Fitch Ratings has revised its outlook for Aegon to negative from stable following disruption to economic activity and financial markets from the coronavirus pandemic.
A set of rating assumptions were used by Fitch to develop pro-forma financial metrics for Aegon that were compared with both rating guidelines defined in its criteria, and relative to previously established Rating Sensitivities for Aegon.
The negative outlook reflects the impact of the economic fallout on Aegon’s financial performance.
Under Fitch’s rating-case assumptions it expects Aegon’s underlying earnings to deteriorate, driven by weaker financial performance of Aegon Americas based on adverse equity-market performance, rating migration and credit defaults.
However, Fitch notes that Aegon’s bottom-line earnings for the first quarter benefitted from non-operating items, including fair-value gains in non-US businesses.
Longer-term risks include the impact of lower interest rates for a longer period on Aegon Americas.
Aegon Americas has above-average exposure to market- and interest-sensitive liabilities due to its exposure to variable annuities, long-term care and universal life with secondary guarantees.
The current economic environment heightens risks around its legacy liabilities and could weaken its balance-sheet strength and financial performance.
Under Fitch’s rating case it expects Aegon’s financial leverage and capital metrics to remain broadly stable.
Fitch expects Aegon’s liquidity position to remain adequate, supported by significant cash capital at the holding company.
Aegon has no significant debt maturities in the short-term apart from an USD500 million senior issue maturing in December 2020.
