Fitch Affirms AEGON Group, U.S. Operations; Outlook to Stable
June 08, 2005 10:11:01 (ET)
CHICAGO, Jun 08, 2005 (BUSINESS WIRE) -- Fitch Ratings has affirmed the 'AA+' insurer financial strength ratings of AEGON Group, U.S. Operations (AEGON Group). The Rating Outlook has been revised to Stable from Negative. See detailed ratings list below.
The revision of the Outlook is based on Fitch's review of the AEGON Group's earnings profile. AEGON Group's ratings were placed on Negative Outlook in October 2002, when credit defaults, provisions for variable annuity guarantees, and acceleration of deferred acquisition costs on variable annuities caused a significant decline in net income.
Fitch's review focused on pretax operating earnings, based on the mix of underlying reserves and premiums, as well as the embedded value results for AEGON Americas. Fitch concluded that the fundamental earnings power of the company was very strong, earnings levels were commensurate with the assigned ratings, and operating performance reflects solid management of key drivers, such as persistency, expenses, and asset/liability management and crediting strategies, as well as the achievement of pricing standards and risk tolerances. While net income from 2001-2003 was affected by significant credit impairments and realized losses on shares and real estate, credit impairments have continued to decline and were more than offset by realized gains in 2004, as well as the first three months of 2005.
Fitch views AEGON Group's very strong consolidated statutory capital position as supportive of production levels and risk profile. Capital growth has been self-funding, with the exception of 2002, when parent company AEGON NV (AEG, Trade) demonstrated its support with capital and surplus note contributions of $1.8 billion. AEGON Group's consolidated year-end 2004 NAIC RBC of 369% was solidly in the range for 'AA+' peers and meets Fitch rating expectations.
Other strengths recognized in the ratings include: sound asset quality; the absolute and relative size of U.S. operations, which allow the company to compete effectively in all of its major retail and institutional product segments; significant earnings diversification weighted toward general account life and annuity products; strong pricing and risk management discipline; effective management of an extensive network of well established distribution channels; and the efficiency benefits achieved through successful integration of several large acquisitions. |
