UPDATE: Aegon Swings To 2Q Loss, To Raise EUR1 Billion To Repay Aid
August 13 2009 - 5:44AM
Dow Jones News
Dutch insurer Aegon NV (AGE) Thursday sprung an EUR1 billion
capital increase on the market to partially repay state aid by
year-end and reported a wider-than-expected swing to a
second-quarter loss, sending the company's stock price sharply
lower.
Chief Executive Alex Wynaendts declined at a news conference to
comment on the outlook for the rest of the year, citing market
uncertainties.
Wynaendts said Aegon will save EUR370 million by paying back
EUR1 billion of its state loans by the end of December. He added
that Aegon doesn't have plans to pay back early the remaining EUR2
billion of government loans extended to underpin the company's
capital base last October at the height of the global credit
crunch.
Aegon slid to a second-quarter net loss of EUR161 million from a
net profit of EUR276 million a year earlier, after taking a EUR385
million loss on the sale of a unit in Taiwan and EUR393 million of
charges in part related to investments in structured residential
mortgage assets in the Americas.
It said it expects a high level of impairments in the rest of
this year, too, though Wynaendts told a television interview that
it was difficult to say how high they will be.
Closely tracked underlying pretax profit before tax, which
excludes book losses and other extraordinary items, fell to EUR404
million from EUR596 million a year earlier.
Seven analysts surveyed by Dow Jones Newswires prior to
Thursday's news had on average expected Aegon to report a net loss
of EUR35.1 million, with underlying profit of EUR459 million.
Aegon provides life insurance, pensions and other long-term
savings and investment products. It has major operations in the
Netherlands, the U.S. and the U.K. and had just over EUR330 billion
in revenue-generating investments at the end of 2008.
The company's fundamental insurance business still appears hurt
by the economic downturn. Second-quarter revenue fell to EUR7.12
billion from EUR8.45 billion a year earlier.
Aegon was vague about its intentions for external growth. "Our
strategic focus remains on existing markets, but we will closely
watch acquisition opportunities if they seem interesting,"
Wynaendts said, adding he hasn't specific plans for acquisitions in
the rest of 2009 and hasn't set its acquisition budget for 2010
yet.
Analysts were perplexed by the decision to tap equity markets to
raise funds to pay down the state aid in light of the EUR3.5
billion of excess capital the company said it is holding. "It is
somewhat strange," analysts at KBC securities said in an investor
note. KBC, nonetheless, reaffirmed their accumulate recommendation
on the stock.
SNS Securities said it is disappointed that the company is
selling shares to pay down the debt instead of drawing down some of
its excess capital. "This might imply that management expect a
difficult second quarter and that given the equity issue today,
they do not expect the share price to be higher than the current
one."
Aegon's shares were down EUR0.37, or 6.4%, to EUR5.34 at 0845
GMT. In the year to date, the shares have gained 18%.
- By Bart Koster; Dow Jones Newswires; +31 20 571 5201; bart.koster@dowjones.com