The firm’s long-term issuer default rating has dropped from AA to A+ while its senior unsecured debt rating has been downgraded from AA- to A. Aegon’s short-term IDR and commercial paper ratings has fallen from F1+ to F1.
Fitch has also downgraded the financial strength ratings of Aegon’s primary North American life insurance subsidiaries to AA from AA+ and the long-term IDR of Transamerica Corp. to A+ from AA. The outlooks for the long-term IDR and IFS ratings are negative.
Fitch says the two-notch downgrade of the holding company’s long-term IDR reflects the general weakening of Aegon’s financial profile and flexibility which has occurred as a result of lower profitability and increased financial leverage caused mainly by the impact on capital of unrealised investment losses.
For the full year 2008, Aegon expects to report a net loss of approximately £900m. Underlying earnings before tax are expected to be £1.43bn, down by around 40 per cent from 2007, including an underlying loss before tax in the fourth quarter of £179m. Pre-tax impairments are expected to be £900m for 2008, driven by corporate bonds in the financial services sector as well as mortgage-related structured assets.
Aegon is expected to report a 60 per cent decline in shareholders’ equity in 2008 to £5.46bn owing to realised and unrealised investment losses.