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Aegon drops after reporting 3Q loss of US$563m

[AMSTERDAM] Aegon NV, the Dutch owner of US insurer Transamerica Corp, swung to a third-quarter net loss of 524 million euros (S$798.2 million) on the sale of its Canada business, changes to the way it calculates risk and lower fixed-annuity earnings. The shares declined.

The results were affected by "assumption changes, our ongoing model refinement program, and the anticipated book loss on the sale of our low-return business in Canada," Chief Executive Officer Alex Wynaendts said in a statement on Thursday. Net income was 52 million euros a year earlier.

Aegon's solvency ratio, a measure of available capital compared to what's required to meet obligations toward policyholders, rose to 225 percent from 206 per cent at the end of June, the company said . Aegon, which is preparing for stricter capital demands next year, "still hasn't received the internal model approval" from the Dutch central bank for the new capital regime, Chief Financial Officer Darryl Button said in a telephone interview. The new rules, known as Solvency II, come into force in January.

The insurer, which receives two-thirds of its income from its US subsidiary Transamerica, said the book loss on the divestment of its Canadian insurance business amounted to 751 million euros, while the assumption changes and model updates accounted for 204 million in charges in the third quarter.

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Aegon fell as much as 5.2 per cent in Amsterdam, the most since Sept. 18. The shares were down 4.2 per cent at 9.30 am, bringing the decline for this year to about 12 per cent.

"The book loss on the Canada sale is a big one-off," Joost van Beek, an analyst for Theodoor Gilissen Bankiers NV, said by phone. "The assumption adjustments are a bit of an unclear story. It may just be because they're two steps behind the market." The Hague-based insurer was added last week to a list of nine too-big-to-fail insurers compiled by global financial rule makers, meaning it could face a 10 per cent increase in capital requirements and tighter regulation. In September, the company said it's reviewing its UK operations to decide whether they fit with the business's future goals.

Underlying pretax earnings was 436 million euros, up from 291 million euros a year ago. Return on equity, a measure of profitability, fell to 6.8 percent in the third quarter from 8.2 percent in the second.