3rd UPDATE:Aegon To Sell Taiwan Operating To Consortium For EUR65 Million

Dutch insurer Aegon NV (AEG) said Wednesday it will sell its unprofitable Taiwan operation to a consortium led by the chairman of Taiwan's Meifu Property Development Group for NT$3 billion (EUR65 million).

Aegon is the latest European insurer to exit Taiwan or scale down operations on the island to reduce their capital burden. Taiwan is one of the world's most saturated insurance markets and companies are struggling to deliver the high returns promised to policyholders.

The Dutch insurer said the sale will result in a total negative earnings impact of approximately EUR400 million in the second quarter of 2009, resulting in a charge of approximately EUR300 million to shareholders' equity. But it said it expects the sale to have a positive effect on future earnings.

Aegon's Taiwan operation had a 2008 net loss of EUR103 million. As of the end of last year, it had about 1 million clients and assets totaling NT$187.2 billion. Its net worth was NT$4.8 billion and its embedded value approximately EUR70 million.

"Our decision to divest our Taiwanese life business is a result of Aegon's strategic priorities to optimize capital allocation and returns, announced last June," Aegon Chief Executive Alex Wynaendts said in a statement.

"Aegon continues to view Asia as an important growth market. We will focus our attention on further developing Aegon's Asian platform, which we believe offers significant growth and return prospects in the coming years."

Meifu Chairman Tom Peng Cheng-hao is leading the consortium, which also includes P.F. Lin, president of Taiwan Glass Industry Corp. (1802.TW), Aegon Taiwan said in a separate statement.

A person familiar with the transaction said earlier the "headline number" of the deal's value would be around NT$3 billion, but the actual amount that Meifu pays would be more than NT$1 billion after "some adjustments." He didn't elaborate.

James H.C. Liu, the current president of the operation who will become chairman after the company is transferred to the new shareholders, said at a press conference he couldn't comment on the size of the deal.

Liu said the new shareholders have pledged to increase Aegon Taiwan's capital by at least NT$10 billion in the long term for future expansion, from the current NT$27 billion.

He said Aegon Taiwan will focus on the domestic market.

"We have solicited full financial support from our cash-rich new investors, but for now, we don't have any China plan," said Liu. "We do aim to become a listed company in the next five years."

He said Aegon's Taiwan operation, which employs 500 people as well as about 750 sales agents, will use the Aegon company name for a few more months.

The deal will be completed within one to two months, depending on regulatory approval, he said.

Liu added that after the transfer of ownership, the Taiwan operations won't be involved in the plan by Aegon and Taiwan's Taishin Financial Holding Co. (2887.TW) to set up a bancassurance joint venture.

"Based on my understanding, the two sides remain highly enthusiastic about the plan," he said.

-By Perris Lee Choon Siong, Dow Jones Newswires; [phone]; [e-mail]