Dutch insurer Aegon exceeded expectations with a 3 percent rise in third-quarter net profit on Thursday, due mostly to higher returns on stock market and property investments in the United States. Aegon - one of the world's top 10 insurers - said net profit, including realised capital gains and losses, rose to 448 million euros ($577 million), despite missing contributions from US units it had sold as it focuses on its core life business.
Shares in the group, which makes two-thirds of its life insurance income in the United States, rose 1.83 percent to 9.45 euros by 1212 GMT, extending a 3-week rally which has seen it add about 10 percent to its market value.
Analysts and traders said slightly more upbeat guidance was behind the firmer share price, but they cautioned that after stripping out capital gains and lower bond defaults, Aegon - which trades relatively cheaply compared to its peers - was not yet showing sufficient underlying business improvement.
"Bottom-line figures were reasonably good but we have our doubts about the quality of the profits as they were heavily affected by capital gains," said a trader at broker Petercam.
"There is not much underlying growth in production figures, and in the end that's what a company needs to have," he added.
Aegon - whose CEO Don Shepard told Reuters he was still looking for add-on acquisitions, particularly in Mexico and Japan - said it realised capital gains on equity and real estate investments of 135 million euros in the quarter.
The net profit figure beat the average of forecasts from a Reuters poll of 14 analysts of 382.14 million euros. Estimates lay between 259 million and 430 million.
Sales of new life policies were significantly lower in The Netherlands and disappointing in the United States and the UK, the group's two critical markets.
"We feel pretty good about the rest of the year," Shepard told journalists on a conference call but he would not provide a more detailed forecast for 2004.
Aegon has given no concrete earnings guidance since late 2002, when its reputation for solid growth was dented by its first profit warning after weak stock markets hit the value of its investments and defaults on bonds it held eroded earnings.
"The guidance was a bit better than expected so we'll probably upgrade our estimates," Fortis Bank senior sales trader Peter de Bie said.
Aegon - whose price to earnings ratio (PE) of 9 makes it cheap compared with insurers like Axa, which has a PE of 13.8, and Allianz with one of 15.9 - has seen its shares fall about 20 percent this year. The benchmark DJ Stoxx Insurance index is unchanged.
Aegon, which does not plan to make any large acquisitions to boost its growth, said it expected the lower level of bond defaults in the United States in 2004, which helped buoy its results, to continue for the rest of the year and for 2005.
Shepard said Aegon had received a request from the Connecticut Attorney General to give information in a wider probe of the US insurance industry, but had not yet received any similar request from New York Attorney General Eliot Spitzer regarding his investigation of practices in the industry.
Aegon, which under trying market conditions is focusing on preserving its profit margins rather than defending market share, said group new life production fell 8 percent, while new life production in the United States and Canada rose 9 percent.
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