Aegon expects fourth quarter loss, but measures will help counter crisis

February 16, 2009

Aegon expects a net loss for the fourth quarter of EUR 1.2 billion due to continued turmoil in the world financial markets. But, the measures the company is taking will help counter the effects of the global crisis on its businesses.

These measures include a scaling-back of Aegon’s institutional markets operations in the United States.

According to preliminary figures released today, Aegon estimates a net loss for the final three months of 2008 of some EUR 1.2 billion. Underlying earnings before tax are meanwhile expected to show a loss of approximately EUR 200 million.

Despite the losses, Aegon’s core businesses remain healthy: new life sales during the quarter amounted to EUR 600 million, while total gross deposits reached EUR 12 billion – thanks, in part, to another sharp rise in fixed annuity sales. Net deposits reached EUR 1.7 billion.

Aegon’s capital position also remains strong: at the end of December, the company had more than EUR 9 billion in core capital – a surplus, above AA rating requirements, of EUR 2.9 billion. Complete fourth quarter and full-year results will be published, as scheduled, on March 12.

In response to the global financial crisis, Aegon is pushing through a program aimed at reducing risk, lowering costs and releasing more capital from the company’s businesses.

Last year, Aegon freed up a total of EUR 1.7 billion in additional capital – EUR 1.0 billion in the fourth quarter alone. Another EUR 1.5 billion is expected in 2009. These measures – alongside the EUR 3 billion the company received last year from the Dutch State – will provide an important safeguard against any further declines in financial markets. 

Euro 150 million cost savings

Aegon is also on track to deliver around EUR 150 million in cost savings this year – primarily the result of business restructuring at the company’s main operations in the United States, the Netherlands and the United Kingdom.

Alongside the preliminary figures, Aegon also announced it will be scaling back business at its Institutional Markets Division, based in Louisville, Kentucky. Opportunities to write profitable business in the US institutional markets have dried up in recent months because of the financial crisis, and over the next two years Aegon will reduce spread-based balances at IMD by around EUR 14 billion. Aegon expects the move will release approximately EUR 600 million in capital over the same period, and significantly lower the company’s overall credit risk.