Dutch Insurer Aegon Plans $432M share buy-back, to cut U.S. charges

Aegon NV jumped the maximum in almost six years after announcing it plans to shop for back four hundred million euros ($432 million) of stocks and reduce costs to enhance its go back on equity.

The Dutch owner of insurer Transamerica Corp. introduced a plan to decrease expenses in the americaand the Netherlands through 200 million euros by using 2018 and reiterated a return on equity target of 10 percent. The stock remains 27 percentage decrease than the peak of 7.sixty six euros in March.

Aegon stock plunged in August and once more in November on issues approximately the way it calculates its solvency ratio, a key measure of economic power. The enterprise Wednesday said it won approval from the Dutch relevant financial institution for the way it tallies risk, reducing uncertainty and permitting the percentage buyback to head ahead. The expected price financial savings may also help make up for costs incurred in changing the hazard model.

“i am assured that handing over on our method to grow our commercial enterprise profitably, reduce charges, and return capital to shareholders will enable us to acquire a ten percent go back on equity in 2018,” chief government Officer Alex Wynaendts said within the assertion.

Aegon has a further six hundred million euros that it may go back to shareholders, chief economic Officer Darryl Button said on a call with traders. The organization plans to complete the four hundred million euro share buyback this 12 months, he stated.

Analysts were cut up on whether or not the corporation has completed sufficient to win lower back investors. The shares climbed as a great deal as 14 percent in Amsterdam trading and have been up 11.1 percentage at five.50 euros as of 12:32 p.m. The stock is down nine.2 percentage over the last twelve months.

“Aegon has eliminated insecurities via announcing the internal version approval and the proportion buyback application,” Marcell Houben, an analyst at SNS Securities with a buy rating on the insurer, said via telephone. Albert Ploegh, an analyst at ING Groep NV, known as today’s moves “a strong announcement of confidence in its capital function and capital generation.”

William Hawkins and Rufus Hone, analysts at Keefe, Bruyette & Woods, were extra skeptical.

“whilst they have got added on the critical buyback that we've sought, it seems one-off in nature instead of sustainable and leaves the influence that Aegon nonetheless wishes to reinforce solvency over the medium term,” they stated in a word to clients. “We hold to sense that the hazard/reward is challenged for the Aegon shares versus peers.”

Aegon, which gets -thirds of its profits from Transamerica, is making plans $150 million of cost savings within the U.S. through 2018 and 50 million euros of savings in the Netherlands. it's going to cut “management layers” as a part of the strategy, the business enterprise stated within the presentation.

Matthias de Wit, an analyst at KBC Securities in Brussels, wrote that at the same time as he turned into undoubtedly amazed by the buyback, “we nonetheless reiterate our lessen rating as we see extra value elsewhere in our insurance.”

The insurer will grow asset management profits via 20 percentage within 3 years and could are looking for challenge partners to assist it increase its Asia commercial enterprise, the presentation to buyers said.

Aegon is growing its dividend to 13 cents, beating a Bloomberg Dividend Forecast of 12 cents a share. It additionally added 4 new members to its control board including Sarah Russell, the chief govt officer on the asset control unit.

After receiving crucial bank approval for its threat model, the insurer stated its ratio of eligible own funds to the solvency capital requirement turned into 160 percent at Dec. 31 based totally on its partial inner model, the top cease of its forecast variety of a hundred and forty percent to one hundred seventy percentage.

The insurer introduced a loss of 524 million euros in November due to version assumption modifications as well as habitual costs of 100 million euros for the version refinements and 50 million euros for digitalization costs.