Aegon, the Dutch insurer, reported a sharply lower second-quarter net profit on Thursday, hit by impairments, the weak US dollar and pound, lower investment income and losses on bond trading.
The company’s second quarter net profit fell to €276m – below analyst expectations – from €655m a year ago. Earnings per share dropped to €0.08 from €0.34 a year ago.
Aegon said impairments totalled €98m in the quarter, of which €57m was related to its US credit portfolio.
Shares in Aegon initially fell sharply but recovered slightly to trade 4.2 per cent lower at €7.91 in mid-morning trading in Amsterdam.
“Unfortunately the focus is on the mark-to-market volatility and I have to say I do have some sympathy for the people following us but that’s only for the short-term story,” Alex Wynaendts, chief executive, told the Financial Times. “Our business is about the long-term, that’s what we focus on.”
The company does not make annual profit forecasts and Mr Wynaendts said the uncertainty in markets made it even more difficult to make predictions. But Aegon is sticking to a series of financial targets unveiled in June including underlying earnings growth of at least 10 per cent per annum by 2012.
The insurer also noted that its underlying pre-tax earnings declined just 2 per cent in the quarter, excluding the effects of changes in exchange rates. The company made nearly 40 per cent of its revenues in the US in the quarter and has a significant UK business alongside its Dutch operations.
It also said the €57m in impairments in the US represented about 6 basis points of the portfolio value and as such was within the 25 to 30 basis point range it would expect to impair on annual basis under normal circumstances.
“It’s fair also to say that it’s non-linear and one hit could take you over the 30 basis points as well as we could stay under the 30 basis points,” Mr Wynaendts said. “The range of outcomes is becoming wider because of the uncertainty in markets.”
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