(3,65 EUR, 10,33%) reported a 1Q12 € 425m underlying operating profit before tax which was below expectations (€ 478m) but in line with consensus (€ 419m). The Americas contributed € 292m, the Netherlands € 79m, the UK € 29m and New Markets € 88m. The net profit stood at € 521m which was better than expected (€ 219m) and better than consensus (€ 281m).
All business units, except New Markets, reported uPBT somewhat below expectations. The Americas were affected by € 12m unfavourable mortality results, € 7m Corporate Center expenses and an increase in employee benefit expenses of € 10m. The Netherlands saw some adverse claims experience on disability. The UK saw the positive impact of cost reductions.
Fair value items stood at € 156m mainly related to alternative asset performance in the Americas, the guarantee portfolio in the Netherlands and derivatives in the Holding. Realized gains on investments amounted to € 45m and consisted of normal trading in the investment portfolio. Impairment charged improved strongly to € 41m and are mainly linked to US RMBS.
Other charges amounted to € 17m and mainly represent the Hungarian banking tax (€ 17m) and some smaller items.
New life production (APE) declined 11% to € 445m with a market consistent NB-value (all modelled business) at € 125m. saw € 11.0bn gross deposits driven by pension deposits in the Americas and by AM.
The capital position remains strongwith an IGD solvency at c. 201% (at spot rate and not moving average) and a RBC solvency at c. 445%. Operational free cash flow amounted to € 805m and the capital base ratio increased to 74.2% nearing the 75% target to be reached in 2012.
Aegon’s core capital, excluding revaluation reserves stood at € 17.7bn (74.2% of Aegon’s total capital base). Shareholders equity stood at € 21.3bn or € 10.18 per share (excluding preference shares). Aegon’s total market consistent embedded value stood at € 20.7bn or € 10.42 per share.
Underlying earnings before tax were somewhat below expectations, but in line with consensus. Strong solvency and very strong gross deposites support our investment case.
We maintain our Buy rating and € 7.0 target price.