Last week, AEGON N.V. (AEG) announced an agreement to acquire a 100% stake in Fidem Life from Horizon Capital – a private equity firm in Ukraine. The financial terms of the deal were not revealed. However, the transaction is projected to culminate in the first quarter of 2013, subject to regulatory approval.
Following the acquisition, Fidem Life will become a part of Aegon’s control and management system and be known as Aegon Ukraine. In the beginning, the acquired unit will concentrate on expanding its life insurance business as well as its agency network.
Fidem Life is the fifth largest life insurance company in Ukraine. The country provides significant growth opportunities to life insurance companies due to the low penetration of life insurance products in the market, combined with a large population and a growing middle class that forms the potential client base. Thus, the acquisition should boost Aegon’s market position in the central and eastern European region, where the company started operating in the early 1990s.
Aegon already has a substantial market standing in the central and eastern European region, with a presence in Hungary, Poland, the Czech Republic, Slovakia, Romania and Turkey. The company sporadically undertakes merger and acquisition activities to expand its operations.
In October 2011, Aegon announced a joint venture with Banca Civica to become the sole insurance partner of the latter for life, health and pension insurance products sold by its Caja Navarra and Caja Burgos networks. In July 2011, Aegon announced a joint venture with Unnim to become the sole insurance partner of the latter for its life and pension insurance products.
Aegon currently carries a Zacks #2 Rank (Buy). We maintain a long-term ‘Neutral’ recommendation on the stock. The company’s peer in the life insurance business Cigna Corp. (CI) also carries a Zacks #2 Rank.