28 May 2018Reading time: 3 minutes
Aegon is financially stronger than it was a year ago. The insurance company especially benefited from the American tax reform but at the same time also suffered from the weak dollar. Now it seems that the American currency is recovering, this could affect the financial performance of Aegon.

Early February Aegon presented their fourth quarter results of 2017. Due to the tax reform in the United States resulting in a one-time tax benefit, the net profit doubled on an annual basis to EUR 986 million. However, the underlying results decreased over de same period with 5% tot EUR 525 million, as a result of the weak dollar and less soled damage and additional health insurances. Furthermore the solvency ratio of Aegon improved during the last quarter of 2017 with 6 basis points to 201%. The dividend throughout 2017 came out at EUR 0,27 per stock, which is 4% more compared to 2016. This is the sixth year in a row that Aegon adjusts their dividend upwards.

Early April Aegon finished the sale of their Irish activities. According to the insurance company the transaction is expected to yield EUR 195 million, which would still result in an accounting loss of EUR 95 million. Due to the sale the solvability of Aegon could improve with 4 percentage points. Analysts assume that Aegon will disinvest more in the coming period in order to further strengthen their financial position.

Meanwhile Aegon is slowly entering the market of coco’s (contingent convertibles). These are also known as buffer bonds and look a lot like the traditional convertible bonds. A coco is the most risk-weighted debt paper that financial institutions can issue and in case of an emergency can convert into stocks. During the shareholders meeting in April, Aegon has asked for permission to emit new shares when the need arise to issue a coco. The market for coco’s which are issued by insurance companies is relatively new. At the moment of writing only three insurance companies have issued these special bonds. It remains to be seen if and when the debt papers will be issued. In May Aegon also announced that it will pay-off its everlasting EUR 200 million bond and a coupon discount of 6% on July 23.

After the fourth quarter results the stock price of Aegon rose steady to a provisional all-time high of EUR 6.13 (23.04.2018). However, during the past weeks the stock price plummeted to its current level of EUR 5.62 (25.05.2018). The future price of the share is subject to several political, industrial and sector specific as well as economic factors. Investors should consider such risk when making their investment decisions. Developments can be different at any time than investors expect, which can result in capital losses.

Vontobel products on Aegon are tradable at DEGIRO.

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18/02/2020 18:03:27