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Moody’s downgrades Aegon after £1.08bn Q4 loss announcement

Rating agency Moody’s has downgraded Aegon to negative after the Dutch insurer reported an expected fourth quarter loss of £1.08bn and underlying losses of £179m in its preliminary results today.

Moody’s says the downgrade reflects “the deterioration in Aegon’s profitability and financial flexibility”.

Senior analyst Antonello Aquino says: “We expect continued pressure on Aegon’s financial profile over the medium-term from additional investment losses, the impact of depressed equity markets, and the recessionary environment”.

Aegon reported its decline in income was the result of
investment impairments as well as increasing reserves for guarantees – particularly for variable annuity products in the US – accelerated amortisation of deferred acquisition costs and lower fees.

Aquino says: “We expect the weak global economic circumstances to continue, and the resulting high level of equity market volatility and declining government interest rates to exert pressure on Aegon’s insurance sales volumes and profitability.”

Moody’s says it expects higher levels of asset impairments in 2009 and beyond given the Group’s exposure to higher-risk asset classes, together with the deepening recession.

In particular, the rating agency says meaningful investment losses are likely to develop on Aegon USA’s real-estate and structured securities given its revised expectations for these asset classes, as well as rising corporate default rates as a result of the economy.

Aquino says: “Similarly to other US players, Aegon USA maintains a sizeable holding of mortgage and asset-backed securities – £21.55bn at September 2008 – and an extensive corporate bond portfolio – £37.9bn, over 50% of which is rated Baa or below.”


Tripartite role is criticised

MPs have questioned the tripartite authorities’ relationship after the Prime Minister claimed he had no idea the FSA had found failings in HBOS when considering James Crosby as the regulator’s deputy chairman.

Figure skating

I will be happy to put my money into personal accounts if they can guarantee me an annualised return of 5.1 per cent above inflation. Sadly, even such ambitiously high performance figures will not be enough to make personal accounts an appealing prospect for many low or average-earners with 20 years or less to retirement.

People on the move: Pensions 19/02/2009

Watson Wyatt has appointed Martin Muir as the leader of its insurance and financial services practice UK life team. Graham Fulcher has been appointed leader of the UK non-life team. Muir is a long-time consultant at Watson Wyatt while Fulcher joined in September 2008 from ACE.

What are the key changes to transform pensions?

By Fiona Tait, pensions specialist In her final article for Royal London, Fiona Tait reviews key changes she believes have transformed, or will transform, pensions. In my 12 years with Royal London I have been paid to review, study and explain the numerous changes to pension legislation which have transformed our industry in that time. This is […]


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