The insurer confirms its strength despite receiving government cash injection
Aegon is reassuring UK customers about the strength of the group, despite taking a EUR3bn (£2.4bn) investment from the Dutch government to shore up its finances. On 9 October, the Dutch government announced £15.9bn of capital available to fundamentally sound financial sector companies.
Alex Wynaendts, chief executive officer said the agreement would, "strengthen Aegon's position during this period of uncertainty and unprecedented economic turmoil. There can be no doubt whatsoever about Aegon's ability to fulfil its long-term obligations."
Market conditions forced Aegon to accelerate measures to reduce risk and free up extra capital. The insurer hopes these measures, plus additional capital from the Dutch State and foregoing a final dividend for shareholders, will allow it to maintain its AA rating requirements.
Aegon is accessing the capital through its largest shareholder, Association Aegon. In return for the cash, Aegon will issue securities to Association Aegon. The Association will use income from these securities to service its loan from the Dutch State.
Aegon is not the first European insurer to receive state aid. On 20 October, the Belgian government injected EUR1.5bn into mutual insurance group Ethias.
Andy Couchman, director of financial services consultancy Bank House Communications, said: "The biggest hits are going to be on those insurers that are most diverse. From then, it depends on the strength of firms' balance sheets."
In the UK, on 30 October, Standard Life said its capital position was strong despite the stock market slump. On 30 September, it had a capital surplus of £3.4bn, compared with £3.5bn three months earlier. The insurer said a 40% drop from 30 September would see the buffer fall to £1.9bn. A company statement said: "Our financial group directive surplus is still strong in the event of further market weakness."
Falling stock markets are also taking their toll on Legal & General (L&G). L&G's insurance group directive surplus stood at £2.9bn in mid-October, down from £3.4bn at the end of June. With equity markets having fallen in the meantime, it can be assumed to have worsened since then.
Aviva's capital buffer has fallen from £1.9bn in September to £1.3bn. The company said, "it did not intend to seek any financial assistance," and could withstand another 20% drop in markets.
Couchman added: "I expect the FSA to take the view that assets are undervalued and to bring in exceptional rules if necessary. We are very unlikely to see failures but a few deals will be done."
The FSA is thought to be assembling a team to look at a range of options to assist insurers, including relaxing rules on accounting and capital requirements.
