Aegon (AEG) Closes Central and Eastern European Units' Sale
Aegon N.V. AEG recently completed the sell-off of its Poland and Romania businesses, which forms the last step of divesting the insurance, pension and asset management business of AEG spread across Central and Eastern Europe to the Austria-based insurance group, Vienna Insurance Group AG Wiener Versicherung Gruppe (“VIG”).
The deal to divest the Central and Eastern European businesses spanning across Hungary, Poland, Romania and Turkey was inked by Aegon with VIG in November 2020 for €830 million. The divestment was completed in three stages.
The first step to completing the deal related to selling AEG’s Hungarian businesses for €620 million, which got slightly delayed due to obstacles thrown by the Hungarian Government but was finally concluded in March 2022. A month later, Aegon announced the closure of its Turkish unit, thereby taking another step closer to the €830 million divestiture deal.
The final step in the divestment deal was completed by the sale of the Poland and Romania businesses for €125 million. At the time when the agreement was inked, management believed that the deal proceeds were likely to boost the financial flexibility of Aegon and lower its debt level.
In fact, the proceeds have encouraged AEG to undertake a debt tender offer by virtue of which its financial leverage has declined significantly last year. Its total debt to total capital of 30.9% at the first-quarter end remains lower than the industry’s average of 37.7%.
Divestitures similar to the latest one also provide an opportunity for Aegon to intensify focus on those business lines and countries with high growth potential. Also, proceeds received from divestitures are often used for returning capital to shareholders via share buybacks and dividend payments.
Aegon remains quite active on the divestiture front. In April 2023, Aegon announced the divestment of its UK individual protection book to the mutual life, pensions and investment company, Royal London. The sell-off will allow AEG to boost concentration and grow its core Retail and Workplace platform activities across the United Kingdom.
Shares of Aegon have declined 14.4% over a year, compared with the industry’s 15.5% decline. AEG currently carries a Zacks Rank #3 (Hold).
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The Reinsurance Group stock has gained 17.8% in a year. However, shares of Employers Holdings and AXIS Capital have declined 9.7% and 8.6%, respectively, in the same time frame.
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