The partners will create a joint venture, which will combine CAM's significant customer reach through its banking network and Aegon's expertise in life insurance and pensions. The joint venture will benefit both current and future customers and is expected to become one of the key players in the Spanish life insurance and pensions market.
During the past five years the Spanish life insurance and pensions market has grown strongly and is currently one of the faster growing markets in Europe. Banks have proven to be the preferred intermediary by Spanish customers and have contributed much to the recent growth of the market.
The partnership strengthens CAM's insurance activities and is in line with the company's objective to become one of the leading providers of life insurance and pensions in Spain. The partnership is consistent with CAM's major national expansion plan and diversification strategy, and will enable the company to broaden its product portfolio.
The partnership reflects Aegon's continued commitment to its long-standing strategy to focus on life insurance and pensions in selected countries offering profitable growth opportunities. The partnership also enables Aegon to expand its existing franchise in the Spanish market.
Roberto López, Managing Director of Caja de Ahorros del Mediterráneo, commented: "The increase in the range of financial products provided through CAM's branches is part of our overall expansion and diversification strategy, which goes beyond just the opening of new branches. With this partnership CAM will become one of the leaders in bancassurance and will develop into one of Spain's top financial institutions."
Donald J. Shepard, Chief Executive Officer and Chairman of the Executive Board of Aegon N.V., said: "We are very pleased to partner with such a professional and respected partner as Caja de Ahorros del Mediterráneo. Combining the strengths of Aegon and CAM, the joint venture is very well positioned to become a leading player in the fast growing Spanish life insurance and pensions market. The exclusive use of CAM's banking network to sell life insurance complements Aegon's existing distribution channels in Spain."
Deal structure
CAM and Aegon have agreed to establish a new Spanish holding company, which will be owned 50.01% by CAM and 49.99% by Aegon. CAM will contribute 100% of its insurance subsidiary Mediterráneo Vida to the holding company and provide exclusive access to its customer base through its network of 851 branches. Aegon will contribute EUR 150 million in cash to the holding company and an additional EUR 250 million in high quality financial assets. At the end of the fifth year, the final valuation of the insurance subsidiary will be determined on the basis of achieved performance and according to a pre-agreed formula.
After the tenth year, parties have agreed to reassess the legal structure in place and both have the right to unwind the holding company without terminating the partnership. If it is decided to unwind the holding company, CAM and Aegon each will own 50 percent of the life insurance company directly. The EUR 250 million in high quality financial assets plus accrued investment income will return to Aegon. The remainder of the assets of the holding company will transfer to CAM.
CAM will consolidate the financial accounts of the holding company.
The partnership is established for a period of 30 years, renewable thereafter.
CAM and Aegon will jointly develop the life business of the joint venture. In 2002 life premiums of Mediterráneo Vida amounted to EUR 574 million. The company will provide a full range of life insurance products and will draw on Aegon's international expertise in product development, operations and distribution. Management of the life operations will be shared by CAM and Aegon, while CAM will nominate the CEO of the operation.
The partnership is subject to regulatory approval.
