Aegon joins the dash for cash

AEGON, the Dutch financial services giant which owns Scottish Equitable, is to join the insurance industry's dash for cash with a multi-billion pound equity raising that will see its parent company surrender its long-held voting control of the group.

The life insurer, which issued a severe profits warning in July, hopes the restructure will make it more appealing to investors while increasing its ability to capitalise on the industry's growth and consolidation.

It is thought the deal, which is yet to be finalised by Aegon's board, could see it raise up to £3bn through a preference share issue that would dilute the voting rights of parent Vereniging Aegon. Vereniging controls the voting through its 52% ownership of Aegon's preference shares and has 37% of its ordinary stock.

Aegon UK chief David Henderson refused to comment today on the prospect of a huge preference share issue. But Aegon said the restructure would not dilute existing ordinary shareholders, though it would result in a 'realignment' of Vereniging's stake.

However, the assurances did not stop the stock falling 6% in early trading, extending its slump of 47% in the past year. 'No decisions have been taken in relation to timing and quantum of the restructuring,' Aegon said.

News of Aegon's plans come a day after competitor Legal & General said it would raise almost £800m through a heavily discounted rights issue. L&G believes it can use the extra money to grow its market share at a time when many of its smaller peers are suffering at the hands of poor equity markets. The move was seen as a signal that further consolidation is highly likely in an industry where capital constraints are thought to be holding back the growth of small and medium-sized players.

Aegon said in July that falling stock markets and losses in its corporate bonds portfolio, which included an exposure to failed US telecoms group WorldCom, would result in this year's profits being 30% to 35% lower than expected. However, the abrupt end to its long record of solid profit growth has not stopped Aegon pursuing its strategy of expanding into the area of independent financial advice.

It bought 50% of IFA group Wentworth Rose in June and acquired Advisory & Brokerage Services last month. The moves are aimed at enabling Aegon to take advantage of proposed legal changes, known as depolarisation, that will make it easier for life insurers to provide financial advice.