Aegon Shares Fall After it Lowers Solvency Guidance -- Update

(Rewrites throughout)

By Ian Walker and Archie van Riemsdijk

Shares of Dutch life insurer and pension company Aegon N.V. (AGN.AE) were trading lower on Thursday after the company lowered its solvency guidance, which could hurt dividend growth.

The company estimates its solvency level at 140% and 170%, lowering the midpoint of its guidance by 20 percentage points, from a 150% to 200% range. Aegon 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.

In return, the company received more clarity from Dutch regulator DNB on remaining uncertainties in the regulations.

Shares of Aegon were down 8% in Amsterdam on Thursday. Aegon's Dutch peer Delta Lloyd on Tuesday lost 20% of its market value, after announcing its Solvency 2 estimate had dropped below 140%.

Belgian broker KBC Securities said the lowered guidance is underwhelming and recommended investors to reduce their investment in Aegon's shares.

Rabobank analyst Cor Kluis said that Aegon's solvency is at the lower end of a peer group consisting of Ageas, Achmea, Delta Lloyd and NN Group. A research note by ING stated that the insurance company's new solvency guidance "will trigger many questions on dividend upstream capacity in the Netherlands and the U.K. in the coming years."

Aegon's Chief Financial Officer Darryl Button acknowledged the potential impact on dividend, but said that the U.S. unit Transamerica, from where Aegon derives most of its sales, won't suffer any dividend restraints. For the Dutch and U.K. units, the CFO will discuss the topic with Dutch regulators this year.

Earlier Thursday, Aegon reported a slight rise in net profit, but missed the consensus forecast, partly due to an imperfect interest rate hedge in the Netherlands. For the three months to June 30, net profit was 350 million euros ($389 million), compared with EUR343 million a year earlier and a consensus forecast of EUR540 million.

Write to Ian Walker at [e-mail] and Archie van Riemsdijk at [e-mail]

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