DUTCH insurance giant AEGON is completing its creeping takeover of Scottish Equitable, the UK's largest provider of private pensions, with an earlier-than-expected cash injection of #325m.
The money will be paid shortly into a fund that pays bonuses to Scottish Equitable's with-profits policyholders.
The lump sum will compensate with-profits holders for letting AEGON take some profits which they currently receive from other parts of the business.
AEGON first bought into Scottish Equitable in 1993, effectively ending its status as a mutual company owned by policyholders.
An agreement signed two years ago provided for the Dutch insurer to take over Scottish Equitable completely by the end of the century. But the final move towards this goal has come sooner than expected.
``What we have done is thrive a little more quickly than we could have hoped for,'' said Scottish Equitable marketing director Graham Dumble.
Funds managed by Scottish Equitable have grown about 13% over the last year to more than #9500m.
The Edinburgh-based company started off in 1831 as a life assurance society, but today 90% of its business consists of pension plans sold through independent financial advisers (IFAs).
But over the past decade it has become increasingly focussed on pensions, which now account for over 90% of its business. Two years ago AEGON paid #246m into Scottish Equitable in a deal which transferred its staff and business to a new company wholly owned by the Dutch insurer.
In return, AEGON gained the right to 40% of the profits from Scottish Equitable's fast growing unit-linked business. Investors in unit-linked products simply receive a return on the funds they invest. With-profits policyholders also share in the profits of Scottish Equitable as a whole.
Last year AEGON ploughed a further #150m into Scottish Equitable to raise its share of profits from the unit-linked business to 60%.
Now it will make a final #325m payment into the company's With-Profits Fund.
In return, AEGON's share of profits from the Non-Participating Fund, which pays unit-linked investors, will increase gradually over the next four years.
The Dutch insurer will receive 80% of profits from the Non-Participating Fund next year, 90% in 1997, 95% in 1998 and 100% in 1999.
``What the with-profits policyholders are doing over the next three years is selling that profit stream for a capital sum,'' Mr Dumble said.
Although AEGON will be left in full charge of Scottish Equitable in 1999, the interests of with-profits policyholders will remain protected by a trust company set up in 1993 to represent them.
This trust company will continue to hold reserve powers over key matters such as the distribution of bonuses.
``The With-Profits Fund which belongs to the with-profits policyholders will always be ring-fenced from any other activity,'' Mr Dumble said.
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