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Three-billion-euro cash injection for Dutch insurer

RNW News

28-10-2008

Dutch insurance giant Aegon is to receive three billion euros from a government emergency fund. The cash injection is considered necessary in order to strengthen the company's core equity capital.

At a press conference, Dutch Finance Minister Wouter Bos stressed that Aegon is "in incredibly good health". He added,

Dutch Finance Minister Wouter Bos
Dutch Finance Minister
Wouter Bos

"The general situation is serious to the extent that even the healthiest of companies can get into difficulties. We will help them through these rough times."

Early in October, Aegon's recently appointed chairman, Alexander Wynaendts, announced that his company was faced with a 275-million-euro loss as its investments in failed or nationalised American banks plummeted. The company expects its net loss over the third quarter of 2008 to total 350 million euros.

Conditions
Mr Bos pointed out that the money will be given under strict conditions. In exchange for its support the government will receive shares in the shape of securities. Aegon may later be able to buy these back from the government, at a higher price.

Aegon insurance offices
Aegon is an international insurer with some 40 million clients, most of them in the United States, the United Kingdom and the Netherlands.

Some 30,000 people are employed by Aegon.
Its business includes life insurance, pension schemes, health insurance and damage insurance.

The cabinet is also nominating two members on the Board of Supervisors who have the last say in important decisions. As a further measure, Aegon's top management will not be receiving any bonus payments this year. Severance packages will be limited to one year's salary.

Shortly after the government announcement, Aegon shares rose by 1.8 percentage points on the AEX index at the Euronext-Amsterdam stock exchange.


No rush
Earlier this month the government in The Hague created a bailout fund of 20 billion euros to safeguard bank capital and liquidity amid the global credit crisis.

Two weeks ago Dutch bank insurer ING was the first company to request help from Finance Minister Wouter Bos' emergency fund. ING was granted a capital injection of ten billion euros. So far, no other banks or insurers have applied to the government for support.

 

Tags: Aegon, credit crisis, Dutch finances, Wouter Bos

Reaction(s):


Johan Behanzin, 30-10-2008 - Neth. Antilles

Interesting interpretation from Mr Bos. If 3 billion is needed for an insurer in 'extremely good health', what would it take to assist less healthier companies? These bailouts are getting nastier by the day.

David Berridge, 29-10-2008 - Canada

Why should Aegon receive a package nearly five times its capital and third quarter losses combined, if it is in a financially healthy state? With not all that many places to loan or invest, this extra capital infusion seems not to suit either an immediate or necessary purpose. What does Aegon have (or not) in derivative investments (such as AIG) that would require such an excess capital base for an insurance company? What risk levels are rising in other investments that have made the actuaries desire further capital insurance against potential near term losses? This is a very curious situation. One billion euros cash up front and a guarantee over two billion euros as a contingency, would make more sense and still reassure investors.

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