AEGON, THE Dutch insurer, yesterday took a €3 billion capital injection from the state, becoming the latest Benelux financial company to accept government cash after its shares lost more than three-quarters of their value in the past year.
"Even healthy people put an extra jumper on if it gets cold," said Wouter Bos, finance minister. "We've given that extra jumper to Aegon." However, in spite of an initial rally, Aegon's shares again fell heavily yesterday, hitting a 16-year low at one point, and closing 13.5 per cent lower at €2.93.
Investors appeared concerned that although the deal did not dilute current shareholders, it would reduce earnings.
The capital injection came a day after Belgium pumped €3.5 billion into KBC, its biggest lender, and just over a week after ING, the Dutch banking and insurance group, accepted a €10 billion government investment.
Aegon said it had asked for the government money in order to dispel doubts about its capital buffers. Aegon will scrap its final dividend for 2008, its board will give up all cash and share bonuses for 2008, and the government will appoint two supervisory board members.
"The fact is business partners, distributors and, most importantly, our customers want to know that they are dealing with a strong, reliable company that will be there for the long term," said Alex Wynaendts, chief executive.
The group's excess capital in its operating units had fallen to €300 million over a level justifying its AA credit rating at the end of the third-quarter from €842 million at the end of the second quarter.
The company expects to make a €350 million net loss for the quarter, due to losses on investments and impairments related to mortgage-backed securities and losses associated with the collapse of Lehman Brothers and Washington Mutual.
The terms of the capital injection are almost identical to those agreed with ING and KBC. The government will buy non-voting securities that pay an 8.5 per cent coupon as long as Aegon declares a dividend. The payment rises over time. - ( Financial Timesservice)
