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Aegon, Providian set deal
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December 30, 1996: 11:22 p.m. ET
Dutch company Aegon to buy Providian's insurance unit for $3.5B
From Correspondent Rhonda Schaffler
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NEW YORK (CNNfn) - Dutch insurance company Aegon announced plans Monday to buy Kentucky-based Providian Corp.'s insurance business for $3.5 billion.
The deal represents one of the biggest acquisitions so far in the consolidating U.S. insurance market, where Aegon is already the largest non-U.S. player.
Analyst Bob Yates said Monday's pact fits in with Aegon's efforts to grow its U.S. business through acquisitions. (197K WAV) or (197K AIFF)
The Aegon deal represents one in a series of recent acquisitions involving European insurance companies looking to branch out from their saturated home markets.
At the same time, U.S. insurance companies are facing a profit squeeze and new competition from banks.
Herb Goodfriend, an insurance expert at KPMG Peat Marwick, said competition has kept a lid on premiums for consumers.
Thus, he said firms that want to remain profitable must take big steps to win more policyholders.
"Size has its advantage, particularly in a paper-processing business where there aren't very much significant margins and you need the law of large numbers to make money," Goodfriend said. "The greater the number of policies, the easier it is to make money."
Just as more policies means a greater chance of making money, so does operating in the United States.
Demand for insurance is higher in the United States than in Europe, where the industry is growing by just 3 percent a year.
By purchasing Providian, Aegon believes it can boost its own profits by 5 percent annually.
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Providian
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