Aegon NV, the Dutch insurance giant with its U.S. business based in Baltimore, reported yesterday a third-quarter earnings decline of 28 percent, as the company boosted reserves to cover losses in its stock-and-bond portfolios.
The company, which employs about 900 in Baltimore and 26,300 worldwide, said no job cuts are planned.
"Earnings for the third quarter were in line with our expectations," said Donald J. Shepard, Aegon's chairman. "New business production increased in the U.S., while weak financial markets contributed to lower overall production levels in the Netherlands and the U.K. during the quarter.
"Our expense-management initiatives continue to be on target."
For the full year, Aegon expects profit to be 35 percent lower than last year's. In July, the company had told investors that earnings would be down between 30 percent and 35 percent for the year.
Through the year's first nine months, Aegon's profit is 32 percent lower than in the corresponding-period lat year.
Yesterday, Aegon said its third-quarter net income was $432.95 million, down 28 percent from the $601.48 million reported for the third quarter of last year. Net income per share in this year's third quarter was 30 cents, a drop of 30 percent from the 43 cents a share of a year earlier.
Total revenue in the quarter was $7.26 billion, down 1 percent from the $7.74 billion reported last year.
Money set aside
The quarter's decline in net income resulted primarily from Aegon's being forced to set aside money to cover losses on its investment portfolios, to add to reserves to cover guaranteed minimum returns and to write down the deferred costs from selling new policies.
Aegon recorded most of its reserves in the second quarter, when it set aside $867.9 million to bulk up reserves and write down expenses. The company set aside $306.8 million more during the third quarter and is projecting additional reserves of $403.68 million this quarter.
"I don't know if they've taken all the agony yet," said Masja Albers, a fund manager at Robeco Group in Rotterdam, Netherlands, which has Aegon shares among the $100 billion it manages.
Some of the company's products grew, as Aegon increased its distribution channels and new U.S. life insurance sales gained 16 percent.
But that didn't translate into higher profit because of tighter profit margins and the reserves against investment losses.
Profit from Aegon's North American business dropped 24 percent to $273 million.
Aegon earns nearly two-thirds of its profit in the United States.
Once the stock and bond markets rebound, Shepard said, Aegon can get back on track and return to its long-term target of 10 percent average-annual profit growth.
Bullish on long term
"I'm pretty bullish on the long-term outlook," Shepard said.
Shares of Aegon lost $1.28, or 8.9 percent, yesterday to close at $13.12 on the New York Stock Exchange.
Bloomberg News contributed to this article.