American division Aegon pulls down half-year figures

American division Aegon pulls down half-year figures

14 September 2020Reading time: 3 minutes

Aegon's first half-year results turned out to be significantly lower than previously expected by analysts. Especially in the United States the COVID-19 virus resulted in drastically lower profits for the insurer. Because of these disappointing results, Aegon has decided to cut down on its dividend and has withdrawn its financial targets for this year. Investors did not react positively at all.

In the first half-year of 2020 Aegon’s net profit amounted EUR 202 million, which is 67 percent less compared to the same period last year. The underlying result, excluding one-off items, was 31 percent lower year-on-year at EUR 700 million. The return on equity also dropped from 9.6 to 6.5 percent and the Solvency II ratio declined, due to adverse market influences, from 201 to 195 percent. 

Sharp profit drop US

In particular Aegon's activities in the United States, which operate under the name Transamerica, were severely affected by the effects of COVID-19. Partly due to the coronavirus , American death rates have increased significantly in a short period of time. The insurance company expects that this development will not change any time soon, due to the amount of new infections in the US. 

The corona crisis also resulted in lower interest rates in the US, which is a unfavourable development for Aegon. The American market currently accounts for approximately two-thirds of Aegon's total sales.

Aegon’s Dutch and British results did not change due to the corona crisis, according to the insurance company. The insurer does see a decline in the sales of life insurance policies, particularly in the Netherlands, because these are no longer mandatory when taking out a mortgage.

Lowered dividends

Earlier this year CEO Lard Friese explained that Aegon will do everything it can to return to its former financial level. The departure of the insurance company from certain countries is not excluded. The board also admits that calculations were made with far too optimistic assumptions for the American market. The downward revision of these assumptions and in particular the expectations for interest rates in the US, resulted in an additional loss of EUR 1 billion in the second quarter of this year.

As a result of the disappointing half-year figures, the insurance company has decided to cut down on its dividends. The final dividend for 2019 will be skipped and the interim dividend for this year will be reduced by 60 percent to EUR 0.06 per share. Aegon wants to use this extra capital to reduce its debt position with USD 500 million.

Aegon has also withdrawn its financial targets for this year. The insurance company will present its new strategy and targets in December 2020.

Stock price development

The publication of the half-year results mid-August also had an impact on the stock market, with a considerable decline Aegon’s share price. Since then the stock price has not been able to recover and is currently (07-09-2020) standing at EUR 2.32.

The future price of the stock is subject to several political, industrial and sector specific as well as economic factors. Investors should consider these risks when making their investment decisions. Developments can be different at any time than investors anticipated on, which could result in capital losses.

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26/11/2020 08:38:16