Aegon CEO: Consolidation, M&A Needed To Boost Cost Savings
June 09 2009 - 9:06AM
Dow Jones News
Dutch life insurance and pensions provider Aegon NV (AEG) said
Tuesday it aims to achieve cost savings by consolidating its
operations and is looking at potential acquisitions, perhaps from
next year.
"That (consolidation) could be within our operations, but in
particular, also, within the markets where we operate in," Aegon
Chief Executive Alex Wynaendts told reporters in London.
The comments indicate that Aegon remains acquisitive even though
it is currently focused on finding ways of strengthening its
capital position.
Wynaendts said that in the U.S., for example, "I can well see
that in the area of pensions ... there is clearly going to be
opportunities for market consolidation."
"That's an area we would like to consolidate and do an
acquisition so that we can become a bigger player in that market
segment," he said.
Wynaendts expects consolidation within the insurance industry to
kick off from 2010, with cost reduction an important feature of any
acquisitions. "In past years, it was all about expanding in new
markets and expanding revenue," he said. "What's taking place is
that margins are under pressure. So that means you need to take
action. The action we've been taking organically by reducing our
costs is an important step."
"But it also means that in general, more consolidation within
markets segments, within a certain country or within a certain
segment. That is the best way of reducing cost," he said.
"We're very focused on realizing cost synergies. That's
important - putting two organizations together and taking out the
costs. That will be an answer to reduced margins," Wynaendts said.
Aegon has a EUR150 million cost savings target this year, one-third
of which was achieved in the first quarter.
However, Wynaendts said that under current market conditions it
was hard to establish the correct valuation of any potential target
acquisition. "Valuations are not very high when you look at stock
market valuations, but there's also no activity taking place so its
hard to judge valuations," he said.
Asked when he expects valuations to stabilize, Wynaendts said:
"It's clear that we've seen a dramatic development in markets, but
this could change again. And our view is that there is still a lot
of uncertainty out there."
"So trading conditions will remain challenging for the rest of
the year. I'll reassess after that," he said.
Company Web site: www.aegon.com
-By Vladimir Guevarra, Dow Jones Newswires; +44 (0) 20 7842
9486, vladimir.guevarra@dowjones.com