By Maarten van Tartwijk
AMSTERDAM--Dutch life insurance and pension company Aegon NV
(AGN.AE) Thursday became the latest European insurer to post solid
second-quarter earnings, but it pledged to sit on its growing cash
pile to protect itself against the tough market climate.
Aegon reported a 37% drop in net profit to 254 million euros
($314 million) mainly because of a charge of EUR265 million to
compensate unit-linked policyholders in the Netherlands. Excluding
the charge and some other exceptional items, profits rose 10% to
EUR443 million, beating market expectations.
Earnings got a boost from a 27% rise in sales to EUR1.6 billion,
while they were also helped by cost savings and the stronger
dollar. Aegon generates over two-thirds of its profits in the U.S.,
where it owns Transamerica Corp.
Chief Executive Alex Wynaendts said Aegon managed to squeeze out
"a strong set of results," despite the uncertain market
environment.
The European insurance industry is groaning under historically
low interest rates and ongoing volatility in financial markets. A
cloudy economic outlook and stricter regulations are also causing
headaches.
But earnings reports of some of Aegon's rivals suggest that the
industry is well-placed to cope with the turmoil. Last week,
Germany's Allianz SE (ALV.XE), Europe's largest insurer by market
value and premium income, was one of the star performers of the
industry, posting a 39% increase in first-half net profit to
EUR2.61 billion. And France's Axa, Europe's No. 2 insurer by market
value, also reported strong earnings.
Aegon last year fully repaid the government bailout it received
in 2008, when its finances were hit by investment losses. After
cutting the government lifeline, it is allowed to make acquisitions
again and pay dividends.
But apart from offering shareholders a EUR0.10-a-share interim
dividend, Aegon said it will continue to sit on its cash pile. By
the end of June, the buffer was EUR1.6 billion, from EUR1.4 billion
in the first quarter and more than twice as large as its target of
at least EUR750 million.
Some analysts suggest that it could put its excess capital to
better use.
"Aegon is one of the strongest capitalized companies in the
European insurance sector. [It] can use this strong capital
position to grow business and gain market share," Cheuvreux analyst
Hans Pluijgers said in a note.
Mr. Wynaendts signaled little appetite for acquisitions,
however. "Maintaining a strong capital position is essential," he
told a conference call.
Mr. Wynaendts said Aegon currently invests some of its excess
capital in safe-haven government debt, despite the thin returns.
"That's a price we're willing to pay. It's the right thing to do
now," he said.
At 0930 GMT, Aegon shares traded 5.3% higher at EUR4.23, the
biggest riser in Amsterdam's AEX market. The stock has gained
around 36% since the start of this year.
-Write to Maarten van Tartwijk at
maarten.vantartwijk@dowjones.com
Subscribe to WSJ: http://online.wsj.com?mod=djnwires