AMSTERDAM (Reuters) - U.S.-Dutch insurer Aegon NV (AEGN.AS) on Tuesday reported worse than expected first-quarter underlying income due to the impact of coronavirus and falling interest rates in the United States, where it does the bulk of its business under the Transamerica brand.
However, group solvency rose to 208%, up from 190% in March, as the company withheld paying dividends and as a fall in estimated liabilities at the company’s Dutch subsidiary led to a “fair value” gain of 1.9 billion euros.
Underlying pretax income was 366 million euros ($396 million), against estimates of 449 million euros in a company-compiled poll.
“COVID-19 is going to have an impact on mortality rates and I would say especially in the United States,” said CFO Matt Rider. “We’re going to see it in the general population, but I would say the question is, are we going to see it in the insured population?”
He said the company was overall “long mortality risk”, meaning it will suffer financially from increased death claims from life insurance, though that is offset by other products, such as annuities.
On April 3, Aegon said it would suspend payment of dividends, including its 2019 final dividend, heeding calls from the Dutch central bank and European insurance watchdog EIOPA. [L8N2BR73C]
Rider said the company would revisit the final 2019 dividend and 2020 interim dividend decisions in August.
Aegon, which usually reports earnings twice a year, provided the first-quarter update due to the increased uncertainty caused by the coronavirus outbreak. It did not provide comparative figures from the first quarter a year ago.
Shares fell 1.9% to 2.15 euros by 0817 GMT, and are down about 50% year to date. Rider said the recent fall in U.S. treasury rates presents the company with some difficulties in finding adequate investments to match its liabilities.
“There’s no question about it, low interest rates are not good for insurance companies, it does affect reinvestment rates, but at this point we seem to be holding in there very well, with things like capital testing and capital generation,” Rider said.
Reporting by Toby Sterling; Editing by Kim Coghill and Louise Heavens