(Updates with analyst’s comment in fourth paragraph, ING comment in sixth.)
By Maud van Gaal and Corina Ruhe
Aug. 30 (Bloomberg) -- Aegon NV and Delta Lloyd NV are among Dutch insurers facing a drop in solvency because regulators decided to preserve the interest-rate curve used to calculate liabilities following France’s downgrade.
“Discussions took place at the request of the Dutch Association of Insurers to explore the possibility to allow for a different alternative interest-rate curve,” the Dutch Central Bank, or DNB, said yesterday in a statement. “However, DNB currently sees insufficient reason to approve a different alternative interest-rate curve.”
Insurers asked the regulator to reconsider after Fitch Ratings stripped France, Europe’s second-largest economy, of its AAA rating last month. The exclusion of French government debt left the curve, which is made up by a selection of sovereign bonds of AAA nations, dominated by low-yielding German debt, they said. A lower average curve inflates insurance liabilities, hurting capital buffers.
“Although we consider this discount-rate story to be largely accounting noise, we hoped for more flexibility from the Dutch central bank away from this ‘worst case’ scenario,”
Maarten Altena, a London-based analyst at Mediobanca SpA, said in a note today. “All in all, we do not see any impact on dividends currently although Delta Lloyd, that is largely exposed to the Netherlands, clearly has the biggest disadvantage.”
Shares Decline
Delta Lloyd shares fell 3.5 percent to 14.44 euros in Amsterdam at 12:31 p.m., while ING Groep NV and Aegon both dropped 1.2 percent.
Aegon, owner of U.S. insurer Transamerica Corp., said this month that the solvency ratio in its Dutch unit, which stood at 270 percent at the end of June, would drop by about 35 percentage points on France’s downgrade. Delta Lloyd forecast a decline of about 15 points and said it’s solvency would drop to
171 percent at the end of July. ING said today solvency in its combined European and Asian insurance unit would drop by 20 percentage points to 30 percentage points from 304 percent at the end of June.
The Dutch Association of Insurers, a trade group representing about 95 percent of the market, said the industry still has a strong solvency position.
“The association considers it undesirable that solvency depends on an external event such as the downgrade of France, while nothing has changed on the Dutch market,” the organization based in The Hague said in an e-mailed statement.
Ratings Revised
Dutch insurers can stick to the ECB AAA yield curve or shift to a standard interest-rate curve, the central bank said.
Tobias Oudejans, a spokesman for the Amsterdam-based regulator, declined to comment on the possible consequences of a downgrade of the Netherlands.
The Netherlands, together with Germany, Finland and Luxembourg, are the only remaining countries in the euro region that have top ratings at the three major rating companies. Fitch was the last to change its outlook for the Netherlands, revising the country down to negative from stable in February because of the level of public debt, falling property prices and concern about the financial health of some banks.
Moody’s Investors Service lowered its Dutch outlook to negative in July 2012, while Standard & Poor’s has had a negative outlook for the rating since January 2012.