquisitions). Today people are much more cautious on taking action."

Dutch banker and lender ING (ING.AS) also tapped into government funding, accepting 10 billion euros in October under similar terms to the government capitalisation deal with Aegon.

(Reporting by Reed Stevenson; Editing by Mike Nesbit)