Aegon enters arbitration with Spanish retail bank
From Europe Nov 10 2011 BY: Simon Danaher
, Online News Editor
, International Adviser
Dutch life insurer Aegon has entered in to arbitration with Spanish retail bank, Caja de Ahorros del Mediterráneo (CAM), in order to exit a partnership with the bank after it failed to make the “required business returns” in a distribution agreement.
In January 2004 the two “strategic partners” signed an agreement in which CAM said it would distribute Aegon products via its high street branches in Spain. At the time, the two companies said the deal would “combine CAM's significant customer reach through its banking network and Aegon's expertise in life insurance and pensions” and both clearly hoped it would be a successful cash generator.
Specifically, CAM said the agreement was in line with its objective to become one of the “leading providers of life insurance and pensions in Spain”, while Aegon said the deal would enable it to expand its existing franchise in the Spanish market.
However, Aegon revealed in its third quarter results, published today, that the deal has now gone sour and that it has entered arbitration.
A spokesperson for Aegon said: “The joint venture was not making its required rate of returns and therefore Aegon is taking measures to exit.”
The spokesperson, who is based in the company’s office in Hague, Holland, added that there are “differing views” about what took place but was only able to confirm that this relates to a “change of control” at the bank. According to Aegon, this “change of control” took place when CAM decided to participate in an Institutional Protection Scheme (Sistema Institucional de Protección, SIP) in October 2010.
A SIP is where a group of Spanish banks, usually three or more, effectively pool their assets in order to shore up their balance sheets. In CAM’s case it has integrated with Cajastur and CCM, Caja Cantabria, and Caja Extremadura.
The Aegon spokesperson said the company could not say at which stage the proceedings were at, nor did they wish to speculate on the outcome of the arbitration.