THE HAGUE, Netherlands - Aegon NV shares closed unchanged yesterday, the day after the No. 2 Dutch insurer's biggest shareholder agreed to pump as much as 2.35 billion euros ($2.28 billion) into the company to help avert a cut in its rating.
The shares ended at 11 euros after rallying as much as 6.8 percent.
The shareholder, Vereniging Aegon, will sell 25 percent of Aegon's stock and reinvest part of the money in the company. Aegon's U.S. operations are run largely from Baltimore, though its formal headquarters is in San Francisco.
European insurers including Zurich Financial Services AG and Legal & General Group PLC have said they will tap investors for at least $5 billion in new money to shore up reserves as investment losses deplete funds needed to pay claims and back new business.
"It's better news for Aegon shareholders because they're not being required to buy new shares," said Iain Beattie, deputy chief investment officer at Edinburgh Fund Managers, which has assets of about $8.8 billion, including Aegon.
Shares in Aegon have lost 64 percent this year on concern the company also might have to sell new stock to bolster funds. Aegon reiterated Sunday that profit this year will fall as much as 35 percent to between 1.6 billion and 1.7 billion euros.
Under the agreement reached Sunday, Vereniging will sell 350 million Aegon shares, worth 3.85 billion euros at Friday's close, and cede majority control of the company.
Vereniging will use at least 1.5 billion euros of the proceeds to cut its own debt and will reinvest the rest in Aegon by boosting the capital backing preferred shares it already owns. Those shares pay an annual dividend based on the capital invested, which this year is 5 percent. Aegon, whose capital fell 11 percent in the first half to 13.6 billion euros, will get money without having to issue new stock and dilute earnings per share for existing investors.
"We're comfortable with our solvency but in these volatile times it's prudent to run our capital levels higher," chief executive Don Shepard said at a press conference yesterday in The Hague. "The association is giving us an opportunity to do that in a nondilutive way."
The Dutch insurer risked having its ratings cut at Moody's Investors Service and Standard & Poor's, which said in July it would lower Aegon if it didn't raise enough capital by year's end.