(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.
Our View:
Underlying earnings before tax were somewhat below expectations, but in line with consensus. Strong solvency and very strong gross deposites support our investment case.
Conclusion:
We maintain our Buy rating and € 7.0 target price.