January 13, 2016 / 8:49 AM / in 3 years

UPDATE 1-Aegon shares surge on buy-back and divended hike

* Aegon says Solvency II ratio is around 160 percent

* Company will hike dividend, buy back shares

* Will consider selling British annuity business

* Targets 200 million euros in cost cutting by 2018

* Shares surge, biggest one-day rise since 2012 (Recasts after share rise; adds analyst comment and further details on targets)

By Toby Sterling

AMSTERDAM, Jan 13 (Reuters) - Aegon’s shares surged on Wednesday after the Dutch insurer said it would buy back shares and hike its dividend, and confirmed its solvency ratio is near the high end of earlier guidance.

Shares in Aego were up 8.9 percent at 5.39 euros, their largest one-day increase since 2012, and erasing most of six months of underperformance against the Dutch AEX index.

Aegon said it had a solvency ratio of around 160 percent at the end of 2015 under Europe’s new Solvency II regime, ahead of a meeting with investors on strategy in London.

That is at the high end of a 140-170 percent range the company said it expected in June, this was worse than analysts had expected and led to a sell-off in shares.

Aegon said it would buy back 400 million euros worth of shares and increase its final divdend for 2015 by 8 percent to 0.13 euros.

“This is in line with our expectations in terms of buybacks, but we believe that it’s better than the market has assumed,” analysts at JPMorgan Cazenove wrote in a note. Cazenove has an “overweight” rating on the stock.

Aegon also said it intends to cut 200 million euros in costs by 2018 to improve its return on equity and that it would consider selling its annunities business in Britain.

“Overall, we see these as many positive (pieces of) news at Aegon,” the Cazenove analysts said.

Aegon is due to report fourth quarter earnings on Feb. 19. ($1 = 0.9241 euros) (Reporting by Toby Sterling; Editing by David Goodman and Alexander Smith)

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