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Aegon posts Q3 loss, shares helped by solid business

Dutch insurer Aegon, which is being backed up by €3 billion ($3.9 billion) in government capital, reported a steep quarterly loss but shares recovered as investors found signs of a stronger performance and balance sheet.

Aegon's third-quarter loss was €329 million, compared with a €541 million profit a year earlier. The loss was triggered by a €384 million in underperformance of investments and a €407 million impairment charge on corporate bonds, most of them stemming from failed US financial institutions Washington Mutual and Lehman Brothers.

Belgian financial group KBC also made a loss of €906 million.

“Aegon has been doing good in the past few days. They have a strong capital position and the underlying performance was good,” said one Amsterdam-based trader.

Aegon has been freeing up capital in addition to the government capital funding, and is expected to have a capital base of around €6 billion by year-end.

Analyst Paul Beijsens at Theodoor Gilissen said that the value of new business pulled in by Aegon was also positive. Aegon's value of new business, which measures the income value of newly written insurance business, fell 12% to €206 million compared with a year earlier.

“That is fine and better than expected,” Beijsens said.

Aegon had already released most details of its results on October 28, when it tapped into €3 billion of government funding to strengthen its capital base. It will have to repay the government at a premium, or pay a steep 8.5% interest rate. Aegon also scrapped its year-end dividend payment.

Shares in Aegon are down by more than a half since early September, when the global financial crisis deepened and triggered the nationalization or capitalization of financial companies by governments, but are up over 40% from 16-year lows just before the government capital injection.

“We are all affected by the turmoil,” Aegon Chief Financial Officer Jos Streppel told a conference call. “Two months ago people were still talking about making use of the turmoil (for acquisitions). Today people are much more cautious on taking action.”

Dutch banker and lender ING also tapped into government funding, accepting €10 billion in October under similar terms to the government capitalization deal with Aegon. (Reuters)