Dutch insurer strikes record $3.5bn US deal

Aegon, the Dutch insurer which owns Scottish Equitable, yesterday pulled off the largest life insurance acquisition in the US and the biggest ever by a Dutch firm when it struck a $3.5bn (pounds 2.1bn) deal to buy Providian Corporation of the US.

The acquisition, which is expected to be concluded in the first half of the new year, will increase the size of Aegon by 25 per cent. It will almost double the size of the group's US earnings.

Providian Corporation is based in Louisville, Kentucky and consists of Providian Bancorp, a consumer lending organisation, and three insurance divisions - agency, direct insurance and capital management.

The three insurance operations will become part of Aegon USA, while Bancorp will be spun off to existing Providian shareholders immediately prior to the acquisition.

The deal involves a tax-free share swap under which Providian shareholders receive Aegon shares worth $2.62bn and Aegon USA takes over loans worth $780m and preferred stock worth $100m.

"This record-setting acquisition is fully in line with Aegon's stated strategy. It is earnings enhancing, highly compatible and will provide a healthy boost to our growth into the next century," said Kees Storm, chairman of Aegon.

Irving Bailey, chairman of Providian Corporation said: "The deal provides our insurance activities with a committed partner ... while freeing Providian Bancorp to develop its considerable potential as an independent consumer lending specialist."

"Our shareholders thus end up with stakes in two strong and successful companies, each a fast growing leader in its respective field," Mr Bailey added.

The deal comes at the end of a year which has seen rapid consolidation in the insurance industry world-wide.

The industry is facing fierce competition from new entrants to the business, such as banks, as well as fighting rising costs.

In the UK, Royal and Sun Alliance merged earlier this year putting hundreds of jobs of risk.

Two French insurance companies, AXA and Union des Assurances de Paris, also announced merger plans in November to create the world's second- largest insurance company after Nippon Life of Japan.