Aegon plans to repurchase EUR 1 billion worth of its common shares between now and the end of 2007
EUR 500 million will be repurchased through an agreement signed today; Aegon plans to repurchase another EUR 500 million worth of shares before the end of 2007
Share repurchases will form an integral part of Aegon's overall capital management strategy
Aegon expects more efficient use of capital over the medium term, driven by a shift in product mix to less capital intensive products, and application of the Group's internal Market Consistent Framework
Additional returns of surplus capital to shareholders will not affect Aegon's current investment plans for its businesses, including possible add-on acquisitions
Interim dividend for 2007 increased by 25% to EUR 0.30 per common share
Aegon announces that it will start repurchasing common shares as part of its overall capital management strategy. A share repurchase program totaling EUR 1 billion has been authorized for 2007. Today, Aegon has entered into an agreement with a third party under which Aegon has irrevocably committed itself to purchasing EUR 500 million worth of shares before December 14, 2007. Aegon plans to carry out one or more other transactions to complete EUR 1 billion worth of repurchases in total before the end of this year. Aegon will seek approval from its shareholders at the next Annual General Meeting to cancel all common shares repurchased as part of this program.
Based on the total program value of EUR 1 billion, the number of common shares to be repurchased under this program will be approximately 74 million, using the closing share price of August 8, 2007. This represents 4.5% of Aegon's issued and outstanding common shares and 3.4% of Aegon's total issued and outstanding share capital. Under today's agreement, Aegon will repurchase shares at the average of the daily volume weighted average prices minus a discount. Aegon will publish details on a weekly basis of all transactions carried out under this program.
In recent years, Aegon has achieved significant growth in its value of new business. At the same time, the Group's existing operations have shown healthy capital generation, primarily as a result of benign world financial markets, while opportunities for significant value-enhancing acquisitions have been limited. Aegon's share repurchase program will not affect the Group's organic growth, nor will it limit Aegon's ability to carry out value-enhancing add-on acquisitions in the future.
A number of developments are allowing Aegon to adopt a more proactive and efficient approach to capital management over the medium term. Aegon's recent strong financial performance has been paired with a shift to less capital-intensive businesses, particularly in the Group's North American operations. At the same time, the market for securitizations of life insurance portfolios has developed more attractive pricing characteristics, making securitization a potentially more effective capital management tool. With increased hedging of market risks and the application of the Group's own internal Market Consistent Framework, Aegon believes its business will become increasingly more capital efficient in the medium term.
Aegon is also announcing today an increase of its interim dividend for 2007 to EUR 0.30 per common share. In line with its stated policy, Aegon aims to further increase dividend payments to shareholders in the years ahead, subject to continued strong cash flows and a solid capital position.
Share repurchases will form an integral part of Aegon's overall capital management strategy. Aegon expects that the introduction of this additional capital management tool will have a positive effect on its net (underlying) operating earnings per share in the future.