Aegon Plots Path For Recovery

Posted on Mar 03, 2011 by Sergio Ulloa (G+)

Aegon, the troubled life insurer, has reported a year-on-year fall in net earnings during the fourth-quarter of 2010; earnings totaled €318 million (US$438 million) compared to €393 million (US$541 million) achieved in quarter four 2009. This represents a 19 percent decline in profitability for the 13 week reporting period, although underlying earnings before tax showed a 2 percent improvement. The Amsterdam based insurer received a government bailout loan in 2008 to prevent its collapse - along with many other companies in the financial sector worldwide. The company has been restructuring in order to get itself into a position to repay the loan, which is now targeted for completion in June 2011. Aegon has stated that it will issue new shares in order to raise capital to help repay the Dutch taxpayer, and is expected to issue an additional 173.6 million shares through the Amsterdam Stock Exchange - equating to approximately 10 percent of the value of the company - as part of the process for this action. Aegon expects the share issue to generate enough funds to repay the Dutch government €750 million (US$1.2 billion) depending on the underlying stock market trading conditions. Aegon has been struggling since the world financial markets crashed in 2007-2008 as a significant proportion of its business is conducted in the USA life insurance sector - where the life insurance market has been stagnant suffering from high levels of unemployment and a low level of growth in economic activity. Speaking on the results, Aegon's CEO, Alex Wynaendts, said "AEGON has delivered a strong set of results for the full year 2010. During the year, we have concentrated our efforts on executing a consistent strategy aimed at sharpening our focus on our core business, improving our risk-return profile and executing significant cost reduction programs. As a result of our efforts over the past years, Aegon is a different company today." As well as dealing with the tough trading conditions in recent years, Aegon has undertaken major restructuring within the group's multinational operations including the Transamerica and World Financial Group brands. Part of Aegon's restructuring has been to rationalize financial exposure in the suspect economies prevalent in Greece, Ireland and Portugal. By lowering risks in such markets, Aegon has put itself in a much stronger position to meet the challenges existing in its key markets - North America, the Netherlands and the UK. Aegon's financial results for 2010 include a €208 million (US$285 million) write-down for elimination of activities involved with the sale of executive life insurance programs through small business outlets and banks. Aegon has also indicated that the reinsurance arm Transamerica could be sold with the proceeds being used to repay the bailout loan. Aegon's strategy is to focus on improving growth and earnings within the insurer's core markets of life, pension and asset management. The Dutch insurer also plans to fully integrate its Asian business with a new management structure being put in place. Like most multinational insurers, a key element for future growth has been identified as the Asian region, with China, India and other South East Asian nations generating substantial new premium returns driven by the rapidly expanding wealth of the massive populations in these countries. Likewise the opportunities in the other region of exceptional growth - Latin America - will be exploited. Aegon has also stated that it will continue to stabilize its US operation implementing more efficiencies and optimizing its strong reputation in this mature market. The combination of these actions is planned to deliver a resumption of dividend payments in May 2012. Insurance Companies Mentioned: AEGON AEGON is present in more than 20 countries in the Americas, Europe and Asia, employing 28,000 people and serving more than 40 million customers. AEGON's ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably. AEGON products include life, pensions, life reinsurance, individual savings & retirement products. Transamerica Reinsurance Transamerica Reinsurance is a division of Transamerica Life Insurance Company, an AEGON company. It is one of the largest life reinsurers in the U.S., offering broad capabilities in risk, capital and expense managements to help companies improve the competitiveness and profitability of their life and annuity products. Transamerica Reinsurance supplies automatic and facultative reinsurance, product consulting and development and alternative underwriting solutions to more than 500 companies in North America, Asia-Pacific, Latin America and Europe.