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Insurer Aegon takes 3 billion euros in state aid

Insurer Aegon takes 3 billion euros in state aid

Insurer Aegon NV said Tuesday it has taken a 3 billion-euro ($3.7 billion) investment from the Dutch government, acting to shore up its cash position in the face of the continuing global financial crisis.
The company also said it expected to post a loss of around 350 million euros ($436 million) in the third quarter and canceled dividends and executive bonuses for the rest of the year.
"We welcome this additional capital buffer that the Dutch state has provided ... in this time of uncertainty and unprecedented economic turmoil," chief executive Alex Wynaendts said in a statement. As recently as Oct. 9, Wynaendts said Aegon could maintain its credit ratings without raising fresh capital.
The government aid is the latest of many such interventions across the U.S. and Europe. In Aegon's case the question appeared to be when and how, rather than if, it would need support.
Aegon's shares closed 11 percent lower Monday at 3.38 euros ($4.21) on speculation a deal was imminent. They fell 4.1 percent to 3.24 euros ($4.04) in Amsterdam Tuesday and have now fallen amost 75 percent since January.
The company had been tapped as one of Europe's most vulnerable because it has two-thirds of its operations in the U.S., where it operates insurer Transamerica. It also is well represented in Britain, the hardest hit among European economies.
Of the four major Dutch financial companies in existence at the start of October last year, ABN Amro and Fortis have been nationalized, and ING Groep NV and now Aegon both have taken state support.
Aegon's deal is structured on terms similar to a larger package the Dutch state gave ING Groep NV last week: the company has sold a special class of shares that pay interest of at least 8.5 percent per year. But Aegon has the right to buy them back at a premium _ for 4.5 billion euros ($5.6 billion) _ if markets recover. That limits dilution to current shareholders.
If the 750 million new shares,issued at 4 euros ($4.99) each, were converted to common shares, they would represent around a 47 percent stake in the company. The shares are nonvoting, but give the Dutch state will name two members of Aegon's supervisory board.
The company said after the move it will now have 5 billion euros ($6.2 billion) in surplus cash, and 300 million euros ($373 million) more than it needs to maintain an AA rating from Standard & Poor's _ the highest corporate rating.
"We are pleased that Aegon has strengthened its balance sheet ratios to such an extent that we no longer have to fear a dilutive share issue," said Petercam Securities analyst Ton Gietman in a note on the deal. However, he said the company "may be overcapitalized in the near future," putting an unneeded drag on earning. Interest on the shares is 255 million euros per year.
Aegon said its "underlying earnings" _ a nonstandard measure _ were around 500 million euros (US$623 million) in the third quarter, with 400 million euros ($498 million) in impairment charges and 400 million euros in "underperformance of fair value items (investments)."


Updated : 2021-02-27 15:23 GMT+08:00