Aegon, L&G See More Defaults, Insurer Woes Continue

February 18, 2009

Writedown woes hit European insurers again on Tuesday as life insurers Legal & General Plc and Aegon NV predicted more companies would default on loans, sending insurance shares down.

Legal & General more than doubled its credit default reserves to 1.2 billion pounds ($1.7 billion) but said it had no plans to raise capital, sending its shares up 3.6 percent to 46 pence by 0938 GMT while the DJ Stoxx European insurers index fell 2.7 percent.

But L&G shares were still down from the end of last week, having dropped 10.5 percent on Monday as investors worried the company could be forced to launch a rights issue.

Aegon, whose shares were down 3.6 percent at 3.58 euros, said it expected a loss of 1.2 billion euros ($1.5 billion) in the fourth quarter of 2008, partly due to 350 million euros in impairments it took on its bond portfolio because it expected defaults to increase.

“Credit losses in basis points of assets was 54 basis points for the first nine months of 2008 and we expect this to rise to about 90 basis points for the full year,” an Aegon spokesman said.

Insurers like U.S. MetLife and Prudential Financial Inc are vulnerable to a deteriorating economy due to large bond and equity holdings, forcing some to raise capital, such as reinsurer Swiss Re did earlier this month.

In Europe there were falls in insurance stocks such as ING Group and AXA, which will publish results on Wednesday and Thursday respectively.

“AXA will also have to say what measure it will take. It’s not a question whether it will cut dividend but by how much,” ING analyst Albert Ploegh said. (Editing by David Holmes) ($1=.7071 Pound) ($1=.7908 Euro)

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