Dutch insurer Aegon NV posted a 26 percent drop in quarterly net profit to 648 million euros ($984 million), hurt by currency effects and investment writedowns that sent shares lower on Thursday. The result came in above analysts' expectations, thanks to net gains of 167 million euros on equity investments that offset a writedown of 17 million euros on equity and bonds.
Analysts, on average, expected a net profit of 544 million euros, according to a Reuters poll of eight analysts. Analysts had forecast writedowns of 20 to 30 million euros. But shares in Aegon slipped more than 4 percent, as the market focused on the steep profit decline and a negative revaluation on subprime and related risky investments, said Collins Stewart analyst Tim Young.
Operating income in the fourth quarter fell by 32 percent to 484 million euros, due to a weaker dollar and lower investment income, while a tax benefit boosted income a year earlier.
For 2007 as a whole, net income fell 20 percent to 2.55 billion euros, mainly reflecting accounting changes that boosted income the previous year. Also for 2007, Aegon booked a negative revaluation of 487 million euros on subprime and related investments to a reserve in shareholders' equity, a step also taken by ING and Rabobank.
"A lot of momentum funds are looking for reasons to short insurers," Young said of the stock price reaction. Aegon's shares were down 4.2 percent at 9.40 euros by 1029 GMT, making it the biggest loser on the DJ Stoxx European insurers index, down 2.1 percent
Aegon, along with other Dutch financial groups with insurance businesses, has avoided the worst of the credit and subprime crisis, which has forced European groups such as UBS and Credit Suisse to take billions of euros in writedowns. "Our investment strategy has weathered the current environment," Aegon Chief Executive Don Shepard told reporters.
Aegon's shares have lost nearly a third of their value in the last 12 months, while the DJ Stoxx insurers index has lost a quarter of its value. Earlier in February, Aegon shares touched a 40-month low but have since recovered by 10 percent. Separately, CEO Shepard said that Aegon was not planning to buy back any more shares in 2008, after completing a 1 billion euros buyback in November 2007.
Shepard said Aegon had excess cash of about 1 billion euros, which will be used for investing in the business and making acquisitions. Aegon hiked its full year dividend by 13 percent to 0.62 euro per share.