The Dutch insurer Aegon
came Thursday morning with poor half-year results. Operating profit fell more sharply than expected by 31 percent to 700 million euros. Net profit even tumbled by two thirds to 202 million euros due to depreciation. The share plummets by 15 percent.
Jason Kalamboussis, a KBC Securities analyst, says the numbers are bad, but not dramatic. He is not too negative about the write-offs he calls the ‘cleaning up of the Augias stables’. ‘We knew that Aegon needed to clean up these stables. That is now being addressed. In the US, the assumptions about interest rates have been adjusted (now Aegon assumes a lower long-term interest rate, ed.) In these results. In addition, the overly optimistic expectations about the average American life expectancy have been adjusted. ‘ The analyst thinks that in other countries the assumptions will be adjusted in the second half of the year. “This is not ready yet,” he warns.
Kalamboussis says the new CEO Lard Friese is taking steps in the right direction. Over the past 20 years, Aegon has fared worse than the industry because it was unable to do what it takes. The new CEO shows that he wants to take strategic steps to make Aegon a more stable company. He wants to reduce the group’s sensitivity to US interest rates, better management, a departure from non-core countries and a lower debt. ‘
The insurer cuts the dividend. Aegon had already canceled the proposed final dividend for the 2019 fiscal year – 16 cents per share – this spring. The advance dividend has now also been cut, dropping from 15 to 6 cents.
The dividend cut is not a bad thing, according to the analyst. ‘Frisian wants to reduce the debt and not spend money that is not there. I think in two years ‘time we will see a company that is much less volatile.’
Kalamboussis says he is looking forward to more details on the strategy at the investor day in December. The analyst says headwinds remain, but Aegon is making “significant” progress. He currently uses a ‘keep’ advice.
The stock market blow from Aegon hits the other European insurers, which are on average 1.2 percent lower. In Brussels, Ageas lost 0.7 percent.