VIG rises to ‘number one’ in Hungary as Aegon exits with €620m deal to settle debt

Vienna Insurance Group (VIG) has acquired a 100% stake in the Hungarian businesses of Dutch insurer  Aegon for gross proceeds of €620 million, in a move that positions  VIG to take over the market leadership in Hungary, whilst allowing  Aegon financial flexibility to reduce its debt and strengthen its balance sheet.

Having received the approval from the local Hungarian authorities, VIG Group has completed the biggest part of the planned acquisition of the entire Aegon CEE (Central and Eastern Europe) for €830 million. The sales of Aegon’s businesses in Poland, Romania and Turkey are expected to be completed in the course of 2022, subject to required local regulatory approvals.

Aegon’s divestment of its Hungarian businesses will result in a “significant increase” of cash capital at the holding, which amounted to €1.3 billion at the end of 2021, bringing it above the stated operating range of €0.5 billion to €1.5 billion.

It will provide Aegon with the financial flexibility to reduce its debt through a €375 million tender offer, and potentially return surplus cash capital to its shareholders via a €300 million share buyback, “barring unforeseen circumstances”.

The share buyback will be executed in three tranches of €100 million each, during the course of 2022, with each tranche “conditional” on maintaining the capital positions of Aegon's main units in line with its targeted ambitions, and the Cash Capital at the Holding being above the middle of the operating range.

After the sale, Aegon’s IFRS equity will increase by approximately €400 million in the first quarter of 2022, of which approximately €375 million will be recognised as a book gain, based on the balance sheet position on December 31, 2021.

Together with the existing VIG insurance company UNION, VIG Group will become “the market leader in Hungary” with a market share of over 19%.

"With the closing in Hungary, we will achieve our target of being among the top three in the market by the end of 2025 already in 2022 and take over the market leadership in Hungary,” according to VIG chief executive officer Elisabeth Stadler.

"We have been represented in Hungary for 26 years and pursue a long-term market strategy,” explained Stadler. “With the attainment of market leadership in the Hungarian market, a significant player has emerged in the insurance and pension sector.”

Lard Friese (pictured), chief executive officer of Aegon, said: “Today’s announcement marks an important step in the transformation of Aegon as we narrow our strategic focus to select core and growth markets, and further strengthen our balance sheet.”

“I am very pleased that by further reducing our debt, we are able to deliver on our deleveraging goal well ahead of our 2023 target date,” he added. “Today’s announced share buyback also underscores our intention to return surplus cash capital to shareholders.”

Did you get value from this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.