Dutch insurer Aegon became the latest Dutch financial company to tap into government funding on Tuesday, taking €3 billion ($3.7 billion) to strengthen its capital base eroded by investment losses and exposure to risky investments.
Aegon, based in The Hague, said in a statement it now expects impairments of about €400 million before taxes and a net loss of €350 million for the Q3, adding that it is scrapping its year-end dividend payment. Shares in Aegon, which had fallen since early September by 60% to lows not seen since 1993, were trading flat in Amsterdam at €3.37. The DJ Stoxx European insurance index was down 1.6%.
The Dutch Finance Ministry said Aegon was a “healthy and well-run” insurance business and CEO Alex Wynaendts sought to reassure investors and policyholders of its solvency. “There should be no doubt whatsoever about Aegon’s ability to fulfill its long-term obligations,” Wynaendts said on a conference call.
The Dutch government will also appoint two directors to Aegon’s supervisory board who will oversee auditing, compensation and nominations, and Aegon’s senior management will forego all performance-based income, in cash, options or shares, for 2008. The capital injection will be provided to Aegon’s largest shareholder, a foundation that controls 34% of the company’s voting rights. This will in turn buy non-voting perpetual securities, convertible into shares, from the company.
Terms of the injection are nearly identical to the deal between the Dutch government and financial group ING announced last week. After one year, Aegon will be able to buy back the securities it issues at 150% of face value, or €6 per share, or convert them into shares. The securities carry a coupon of at least 8.5%. Earlier in October, the Dutch government said it would set aside €20 billion to protect financial companies.
Smaller firms such as SNS Reaal, Van Lanschot and BinckBank have said they did not need any government money. Aegon said shareholders’ equity stood at €9.4 billion at the end of September. Dutch companies typically pay out dividends twice per year, and Aegon has decided to forego its end-2008 dividend. It paid out a dividend of €0.30 in September. (Reuters)