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Transamerica parent misses profit estimates for Q2 earnings

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(Bloomberg) – Shares of Aegon NV, the Dutch owner of U.S. insurer Transamerica Corp., fell the most in almost two years after the company reported second-quarter profit below estimates and lowered its target for a key financial ratio.

The company on Thursday said net income stood at 350 million euros ($389 million) in the three months to June, missing consensus estimates of 546 million euros, according to analysts at Bryan Garnier & Co. Ltd. Lower returns from hedge-fund and energy investments and losses on interest-rate hedges hit profit, the company said.

Aegon, which is preparing for stricter capital demands next year, said it’s reducing its solvency-ratio target, a measure of available capital compared to that required to meet obligations toward policyholders. The lower target will place Aegon’s ratio, which fell in the second-quarter, below that of some competitors.

The guidance for solvency is “underwhelming,” Matthias De Wit, an analyst at KBC Securities wrote in a note to clients. He cut his recommendation on the stock to reduce from hold.

The shares fell as much as 10 percent and were 8 percent lower at 6.11 euros at 4:36 p.m. in Amsterdam.

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The insurer, which receives two-thirds of its income from its U.S. subsidiary Transamerica, said profit was affected by a 293 million-euro loss on fair-value items.

Aegon lowered its estimated range for solvency under the new rules, known as Solvency II, to between 140 percent and 170 percent, from a previous range of 150 percent to 200 percent.

Rabobank analysts estimate Aegon will come in at 155 percent, below NN Group NV at 220 percent and Achmea BV at 208 percent.

The group solvency ratio, a measure of available capital compared to that required to meet obligations toward policyholders, stood at 206 percent at the end of June from 216 percent at the end of the first quarter, the company said.

–With assistance from Chris Malpass in Berlin.