More European insurers unveiled writedowns on their investments in a second wave of first-quarter results on Thursday, although some said sales were proving relatively resilient. Analysts said investors were left with something of a mixed picture, with signs of improving health in the underlying businesses on the one hand but the prospect of more losses to come on soured investments and continued uncertainty over capital and equity market trends.
"It seems with the insurers our thesis remains, the basic solvency looks intact and the business models - while not unaffected - are still basically in place," said Bruno Paulson, insurance analyst with Sanford Bernstein in London. "There's noise, there's unpleasantness, but compared with what the banks have been through they're relatively unaffected," Paulson said.
Dutch insurer Aegon NV posted a smaller first-quarter loss than expected and warned of more asset impairments through the rest of the year. However, it said the value of new business in the quarter came in at 201 million euros, better than the average of analysts' forecasts of 186 million euros. "It's clearly too early to be optimistic," Chief Executive Alex Wynaendts said in a corporate video.
British insurer Prudential said first-quarter sales dropped by a slightly less than expected 5 percent and also reported a higher capital surplus. Fortis, transformed into an insurance company after its carve-up by the Netherlands, Belgium and France's BNP Paribas, reported investment losses of 96 million euros, but managed to squeeze out a net profit and said total inflows were 4.2 billion euros, up 28 percent quarter-on-quarter.
By 0938 GMT the DJ Stoxx European insurance sector index was up 0.6 percent, with Aegon rallying 10 percent and Prudential up 0.5 percent. On Wednesday similar writedowns and slumping investment income had wreaked havoc on the first-quarter results of three major European insurers - ING, Allianz and Generali.
Hague-based Aegon recorded impairment charges of 386 million euros ($523 million) on Thursday, with the writedown largely fuelled by housing-related investments in the United States. Wynaendts said the company could not forecast how impairments later this year would compare. "I think it's way too early to have a clear view," he said in an interview. "We don't know what the markets are going to do; I think nobody knows, by the way."
But he also added that Aegon was seeing definite signs of improvement in the bond markets, and that after moving heavily into cash and other safe investments in the first quarter, it was starting to take a look at high-quality corporate debt as a place to put inflows. For its part Prudential said it was still excited about Asia as an opportunity, but also added it was not going to chase growth at the expense of the bottom line.
"In this environment we do not target sales or volume growth. The game is about capital preservation," Finance Director and Chief Executive-designate Tidjane Thiam told reporters on a conference call.
Meanwhile Fortis sounded an optimistic note on the current quarter saying its inflows held up in April and May after an inflow of 4.2 billion euros in the first three months of the year. Generali's German insurance unit on Thursday also said it was cautiously optimistic about 2009 and expected earnings to be markedly higher than in 2008, but like its peers remained uncertain about investment markets.
"These optimistic expectations concerning our insurance activities are, however, contrasted by the persistently difficult environment of international capital markets which all players in the industry will continue to face in the current year," Generali Deutschland said in a statement, adding that uncertain markets prevented it from making a full-year forecast. Also on Thursday, British insurer RSA Insurance Group Plc said it raised 500 million pounds ($756 million) of subordinated debt in a sale met with strong demand.
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