NETHERLANDS - Dutch insurer Aegon has put the odds of an "economic horror scenario" - where a number of peripheral euro-zone countries, including Italy, default - at 25%.

It said its negative outlook for this year was "much more serious" than last year's prediction, and that the worst-case scenario would see a "staggering" European Union.

However, the company predicted equities, listed property and high-yield bonds would perform well over the next four years, returning on average 7%, 9% and 7%, respectively.

The insurance company also estimated that EU government bonds, EU credit and commodities would return -1%, 3% and 3%, respectively, over the same period.

However, Olaf van den Heuvel, investment strategist at Aegon Asset Management, emphasised that this outlook had been founded on a 'basis scenario', which he estimated had a 60% chance of occurring.

Aegon's investment strategist also predicted pension funds' funding ratios - approximately 98% at present - would recover over the next four years on the back of gradual economic improvement.

Meanwhile, Dennis van Ek, investment adviser at Mercer Netherlands, said there were signs in the market that Germany's credit-worthiness was coming under pressure.

"In October, the interest rate on 30-year German government bonds has - with 15 basis points to 2.78% - risen faster than the rate of interest swaps with a similar duration, while the prices of these German bonds have decreased faster than these swaps as a consequence," he said.

"The conclusion could be that the valuation of German government bonds is also suffering from the guarantees given to the emergency measures for the euro, as well as from the growing uncertainties within the euro-zone."

A spokesman for €270bn asset manager APG declined to comment on APG's views on the developments in the euro-zone and the possible consequences for its investment policy.

He said: "As the markets are not only volatile, but also thin, they might be easily affected by movements or comments from large players."

Recently, Angelien Kemna, APG's head of investments, said the asset manager had adopted a 'wait and see' approach due to the volatility of financial markets.