The Hague based life insurance, pensions and asset management
) culminated an agreement which allows it to partner with the
largest financial group in Spain, Banco Santander for a period of
25 years. The deal was previously announced in Dec 2012.
As per the deal, the parties formed a joint venture company with
a life and a non-life insurance business wherein Aegon acquired
51% stake in a life and a non-life insurance company for EUR 220
million or $288.2 million.
Moreover, Aegon's Spain business will serve the back-office
functions for the joint venture operations. Meanwhile, the joint
venture company will utilize Banco Santander's widespread network
of 4000 branches and tap the latter's clientele base of 12
million to provide life and general insurance products.
This long-term alliance is aimed at strengthening Aegon's market
position in Spain and placing it as a leading insurer in the
Aegon has been operating in Spain for more than 30 years through
several bancassurance joint ventures in the region. The aforesaid
joint venture with the leading bancassurer not only boosts its
product portfolio but also enhances the company's competitive
position in European markets. Such efforts are also likely to be
accretive to the company's financials in the long run.
We expect the alliance to bolster the revenues of Aegon thereby
favoring company growth going forward. The long term
earnings growth rate of the company is 18.90%.
In order to fortify its operations, Aegon underwent a
restructuring of its Spanish business last month. It had
initially partnered with Caja de Ahorros del Mediterráneo (CAM).
As part of the restructuring program, Aegon inked a deal to
divest its 50% stake in the partnership with CAM to Banco
Sabadell for EUR 449.5 million or $588.8 million. It also exited
two other joint ventures with Banca Civica and Unnim Banc under
However, Aegon's financials were adversely affected following the
implementation of the new accounting policies. The accounting
policies (IAS 19) negatively impacted Aegon's shareholders'
equity by EUR 1.1 billion or $1.4 billion. Additionally in the
first quarter, excess capital of the company suffered a decline
owing to higher operating expenses and interest payments. Also
the Retail Distribution Review led to a decline in AEG U.K's
operating earnings, the adverse effect of which is expected to
continue through the second quarter of 2013.
Aegon currently carries a Zacks Rank #4 (Sell). Among others in
Assured Guarantee Ltd.
Eastern Insurance Holdings Inc.
) carry a favorable Zacks Rank #1 (Strong Buy) and are worth
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