The European Commission has approved, under EU state aid rules applicable to the financial sector in the current crisis, the recapitalisation of the Dutch insurance company AEGON. The decision was taken after a detailed assessment of the company's preliminary plan submitted by the Dutch authorities on 19 November 2009 and of the final plan submitted on 26 July 2010. On 27 November 2008, the Commission had approved the recapitalisation on a temporary basis as a rescue measure. The final plan meets the commitment provided by the Netherlands to show how AEGON will secure its long-term viability, ensure sufficient burden-sharing between the State and AEGON and will offset the limited market-distorting effects of the aid measures. The Commission concluded that the aid was in line with its Restructuring Communication and as such compatible with Article 107.3.b of the Treaty on the Functioning of the European Union (TFEU) that allows aid to remedy a serious disruption of a Member State's economy.
Commission Vice President in charge of competition policy, Joaquín Almunia, said: "The plan that we approved today shows the commitment by AEGON to repay the aid after only two and a half years since the recapitalisation. The measures in the plan also contribute to ensuring a level playing field in the European insurance market"
AEGON is a Dutch company providing insurance and investment services on a global scale. Its businesses include life insurance, asset management and retirement products. It is one of the leading financial institutions in the Netherlands, employing approximately 28 thousand people and serving around 40 million customers worldwide with a total balance sheet of EUR 298.6 billion.
In November 2008, the Dutch State made available €3 billion in new capital for AEGON, in the form of convertible core capital securities. The coupon of these instruments is set to be the highest of either 8.5% or an increasing percentage of the dividend paid on ordinary shares. The repurchase price of the securities is fixed at 150% of the issue price. One third of the securities could be repaid within 12 months at more favourable terms. Alternatively the securities can be converted into ordinary shares after three years from issuance.
The Commission temporarily approved the capital AEGON received on 27 November 2008. The approval was conditional upon the submission of a plan demonstrating how AEGON would secure long term viability and how distortions of competition would be limited to the strict minimum within six months from the rescue decision.
In August 2009 AEGON successfully conducted a capital increase allowing it to repay a first tranche of €1 billion in November 2009.
Under the plan submitted by the Netherlands, AEGON will implement further changes to its activities to rebalance its business model. The businesses affected by the plan are mainly those that were at the origin of AEGON's difficulties: the institutional spread-based business will be closed down and exposure to equity risk stemming from variable annuities is being hedged. The overall size of AEGON USA’s general account will be reduced by USD 25 billion (EUR 19 billion). The plan includes financial projections in a stress scenario and a sensitivity analysis demonstrating AEGON's capacity to withstand adverse developments in the future.
The plan also provides for a repayment schedule for the remaining State capital. AEGON will repay €500 million State aid as soon as possible and prior to 1 December 2010 and the remaining €1.5 billion before the end of June 2011.
Until full repayment of the aid, AEGON will be subject to a price leadership ban in specific segments of the Dutch market and to a rating withdrawal of its main life subsidiary in the Netherlands, in order to limit competitive distortions in the Dutch mortgage and savings and pensions markets. Furthermore, AEGON is subject to an acquisition ban during the same period.
The Commission recognizes the steps that AEGON has already taken in implementing these important strategic measures to enhance the company’s long-term prospects.
© European Commission
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