Insurers Prudential and Aegon reported lower underlying earnings, weighed by lower investment income, but both signalled in different ways they were becoming more confident with their capital reserves. Prudential, Britain's biggest insurer, said Thursday its financial position was "very strong", and announced it would raise its interim dividend 5 percent to 6.29 pence per share.
Aegon, Europe's sixth largest insurer, indicated it was confident enough to issue shares and unveiled a plan to sell 1 billion euros ($1.4 billion) of new stock. The funds would be used to partly repay 3 billion euro in government aid loaned to it at the height of the financial crisis last year.
But investors appeared to be less certain about Aegon's plan, pushing its shares down 5.5 percent to 5.40 euros, while there was plenty of enthusiasm for Prudential's move and its shares rose 7.7 percent at 515 pence at 1227 GMT. The Dow Jones of index of European insurance shares was up 2.0 percent. Europe's insurance stocks index had slumped to an all-time low in early March, on investor concerns that falling stock markets and rising corporate bond defaults could eat into the already depleted capital reserves of insurance companies.
Concerns over capital among insurers have eased in recent months, in part due to a broad financial market recovery, helping insurance shares rebound, Britain's Legal & General and Aviva last week cut their dividends.
Incoming Prudential CEO Tidjane Thiam further underlined his group's confidence in its prospects, telling reporters he planned no strategic changes when he takes over the top job next month. Thiam said Prudential did not intend to sell its UK division, seen as a potential target for British insurance industry consolidator Resolution, because it provides the group with cash and capital which underpins its fast-growing Asian and US operations.
"(The UK) is a core business for us," he said on a conference call. "We have a base in the UK which provides us with cash and capital, and we have extraordinary growth opportunities in Asia which we are well positioned to capture. It's a very good strategic position."
Prudential's European Embedded Value operating profit fell 8 percent to 1.25 billion pounds ($2.06 billion) in the six months to June 30, still ahead of the 1.16 billion pound profit expected by analysts, according to a company poll. Dutch-based Aegon said it had underlying pretax earnings of 404 million euros in the second quarter, down from 596 million euros in the same period last year, but up from a 22 million euro loss in the first three months of 2009. That fell short of a consensus analyst expectation of 531 million euros.