Posted on Dec 10, 2010 by Sergio Ulloa
The Dutch life insurer Aegon has announced plans to restructure its organization with strengthening of its Asian and US operations. Alex Wynaendts - Aegon's global Chief Executive - set out plans for key changes in the group's management structure at a recent investor conference.
As part of the strategy, Aegon has created a new Chief Executive position to cover the Asian region, with the appointment of the experienced Douglas Henck taking up the specially created role of Chief Executive Aegon Asia. Douglas Henck has spent over 25 years in international insurance, with a specific focus on Asia, and will start his new position early next year.
In the past Aegon has managed its Asian business operations from the USA, but will now establish an Asian headquarters in Hong Kong. The decision to set-up a regional Asian base is designed to capitalize of the group's expertise in the provision of leverage products for life insurance, pensions and asset management, with the overall aim of capturing cost efficiencies and growth of business in the Asian region.
Aegon, the owner of the Transamerica Corporation which was bailed out following the worldwide financial crises in 2007/ 2008, is to improve and strengthen Asian and US business activities to capture a larger slice of the regional markets in the life, pension and asset management sectors.
In the United States, Aegon is setting its sights on growing its market share in the US life and protection industry, while taking measures to cut out less profitable existing operations.
Aegon emphasized that declining interest rates in the US are likely to adversely impact on 2011 earnings and, in order to combat this effect, intends to cut its workforce in the USA by 5 percent.
In addition to job cuts, Aegon said it will discontinue the selling of new executive non-qualified benefit plans and the associated life insurance business.
Talking about the future, Alex Wynaendts Aegon's global CEO said "The steps we are taking are aimed at sharpening our focus on the clear opportunities for our core business, implementing significant cost efficiencies in the United States, Europe and in Asia for the benefit of our customers, business partners and shareholders."
Cost cutting is also planned for the UK life and pension business in order to increase the company's return on capital. As in the US, the UK financial and insurance markets have struggled to achieve growth in the last few years.
Aegon said that resulting job cuts will cost US$80 million, with US$60 million being deducted from fourth quarter earnings in 2010 and the remaining balance factored into 2011 earnings.
There is a suggestion that the Aegon reinsurance unit - Transamerica - could be sold to repay funds provided as part of the bail-out package.
Asia, especially China and India, has become the prime focus for global insurers seeking markets with higher potential financial returns and better opportunities for growth.
Aegon is following in the footsteps of many global insurers and financial institutions by focusing on expanding markets - especially the Asian region. Asia has emerged from the worldwide banking crisis three years ago as a rapidly expanding growth market, with China and India predominately leading the charge in the world's economic recovery. Aegon will be looking to optimize opportunities in Asia, with the implementation of its new organizational structure.
The Dutch government was called upon to rescue Aegon in 2008 at the height of the financial crisis, with the Dutch insurer currently working towards a plan to repay the European Union Commission for the bailout. Aegon reported net income of US$872 million for the third quarter of 2010, a significant improvement compared to the US$ 192 million generated during the same quarter in 2009.
Insurance Companies mentioned:
AEGON is present in more than 20 countries in the Americas, Europe and Asia, employing 28,000 people and serving more than 40 million customers. AEGON's ambition is to be a global leader in helping its customers secure their financial futures and, in doing so, to grow its businesses profitably and sustainably. AEGON products include life, pensions, life reinsurance, individual savings & retirement products
Transamerica Reinsurance is a division of Transamerica Life Insurance Company, an AEGON company. It is one of the largest life reinsurers in the U.S., offering broad capabilities in risk, capital and expense managements to help companies improve the competitiveness and profitability of their life and annuity products. Transamerica Reinsurance supplies automatic and facultative reinsurance, product consulting and development and alternative underwriting solutions to more than 500 companies in North America, Asia-Pacific, Latin America and Europe.