Aegon CFO Says Approval of Solvency II Model Expected in December

By Archie Van Riemsdijk

Dutch life insurer and pension provider Aegon expects the country's regulator will give its approval in December for its internal risk model to calculate its capital requirements under the new regulatory framework Solvency II, after recent constructive talks, the company's chief financial officer said.

Aegon didn't provide an update on its estimated range for its solvency level under the new framework, ahead of the approval. "But we have had very good conversations and the tone is good," chief financial officer Darryl Button said in an interview with Dow Jones Newswires on Thursday. "We therefore expect to receive approval in December."

Aegon will wait until January to formally update investors on its Solvency II level. The new regulatory framework will be in force as of the start of next year.

At the time of its half-year earnings in August, Aegon lowered its solvency guidance to a range of 140% to 170%, from 150% to 200% previously. This caused a negative market reaction, with a drop in Aegon's share price. Aegon also said it had recently submitted its internal risk model for approval under the new regulatory framework, known as Solvency II, which will replace the current regulation next year.

Mr. Button also said the designation of Aegon as one of the nine global systemically important insurance companies, or GSIIs, won't be a binding constraint for the company. He said the status does come with higher capital requirements, but those are well within the current capital policy of Aegon, he said.

Aegon on Thursday reported a net loss of 524 million euros ($563 million) as a result of a book loss on selling its Canadian insurance business.

Its IGD solvency ratio improved to 225%. This number measures the ability of the insurance company to meet its future financial obligations, even though it will soon become obsolete in the new Solvency II framework.

IGD solvency improved due to positive spread developments for Dutch mortgages.

At the company's U.S. operations, which generate most Aegon's income, excess capital dropped to $600 million from $1 billion, due to negative results from market-impact hedging.

Aegon's hedge "did not perform very well", Mr. Button conceded, which caused a loss at the time when global stocks markets fell due to market fears about decreasing Chinese economic growth. Due to a yearly change of assumptions and models at the company, there was a 'hedging gap' which caused the loss, the CFO said. Lower excess capital could potentially mean lower dividends for shareholders in the future.

Write to Archie Van Riemsdijk at archieVan Riemsdijk.

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(END) Dow Jones Newswires

November 12, 2015 04:34 ET (09:34 GMT)

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