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Dutch Government Invests In AEGON

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The Netherlands is putting the equivalent of about $3.8 billion in cash into AEGON N.V.

The news came as AEGON, The Hague, Netherlands, reported a net loss of $444 million for the third quarter, based on an exchange rate of 1 euro=$1.25 for the third quarter.

The Dutch government invested in AEGON through an AEGON investor, Vereniging AEGON, to avoid direct government ownership of AEGON.

The Dutch government announced Oct. 9 that it would invest the equivalent of $25 billion in capital in companies that are fundamentally sound.

“There should be no doubt whatsoever about AEGON’s ability to fulfill its long-term obligations,” AEGON Chief Executive Alex Wynaendts says in a statement about the capital infusion.

AEGON believes that, given the current market situation, increasing capital beyond what is required for the company’s AA ratings would be prudent, the company says.

The capital increase will complement previously announced risk reduction and capital release strategies, AEGON says.

Standard and Poor’s Ratings Services, New York, responded by affirming the AA long-term counterparty credit and insurer financial strength ratings on AEGON’s main insurance operating entities.

“This capital increase will mitigate the balance sheet concerns highlighted by Standard & Poor’s back in April when we revised our outlook on AEGON to negative,” says Mark Button, an S&P credit analyst. “The maintenance of the negative outlook, however, recognizes that the operating environment in AEGON’s core markets has weakened significantly over recent months. This is likely to result in increased pressure on both AEGON’s earnings profile and its ability to execute on a number of balance-sheet management transactions.”

The rating agency says it views the government capital infusion as a “strong indicator” of government support for AEGON, but it says no explicit government support beyond the infusion is factored into the company’s rating.