Aegon CEO: Sales Rise but Canadian Deal Leads to Third-Quarter Loss
November 13, 2015 by David Pilla, international editor, BestWeek: David.Pilla@ambest.com
THE HAGUE, Netherlands – Charges related to the sale of its Canadian business was the main factor in Aegon NV’s third-quarter net loss, along with a negative impact from actuarial assumption changes.
“What we’re seeing in the third quarter is that on the one hand our earnings have been impacted by assumption changes, and on the other hand we see a continuation of the strong growth of our business in each of our key priority markets,” said Chief Executive Officer Alex Wynaendts in a video statement.
The life insurer and asset manager reported a third-quarter net loss of €524 million (US$563.5 million), compared with net income of €52 million in the third quarter of 2014. Overall sales for the quarter rose 12% to €2.60 billion from €2.33 billion.
Charges of €950 million came from a book loss on the sale of Canadian activities and actuarial model updates. “We announced the sale of our Canadian business, which is a low-return business, last year, and we closed the transaction in this third quarter,” said Wynaendts in the video.
In July, Aegon closed the sale of its Canadian life insurance unit to Wilton Re, a Nova Scotia-based insurance and reinsurance group (Best’s News Service, July 31, 2015). In the all-cash deal, Wilton Re acquired Aegon USA’s Canadian operations, including Transamerica Life Canada and Canadian Premier Life Insurance Co., for C$600 million (US$462.2 million). Aegon said the transaction will result in a book loss of C$1.2 billion, which will be booked in the third quarter of 2015. Aegon has earmarked the proceeds for the redemption of the US$500 million senior bond, due in December.
Life insurance actuarial assumption changes in the Americas and Asia led to third-quarter charges of €204 million, reducing underlying earnings by €96 million, the economic assumption changes positively impacted fair value items by €101 million and charges for model updates amounted to €209 million.
“Every third quarter of the year, we review all our assumptions,” Wynaendts said in the video. “These are actuarial assumptions as well as economic assumptions. We make sure the assumptions reflect, as much as possible, our experiences. These assumptions had to be amended, and that has led to an impact on our earnings, which we are seeing this quarter.”
Underlying earnings from the Americas were €243 million and included charges for actuarial assumption changes of €96 million. Lower charges for assumption changes, the absence of model updates and the stronger U.S. dollar more than offset the recurring impact of the actuarial assumption changes implemented this quarter, lower fixed annuity earnings and the divestment of Canada.
In the Netherlands, underlying earnings rose 6% to €135 million, driven by higher investment income and lower funding costs.
Underlying earnings from Aegon’s operations in the United Kingdom were stable at €27 million, as favorable currency movements were offset by adverse market movements and lower fees.
Underlying earnings from new markets rose 74% to €69 million, driven by higher asset management and performance fees, favorable one-time items mainly related to higher than anticipated investment yields, and the absence of assumption changes and model updates.
“Our sales were very strong in terms of pensions and retirement in the U.S., and asset management,” said Wynaendts in the video. “These are key areas where we have been focusing a lot of our efforts, and we see these efforts showing good results.”
