AEGON earnings fall on accounting issue

Dutch insurer AEGON, corporate parent of Transamerica in Cedar Rapids, took a one-time accounting hit and said future earnings at its U.S. business would be lower than previously assumed because it had overestimated an improvement in life expectancy.

AEGON had said in August it would make changes to its accounting models and expected to have to set aside more money in the U.S. market, but analysts said the impact was larger than they had anticipated.

The insurer said it was taking a one-off charge of $360 million at its Life & Protection business, mainly because it had overestimated rising life expectancy. Shorter life spans for its customers mean lower premiums paid into the company's policies.

AEGON also said the change in its mortality assumptions model would reduce future earnings at its U.S. Life & Protection business by around $25 million per quarter. It did not provide details of the assumptions.

Chief Financial Officer Darryl Button said the number that appeared to have surprised investors 'was the ongoing impact. That seems to be the bigger miss.”

Berenberg analyst Matthew Preston said the lower expectations for the U.S. business equated to a downgrade of about 4 percent to underlying profit forecasts.

But he said strong growth in sales - with deposits up in both Aegon's asset management and variable annuities businesses - could offset the blow. Preston has a hold rating on stock.

AEGON said the one-off charge drove its third-quarter underlying profit down 47 percent year-on-year to $362.7 million. Analysts had expected a 30 percent drop to $200.6 million, according to a Reuters poll.

Net income plunged 78 percent to $64.8 million, well below a forecast of $239.3 million.

Preston said, however, that stripping out the one-off charge, the profit numbers were in line with expectations.