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AEGON plans Irish disposal as it books Q2 profit of €529M

AEGON NV announced the sale of its business in Ireland as it returned to profit in the second quarter from a year-ago loss.

The Hague, Netherlands-based group reported second-quarter unaudited net income of €529 million, compared to a loss of €385 million booked in the year-ago period. AEGON said the result benefitted from a €149 million gain related to the divestment of the majority of the U.S. run-off businesses, while the comparative year-ago figure included a book loss on the annuity divestment in the U.K.

The group's underlying pretax earnings rose 23% on a yearly basis to €535 million from €435 million, driven by an improved claims experience and higher fee income from favorable equity markets. Underlying pretax earnings from the Americas rose to €341 million from €270 million, while in Europe, the result increased to €195 million from €160 million.

Net underlying earnings totaled €390 million, up from the year-ago €312 million.

Losses from fair value items declined 71% year over year to €36 million. Net recoveries were €2 million, compared to net impairments of €23 million a year earlier.

ROE stood at 8.4% in the quarter, compared to 6.8% a year earlier.

The group's Solvency II ratio was 185% at June-end, well within its new target range of 150% to 200%. AEGON noted that it obtained approval from the Dutch regulator to amend the conversion methodology for its U.S. business under Solvency II and the second-quarter figure includes the benefit from that conversion.

AEGON added that it will undertake steps aimed at significantly increasing its solvency ratio, including a capital injection of €1 billion to AEGON NL. The company also plans to issue €500 million in one-year senior notes in the third quarter to facilitate the planned capital injection into the Dutch business by Sept. 30.

AEGON added that the Dutch business is expected to be in a position to resume dividend payments to the group, with AEGON Netherlands intending to pay a 2017 dividend of €100 million in the first half of 2018.

The group will pay an interim dividend of 13 cents per share to its shareholders, which it said reconfirms its target to return €2.1 billion of capital to shareholders over the 2016-2018 period.

Separately, the group said it agreed to sell AEGON Ireland Plc to AGER Bermuda Holding Ltd., the holding company of the European operations of Athene Holding Ltd.

AGER Bermuda also said Aug. 10 that the consideration for the transaction will be approximately 81% of the own funds of AEGON Ireland as of closing. Solvency II own funds of AEGON Ireland were approximately £200 million as of June-end.

AEGON said the sale will help further optimize its portfolio of businesses and increase its financial flexibility.

Based on the book value as of June 30, the sale is expected to result in a book loss of approximately £115 million. The divestment is expected to have an immaterial impact on AEGON's underlying pretax earnings going forward.

Completion of the deal, which is subject to customary closing conditions, is expected to take place in the first quarter of 2018. AEGON Ireland, which provides unit-linked guarantee and offshore bond products predominantly in the U.K., had assets of approximately £4.7 billion as of June 30.

Fenchurch Advisory Partners served as financial adviser to AGER, while Ernst & Young served as actuarial and tax adviser, Linklaters LLP served as international legal counsel, and Maples and Calder served as Irish legal and tax counsel to AGER.