Aegon push for growth is continuing

New pension, annuity plans aimed at the baby boomers


When Dutch insurer Aegon NV, which has its U.S. headquarters in Baltimore, ventured into China in mid-2003, the SARS virus was gripping the nation and Chinese authorities had begun to quarantine thousands of people.

But rather than delay opening for business, the insurer unveiled a new product that would cover SARS-related deaths and medical expenses for a year.

"We didn't sell a whole lot of policies, but it gave us a lot of interesting publicity in China," Aegon Chairman Donald J. Shepard said in an interview yesterday.

The China push is just one way the global insurance company is looking for growth. In the United States, Aegon's largest market, the company plans to accelerate the introduction of new pension and annuity offerings to capitalize on the looming retirement of the baby boomer generation. In Europe last year, Aegon launched operations in the Czech Republic and established two ventures in Spain.

Aegon reported yesterday that its net income climbed 21 percent last year to $3.4 billion, including a fourth-quarter profit of $819 million, or 49 cents per share. Profit rose 2 percent in the quarter when counted in euros, but in dollars the figure decreased because of currency calculations.

While most growth came in Aegon's major markets -- North America, the Netherlands and Britain -- Shepard said the company is spending capital in other countries such as China in anticipation of big returns in the future.

"It's really just taking advantage of where there is growth," said Lance Burbidge, an analyst at Bear Stearns & Co. in London. "A place like China clearly does have strong growth potential, but the value creation for the company is a long way off."

Business outside Aegon's three major markets contributed about 5 percent to the company's earnings last year, and that will double to 10 percent within three years, according to Shepard, who formerly headed Aegon USA. "You have to have a lot of patience in China," he said.

The Aegon-CNOOC Life Insurance Co. received a license in January to operate in the affluent Chinese province of Shandong, becoming one of the first foreign insurers to gain access there.

Under Chinese rules, Aegon needed a local partner and has been working with the Chinese National Offshore Oil Corp., or CNOOC, which failed in its bid to take over the American oil giant Unocal but frequently does joint ventures with foreign companies. Aegon also has offices in Shanghai, Beijing and Nanjing.

Growth might be more difficult to come by in the United States where competition for insurance and retirement plans is fierce, analysts said. Aegon's strategy involves rolling out new products aimed at helping baby boomers in retirement, especially as retirees are living longer and having to stretch their savings.

Variable annuity sales in the Americas, which include Canada, grew 19 percent last year, representing new deposits of $6.3 billion. One of Aegon's latest products is the "5 for Life" annuity, under which income is deferred for a decade while the account balance grows. After that, retirees can withdraw 5 percent annually from the account for the rest of their lives.

One barrier to Aegon's growth has been the rising interest-rate environment in the United States, which limits the spread between what the company has guaranteed in payouts and what it can make on investments.

Nonetheless, Shepard said he expects "momentum" for earnings growth to continue this year in the company's core markets while it invests in new frontiers. "Our business is a long-term business so we need to grow it for the future, not just today," he said.

Aegon's American depositary receipts, which are traded on the New York Stock Exchange, slipped 40 cents, or 2.5 percent, to $15.86 yesterday. The company also announced a 7 percent increase in its 2005 dividend to 0.45 euros ($0.54), which shareholders can elect to take in cash or stock.

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