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THE AEGON ASSOCIATION CAPITAL REALIGNMENT
Q: During 2002 major European insurers used rights issues to reinforce their capital. How did the transaction with Vereniging AEGON (the Association) differ?
A: AEGON’s capital realignment in September was not a rights issue; no new shares were issued and the transaction was non-dilutive. Instead, our largest shareholder, the Association, reduced its voting interest from approximately 52% to approximately 33% by selling almost one quarter of the company’s common stock worth EUR 3.5 billion. Largely as a result of this transaction the Association was able to lower its own debt and increase the paid-up capital of its AEGON preferred shares by EUR 2.1 billion. Additionally, the transaction widened ownership through a larger free-float of AEGON shares and improved index weightings. The realignment strengthened AEGON’s equity capital and kept leverage within limits applied by AEGON and reinforces AEGON’s capital base.
Q: Why did the Association reduce its holding?
A: The charter of the Association – which dates back to the merger creating AEGON in 1983 – requires it to support AEGON while balancing the interests of all stakeholders. In the past the Association provided material support for our acquisition strategy, by selling part of its AEGON shares to AEGON N.V. for exchange purposes. The buying back of shares in the open market resulted in some debt and as the price of the shares fell, the Association’s leverage rose substantially, resulting in the need to stabilize the Association’s financial base. The capital realignment achieved this, allowing the Association to more than halve its debt burden, and invest EUR 2.1 billion in preferred AEGON shares, which are a stable asset class, while at the same time bringing the Association’s voting interest more closely in line with its ownership interest.
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