Hedging program losses slash Aegon 1st-quarter earnings

The strong stock performance in the first quarter of the year,  particularly those in the S&P 500 index, created macro hedge program losses that reduced earnings by nearly two-thirds for Aegon.

The Netherlands-based corporate parent of Transamerica in Cedar Rapids recorded net income of $268.8 million in the quarter that ended on March 31, down 61 percent from $691.8 million in the first quarter of 2012.

"The sharp rise in equity markets resulted in a loss on our equity hedging programs, which impacted net income," said Alex Wynaendts, AEGON chief executive officer. "These hedging programs have been put in place to protect our capital position, in line with our strategy to reduce Aegon's exposure to financial market risk."

As the macro hedges are carried at fair value versus the fee revenue emerging over time, the strong equity performance in the first quarter created a $376.9 million loss that will be offset over time by higher earnings from higher stock values.

A Reuters poll of five analysts forecast a consensus net profit of $433.5 million.

Aegon's quarterly underlying earnings before taxes, which assume a certain return on investments, rose 1 percent to $586.4 million, in line with analysts' forecasts.