Aegon chairman of the executive board Kees Storm is noted for being a frank speaker. But even Storm is cagey over acquisitions. As Europe's insurers scramble to seal deals and analysts predict just five major players will emerge over the next few year, Aegon has been tipped as a predator.
In the space of two months late last year, Aegon was rumoured to be preparing a bid for Swedish insurance company Skandia or merging with Dutch bank ABN Amro.
Showing the slightest hint of irritation, Storm admits that he was bemused by the Skandia rumour. He says: "We will constantly be linked with rumours because we have the money and we can do acquisitions. All that talk about us having a £2bn war chest was pretty unsophisticated because we have shown that we can issue shares to fund acquisitions."
Aegon made its biggest acquisition at the end of 1996 when it bought giant US life insurer Providian for $3.5bn.
Aegon took over Scottish Equitable in 1993 and, under a complex arrangement, has seen its share of the company's profits rise to 90 per cent for 1997.
Recent deals in Europe, including the Axa-UAP merger and BAT's decision to merge its financial services business with Zurich Life, have led to analysts' predictions that the long process of consolidation is finally speeding up. So does that mean Aegon is under pressure to do deals? No, says Storm.
He says: "If there is a frenzy, most of the time we do not participate. Between 1986 and 1992, we did not do any major acquisitions. We are sizeable enough so we can afford to be patient."
Storm claims that Aegon's strategy is clear – build on its five key markets in the Netherlands, UK, US, Hungary and Spain. Most of this will be by organic growth, with acquisitions "the icing on the cake".
However, Aegon did make an unsuccessful bid to move into Scandinavia, losing out to Den Norske Bank in the battle to take over Norway's Vital Forsikring in early 1996.
Aegon's failure to seal the deal may be related to what Storm calls the company's "discipline" – not paying over the odds and buying businesses which will meet strict profit and turnover requirements. Aegon demands that any life office in a developed market must have an 11 per cent profit margin. If not, no deal.
Aegon has also been prepared to sell off non-core business. In December, it sold FGH Bank, a Dutch property financing business.
So what does this mean for Scottish Equitable? Storm is adamant that ScotEq will remain Aegon's core interest in the UK. In effect, that would mean ScotEq taking a responsibility for any UK deals.
Storm says: "We have always said that Scottish Equitable is core to us. It would be in line to be involved in any acquisition. If it were a very large company or bigger or the same size as Scottish Equitable, it would still be heavily involved but you could end up with two companies in a holding structure."
The most likely option would be a buying up a small asset manager. ScotEq's strength is in pensions – it has seen its market share rise from 11 per cent in 1993 to 16.7 per cent at the end of 1996 and is vying with Standard Life and Sun Life for the top slot.
But ScotEq has made no secrets of its ambitions to be a top- notch fund manager. In the past year, chief investment officer Russell Hogan has aggressively expanded the investment team to 57 from 48, poaching a number of high-fliers from rival Scottish fund managers.
Hogan's target is to treble pooled pension funds under management to £3bn within the next four years. Stiff targets are also being set for unit- trust funds, currently just £650m spread across 16 funds.
Storm says one of the advantages of snapping up a small asset manager would be the fund management infrastructure.
Like many life offices, ScotEq is aiming to overcome a perception problem – the view that fund management groups are often considered first for Peps and unit trusts ahead of life offices.
"I would like to avoid the situation you saw in the US where life insurers lost a lot of money going into mutual funds. I would like us to be a major player and that includes the UK," says Storm.
In many ways, Aegon has become a City favourite in 1997. In the past 12 months, it has hiked its profit forecast for 1997 on three occasions. It now expects a 36 per cent rise. One major factor has been strict cost control. Since 1986, the Dutch company has seen its expense ratio fall from 16 per cent to 7 per cent.
"Our obsession is with profitability not size," says Storm.
But there are dangers. Storm says his biggest fear is political uncertainty. He says: "Unpredictable governments are the biggest threat to our company. You can live with almost any situation as long as there is certainty. What you can not live with is changing of the goalposts."
Storm has no hesitation in saying that Scottish Equitable will move if Scottish devolution results in punitive and unaffordable taxes. "Wherever life is made impossible, we will move. But I have full confidence that the people in Scotland and the Parliamentarians will not make their good companies go away," he says.
Storm is far more relaxed about the Government's plans for Individual Savings Accounts and stakeholder pensions. Predictably, he is keen to underline his confidence in IFAs. "When we made our deal with Scottish Equitable, people thought it was very strange. Now all of a sudden everyone seems to love IFAs. We believe in individual advice. We try not to follow fashions," he says.
It is difficult to see ScotEq or Aegon rushing into mar kets. At times, this has meant quitting markets which have been hit by squeezed margins or political uncertainty.
For instance, Aegon quit the healthcare market in the US and the Netherlands in 1992. It has yet to return.
Storm, however, is eyeing the long-term care market in the UK and the rest of Europe. But plans seem at an early stage.
He also refuses to rule out the possibility of ScotEq launching a bank to target investors with maturing policies. He says: "We would do everything a bank does but not loans or money transfers."
A key factor in Aegon's expansion is likely to be Scottish Equitable International, which was set up in Luxemburg in June 1995 and headed by Otto Thoresen. The company is being used as a product manufacturing base, allowing ScotEq and Aegon to move into European markets without the hassle of setting up a new life operation or a joint venture. So far, SEI has gone into Italy marketing itself as "The Scottish".
Storm is still not entirely convinced by the opportunities in Italy despite the nation having the highest savings rate in Europe. Other targets include Eastern Europe.
Two years ago, Storm said Aegon expected to expand aggressively in Asia and he predicted the region would provide 5 to 10 per cent of total turnover within 10 years. But he admits that Aegon has been forced to rethink its targets following the turmoil in Asian markets in the past three months.
"I remember sitting in this wonderful economic forum in Singapore three years ago. Everyone was so confident. You had to believe that 8 per cent growth was sustainable for a long period. All of a sudden, it has come crashing down. You can not have unlimited growth like that," he says.
Analysts may be tipping Aegon to be one of the winners in the shake-out of European insurers. But Storm says this is too simple. Yes, consolidation among the existing players is inevitable but a series of new players muscling in is almost as certain.
He says: "What we will see is that the bigger players will become bigger. The UK, US and the Netherlands are the only really open markets and what I predict is that, in the next five years, some companies which have been in these markets will return. You will have lots of companies which will start up again and then be sold."
If Storm is right, we can look forward to another round of bid rumours, consolidation and deals. The Aegon name could well be top of the list as a predator.
Market capitalisation of $25bn
Second-biggest insurer in the Netherlands after ING. Fifteen per cent share of life business, 5 per cent share of non-life.
Estimates 2.5 per cent share of world pensions market in 199l On course for 36 per cent rise on 1997 profits.
Scottish Equitable. Bought in 1993. 100 per cent ownership by the end of 1998. Accounted for 32 per cent of Aegon's group premiums in the first six months of 1997 ending June.
Providian. Giant US insurer taken over for $3.5bn in late 1996. Accounted for 30 per cent of group premium income in 1997.
AB Aegon. Hungarian company influential in opening up the pension market by converting old contracts to new life and pension contracts.