Insurers plunge as Aegon warns

AMSTERDAM, Netherlands -- European insurance stocks tumbled after Dutch giant said it would set aside more money to counter losses from falling stock markets, corporate defaults and a weaker dollar.

Insurance companies pump vast amounts of premiums collected from policies into stocks, but markets have continued to slide amid concerns about corporate bankruptcies and accounting scandals.

Aegon, the second-biggest Dutch insurer, plunged 14.3 percent to a five-year low of 14.50 euros in early Amsterdam trading on Monday after it slashed its 2002 profit forecast by as much as 35 percent. In May, the company said it expected 2002 profits to be "at least equal" to 2.4 billion euros ($2.42 billion) it made last year.

"Due to continuing deteriorating market conditions and a weakened U.S. dollar, Aegon will strengthen its provisions and expects its full-year 2002 net earnings to be 30 to 35 percent lower compared to our previous outlook,'' Aegon said in statement.

Aegon's rivals -- Zurich Financial, Prudential (PRU), ING and Aviva (AV) -- all lost between five and seven percent and the DJ Stoxx Insurance index slumped 5.5 percent to a new low.

Adding to Aegon's woes, WorldCom filed for bankruptcy on Sunday. Aegon has said it could face losses of about $200 million if the second-largest long-distance telecom operator went out of business. In June, it began reassessing its U.S. bond portfolio because of its exposure to WorldCom.

To complete a triple whammy, Aegon said the falling dollar was contributing to lower euro-based earnings due to its significant presence in the United States. The company earns money in dollars in the U.S. but because Aegon is based in Amsterdam it needs to convert the money into euros for accounting purposes.

"I want to emphasise that during the past few months our base business remained good. Without the developments mentioned... we would have been on target for the year,'' Chief Executive Don Shephard said in the statement.