(3,94 EUR, 5,77%) reported a 4Q11 € 346m underlying operating profit before tax which was below expectations (€ 394m) and lower than consensus (€ 357m). The Americas contributed € 328m, the Netherlands € 75m, the UK € -26m and New Markets € 53m. The net profit stood at € 81m and was mainly affected by restructuring charges.
All business units, except the UK, reported uPBT exact in line with forecasts. The UK was affected by a final L 52m (€ 40m) charge for the customer redress program, without which underlying earnings of would have been exact in line. 4Q10 the holding benefited from a one-off benefit.
Fair value items stood at € -20m as negative results in the Americas and the Holding were partly offset by positive results in the Netherlands. Realized gains on investments amounted to € 49m and consisted of normal trading in the investment portfolio. Impairment charged improved strongly to € 94m. In Hungary they were related to the Swiss franc denominated mortgages.
Other charges amounted to € 194m (not expected). In the US a € 37m charge was taken related to increased reserves in connection with the company’s use of the US Social Security Administration’s death master-file. In the Netherlands recorded € 12m restructuring charges and a € 75m goodwill impairment related to its distribution business. The UK saw € 48m restructuring charges and the Holding € 18m.
New production (APE) declined 6% to € 498m with a NB-value (all modelled business) at € 53m. saw € 7.1bn gross deposits driven by resilient sales of pensions and variable annuities in the US.
The capital position remains strong with an IGD solvency at c. 195% (at spot rate and not moving average) and a RBC solvency at c. 450%. Excess capital above the AA-level required by S&P stood a € 3.4bn o/w € 1.2bn at Holding level and € 2.2bn at the operating entities. Operational free cash flow amounted to € 233m and the capital base ratio increased to 73.5% nearing the 75% target to be reached in 2012.
Aegon’s core capital, excluding revaluation reserves stood at € 17.5bn (73.5% of Aegon’s total capital base). The rise in the USD/EUR and tightening of credit spreads led to shareholders equity rising to € 21bn or € 10.03 per share (excluding preference shares).
Underlying earnings before tax were exact in line except for the UK customer redress charge which should not occur anymore in FY12E. will pay a final interim dividend of € 0.10 per share.
We maintain our Buy rating and € 7.0 target price.