Dutch insurer to cut dividend again this year

Aegon NV's profit falls 45 percent in 4th quarter

March 07, 2003|By William Patalon III | William Patalon III,SUN STAFF

Aegon NV, the No. 2 Dutch insurer with key units in Baltimore, will cut its dividend this year for a second straight year, in part because its fourth-quarter profit plunged 45 percent, the company announced yesterday.

Profit for the full year dropped 35 percent, the first annual earnings decline in 14 years. The near-term outlook isn't any better, Aegon said.

"Weak and volatile financial markets and geopolitical uncertainty continue to create a difficult operating environment for our businesses," said Baltimorean Donald J. Shepard, the former Aegon USA head who in April ascended to Aegon's chief executive post. "Aegon's executive board remains cautious in its outlook for 2003 and is not providing an earnings forecast at this time."

Aegon said it has sustained $163 million in losses on its holdings in Dutch supermarket giant Royal Ahold NV, which revealed that its Maryland-based U.S. Foodservice Inc. unit had inflated profits by at least $500 million. The disclosure slashed the value of Ahold's stock and bonds.

Aegon owns $174 million of Ahold bonds and 5 percent of its shares, which have plunged by two-thirds.

Aegon said it expects to slash its 2003 dividend on its Dutch shares to the equivalent of 44 cents per share. The dividend payment will be made in cash or shares, "depending on the company's capital position," according to Aegon.

The insurance firm cut last year's dividend to the equivalent of about 81 cents per share, a reduction of about 11 percent from the 2001 payout of about 90 cents. And the company said it will pay the second-half portion of its 2002 dividend in Aegon stock, aiming to preserve cash and give it flexibility.

For the fourth quarter, Aegon earned $387 million, down 45 percent from the $697 million it earned in the fourth quarter of 2001. Earnings per share plunged by half to about 25 cents, from roughly 50 cents the year before.

For all of 2002, Aegon earned $1.685 billion, down from the $2.612 billion it earned in 2001.

Aegon employs more than 20,000 worldwide, and about 930 in Baltimore. The company would not comment on whether its continuing financial woes would have an impact on local employment.

Analyst Nikolai D. Fisken, an insurance-industry expert with Stephens Inc. in Little Rock, Ark., does not foresee major job reductions for Aegon. In fact, Fisken said Aegon's woes "are more a function of the times" as opposed to poor management or major strategic mistakes by the company.

Another industry member, Axa SA, is cutting its dividend by nearly half to preserve cash. Other major players such as Swiss Reinsurance Co. and Zurich Financial Services SA, also have announced dividend cuts.

Aegon is in much better shape than most of its rivals, Fisken said.

"Unlike the U.S., many European insurers take large equity bets. Aegon is not as aggressive as most," he said. "Of all the European insurers, Aegon in my opinion is the best [positioned for] when there's a shift in the market, especially when the U.S. equity market improves."

Aegon's American Depositary Shares dropped $1.53 each, or 15 percent, to close at $8.42 yesterday on the New York Stock Exchange.

Bloomberg News contributed to this article.

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