The Dutch almost invented the modern multinational corporation. Royal Dutch/Shell and Unilever combined Dutch and UK capital – and moved to the NYSE long enough ago to be grandfathered onto the American indices. Aegon, the Dutch insurance giant, is following in their footsteps – without the benefit of grandparentage despite its 150-year history.
With this year’s takeover of TransAmerica, 33 percent of Aegon’s free float of stock will now be held by shareholders in the US, where 60 percent of its business will also be transacted. Although the merger will give the group a total market capitalization of $50 bn, to the deans of the Dow, it remains a Dutch company. In reality, Aegon does as much new premium business in the UK as it does in the Netherlands, but the securities industries institutions of the US have yet to catch up with Dutch global sophistication.
Premium brands
Since 1992 Aegon’s corporate language has been English, and since January of this year its accounts have been expressed in both euros and dollars. Yet the company has little or no brand recognition outside its Netherlands home. That’s in large part because the group’s globally spread customers pay their premiums to Scottish Equitable in the UK, Monumental and Western Reserve in the US and other locally trusted names.
According to Bob McGraw, the multinational insurer’s peripatetic investor relations officer, this lack of worldwide corporate branding ‘doesn’t hinder things on the institutional side, but it certainly does on the retail side.’ McGraw notes that Aegon has no plans for a global brand name, however: ‘Our strategy is multi-branding – we just don’t see a lot of extra value in global branding,’ he explains.
This summer McGraw relocated his main office to Baltimore from The Hague, but he still returns to Holland for seven to ten days a month since he has overall responsibility for the company’s global IR.
‘Certainly from a European company’s perspective, IR is getting globalized,’ he says. ‘Most of the large Dutch companies are now listed in the US.’ Reflecting that state of affairs, Aegon has investor relations staff based in the company’s headquarters in The Hague, covering the European investor centers; and there are staff in the US, who cover all the financial centers there. The US complement also includes staff dedicated purely to IR for the company’s retail investors who, McGraw contends, ‘are a bit more activist than they are in Europe.’
In any event, Aegon is mostly owned by institutions, according to McGraw. ‘Only 10-12 percent of our holdings have historically been retail,’ he says. This increased to about 15 percent following the TransAmerica transaction. The institutions, McGraw says, know whose stock and dividends are growing, even if the retail customers don’t know to whom they contribute the cash flow.
Aegon would prefer to have a higher proportion of US shareholdings but has to struggle against a number of quaint local prejudices. One of these is the fact that the company fails to feature in the indexes, despite the size of its US holdings and business. ‘It would certainly be beneficial to be in the S&P 500,’ McGraw comments laconically. ‘We are on all the European indices – but not the S&P, even though we have wide holdings in the US.’
The aim is to have as diverse an investor population as possible. ‘Certainly we’d like more [of our shares] to be in the US,’ agrees McGraw. ‘It’s really a function of the markets – at this time the European investors look at insurance and finance stocks more favorably than those in the US do, and we are growing our retail shareholdings.’ In general, he adds, echoing the sentiments of many of his IRO counterparts, ‘We like long-term investors who are looking to acquire a growth company.’
Bearing up
While quaint American customs stop companies being on the Dow just because their head office is overseas, quaint continental European habits, such as bearer shares, can make it difficult for companies to know just who their shareholders are.
McGraw admits that most American IROs would be quite unsettled if faced with the continental European situation. Custodial banks give a breakdown, a profile of where your shares are held, and whether they are in institutional hands or not. ‘But you don’t get specific information on who they are, or how many shares they have.’ Even with the use of IR advisors Taylor Rafferty or Thomson Financial, the information is often quickly out of date. ‘It doesn’t give you very hard trading information,’ notes McGraw resignedly.
This year, Aegon sent out a reply card with its annual report, asking recipients if they would like to receive an investor newsletter from the company. ‘We did get a lot of cards back, indicating which were shareholders,’ says McGraw. ‘But that only gives you a snapshot in time.’ One relief is that ‘European institutions are not as bashful as they sometimes are in the US. You ask them in Europe whether they hold your stock, and they tell you. In the US sometimes they won’t,’ comments McGraw with all the savoir-faire of a mid-Atlantic operator.
However, Aegon has fewer grounds for concern than many companies. ‘A hostile takeover isn’t really on the cards,’ says McGraw. Before the TransAmerica deal, 36 percent of the company was owned by Vereniging Aegon, a typically Dutch institution which is a trust-like body. Ago was one of the companies which merged to found Aegon. It was the equivalent of a mutual insurance company, and when it merged with Ennia to form Aegon, its shareholdings were taken by Vereniging Aegon, which is represented on the supervisory board and in management.
Vereniging Aegon exists to ‘promote the direct and indirect interests of Aegon NV and companies, insured parties, clients, and shareholders,’ so it is a moot point who the beneficiaries would be if anyone ever tried to wind it up.
Even now, any dividends are reinvested in the company with the aim of building up to 40 percent of the stock – and a majority of the votes. McGraw wryly admits that the investor relations department does not have to be overly concerned about this particular shareholder; more to the point, its existence allows the company not to have to worry too much about the views of other shareholders – such as any potentially predatory companies on the horizon.
Monumental career
McGraw himself has had many years to become acquainted with the investor relations anomalies on both sides of the Atlantic. He began his career with the Monumental Life Insurance Company in 1971, which Aegon acquired in 1986. He moved into the Aegon US treasury ten years ago, and has spent the last three years in the company’s headquarters in The Hague as group treasurer.
Following his move to Baltimore, McGraw’s office is next to that of Don Shepard, CEO of the US operation, but he still maintains an office in The Hague as well. There his office is located directly under the chairman’s – one floor down – thus maintaining the physical proximity that IR seems to demand. But what about the three thousand miles between his own two offices? ‘Actually, it’s not that bad travelling between them,’ he says of his Star Trek-like feat of having to be in two separate places simultaneously.
McGraw reports to executive board member Henk Van Wijk, responsible for group staff activities, but American corporate governance enthusiasts may have some difficulty in working out equivalents. ‘The executive board is a board of peers, although one is the chairman,’ he explains. With the TransAmerica acquisition the board will have five members, two in the states, in Baltimore and San Francisco.’
With such a mix of businesses spread across the globe, ‘We also try to extract all the information that we can in order to do our work,’ says McGraw. ‘Each of our business units prepares a quarterly write-up on its own developments within the business and we use that for a starting point. This enables us to stay pretty much on top of developments.’
Quarterly switch
Aegon’s investor relations function is equally dispersed. To begin with, unlike many European insurers, the company reports quarterly, and tries to alternate analysts’ meetings between the Netherlands, the UK and the US, although the annual meeting is fixed in the Hague. Q1 gets a conference call plus road trip, Q2 merits a meeting in The Hague, a conference call and road trips, Q3 has them meeting in the US or UK with a conference call. The conference calls usually attract a hundred or so participants.
Some sell-side analysts complain that they are neglected for one-on-ones, in comparison to the institutions, but overall, the company manages anything between 250 and 500 one-on-ones a year. ‘We usually average two or three portfolio managers in each meeting,’ says McGraw, adding, ‘We also do somewhere between 35 to 50 group or industry seminars or presentations a year, so it’s quite extensive in terms of regular contacts.’
With 50 analysts covering the company, the typical analysts’ meeting showcases members of the executive board, or the IR staff team up with some of the senior staff from one of the businesses. ‘If they’re just learning about the company, then they want to talk to the IR staff so they can get good background. If they know it well and they have things that they want to address then they want to meet the senior managers,’ he finds.
Learning fast
The IR web site (www.aegon.com) was established in January, and originally showed signs of apprenticeship, but analysts say that it is getting easier to use. ‘We get about 25 hits a day but most of the institutional side prefer calls or meetings. Even so we’re trying to use electronic communications more and more,’ he says.
Until this year, the steadily climbing stock price was, as always, the best investor relations news around. However a fall at the beginning of the year has led to some questions about Aegon’s valuation, and some analysts wonder whether a level of disclosure that is good enough for Europe will be enough for the voracious data-mills of the US. They suggest that Aegon may be managing a steady increase in transparency to avoid frightening the shareholders. In the past, most of the US holders were European specialists who knew what going Dutch meant, but TransAmerica will bring along a swarm of new domestic US holders who will be comparing the company with American General or Lincoln National, rather than Allianz or Zurich.
McGraw responds that useful share comparisons with peers are still challenging. ‘Aegon is pretty unique with its geographic spread and primary focus on the life and pension markets.’
