Aegon receives €3 billion government support

The Dutch government has indirectly purchased €3 billion in shares in Aegon, the insurance giant, making it the second prominent company to tap the €20 billion scheme provided by the Dutch state.

The announcement came the day after Belgian bank KBC sold securities worth €3.5 billion to the Belgian government to boost its Tier 1 capital ratio above 8%.

Aegon’s shares have fallen 72% this year, hitting a low of €3.07 today compared to €12.20 on January 2. The firm is expecting a net loss of €350 million for the quarter.

Before the end of November, the Dutch government will acquire 750 million non-voting securities at €4 each in Aegon through its largest shareholder, the holding company Vereniging Aegon.

The terms of the deal replicate those surrounding the Dutch state’s €10 billion injection into the financial services group ING on October 21.

Aegon can terminate the deal by redeeming the value of securities in cash at 150% of the issue price or by converting them to ordinary shares after three years. It can also return €1 billion to the State at any point within the next twelve months should financial markets improve.

Although the government will have no stake in the company, it will nominate two supervisory board members. They will have the right to veto decisions on “substantial” acquisitions or investments, as well as changes in capital levels, and proposals to amend remuneration schemes. The government representatives will also sit on the audit, remuneration, nomination and corporate governance committees.

Finally, Aegon’s executive board will forgo all bonuses for 2008, while redundancy packages will be limited to one year’s fixed annual salary. The company will also pay no dividend for 2008.

On October 9, the Dutch finance ministry and central bank established a pool of €20 billion, which any “financial enterprise that is fundamentally sound and viable” could tap. The offer is due to end on October 10, 2009.

See also: ING’s CFO departs after it received €10 billion from Dutch government ING becomes latest member of helping hand scheme
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