February 13, 2020 / 9:15 AM / 13 days ago

UPDATE 1-Dutch-based insurer Aegon's shares dive after weak earnings

* Shares fall 9%, down 20% in past year

* Weak earnings buck trend among US life insurers

* Departing CEO says low rate environment challenging (Updates after shares fall. Adds quote, details.)

By Toby Sterling

AMSTERDAM, Feb 13 (Reuters) - Dutch-based insurer Aegon on Thursday reported a bigger than expected fall in underlying pretax profit for the second half of 2019, prompting a sell-off in its shares.

The miss by the company, which does most of its business in the United States under the Transamerica brand, follows first-half earnings that also disappointed investors with a worse-than-expected solvency ratio.

The measure is closely watched as an indicator of an insurer’s ability to return cash to investors.

Shares fell 9% to 3.62 euros at 0910 GMT, increasing their loss over the past 12 months to around 20%, compared with a 17 percent rise for the benchmark Amsterdam AEX index.

Major U.S. life insurers including MetLife and Prudential reported better than expected fourth quarter earnings earlier this month.

Aegon said second half pretax profit was 963 million euros ($1.05 billion), down from 1.01 billion euros in the same period a year earlier, hurt by low interest rates and outflows from its U.S. retirement and annuity business.

A company-compiled analysts poll had put the 2019 figure at 997 million euros. The company’s solvency under Europe’s Solvency II regime stood at 201%, up 4 percentage points from the end of June but below analysts’ average estimates of 211%.

Departing CEO Alex Wynaendts said the company had faced a “challenging environment” in the second half. He is stepping down in April to be replaced by Lard Friese, the former boss of larger Dutch rival NN Group.

“In a turbulent first half of 2019, market movements had a negative impact on the capital position in the Netherlands,” Wynaendts said in a statement.

“Underlying earnings before tax were slightly lower as a result of outflows in our fee businesses in the United States and increased investments to support growth and improve customer experience.”

Analyst Ashik Musaddi of JPMorgan Cazenove said the company’s solvency was worse than expected. He described the company’s capital position as adequate.

“We do not see any room for share buybacks in the coming two to three years,” he said in a note.

“We are left with the dividend yield, which although is ahead of the sector average, given the uncertainty around interest rates, we are Neutral on Aegon.”

Aegon declared a 2019 dividend of 0.31 euros per share, up 7% from 0.29 euros in 2018. ($1 = 0.9200 euros) (Reporting by Toby Sterling and Carolyn Cohn; Editing by Muralikumar Anantharaman and Barbara Lewis)

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