(Adds CEO, finance head comments, shares)
By Wout Vergauwen
Feb 23 (Reuters) - Delta Lloyd, the Dutch insurer that is being bought by larger peer NN Group, missed market forecasts for its full-year profit and said on Thursday its solvency had fallen towards the bottom of its target range.
The group said setbacks included unexpected longevity in its life insurance business, changes in regulation by the Dutch National Bank (DNB) that impacted its solvency, and weakness in its markets.
But Chief Executive Hans van der Noordaa said the company's 2.5 billion euro ($2.64 billion) takeover by NN was on track.
The company said full-year net profit was 231 million euros, up 80.5 percent from the previous year. Analysts polled for Reuters had expected full-year earnings of 1.15 billion euros.
Solvency fell to 143 percent at the end of 2016, from 156 percent at the end of September. It said last May it expected to finish the year near the top of its expected solvency range of 140-180 percent.
Delta Lloyd said the DNB issued new guidance in February limiting the deductibility of losses made during a hypothetical future severe downturn. The new treatment lowered Delta Lloyd's solvency by 8 percentage points.
Finance chief Clifford Abrahams also said on a call with journalists that the value of the company's government bonds rose after Britain's vote in June to leave the European Union, but they had since come down.
Delta Lloyd won approval last March for a 650 million euro rights issue, against the wishes of its largest shareholder. It said at the time it needed the money to comply with Europe's new Solvency II regulatory regime.
The Dutch central bank (DNB) is seen as Europe's toughest in enforcing Solvency II rules. Under the rules, a ratio of 100 percent represents sufficient capitalisation to weather an extreme economic downturn, according to regulators.
Van der Noordaa said changes in the company's solvency were not considered a material change to its takeover agreement with NN.
Delta Lloyd shares were slightly higher at 5.34 euros at 0917 GMT, almost in line with NN's 5.40 per share offer. NN shares were down 1.7 percent at 29 euros.
NN fourth-quarter results, which missed market forecasts, sent its stock as much as 10 percent lower last Thursday. Van der Noordaa said this had not changed the takeover deal's prospects.
The integration of the two companies will likely lead to a substantial reduction of the workforce, van der Noordaa said.
Delta Lloyd noted it suspended final cash dividend for 2016 under the terms of the NN deal. ($1 = 0.9485 euros) (Reporting by Wout Vergauwen; Editing by Thyagaraju Adinarayan and Susan Thomas)