Netherlands-based life insurance group AEGON has entered an interest-rate swap on the back of a five-year, EUR350 million (USD322 million) bond the company issued last week. Wilma Schouten, capital markets officer in the Hague, said it receives the coupon on the bond, 4.75%, and pays three-month Euribor plus five basis points. The notional size and maturity of the swap is the same as the bond. Three-month Euribor was 4.74% last Wednesday.
The insurance company entered into a swap on the bond for internal risk management reasons independent of macroeconomic circumstances, such as falling interest rates. Schouten declined to comment further on why it entered the swap or the proportion of its liabilities that are floating-rate.
Credit Suisse First Boston andBarclays Capital lead managed the deal. The insurer entered into EUR175 million (notional) swaps with each of them, according to Schouten. AEGON chose the two banks because they approached the company with a package deal, she added, noting that AEGON's target funding level is Euribor plus 5 basis points.
The proceeds from the bond issue will be used to refinance maturing bond issues. AEGON had EUR2.5 billion of external outstanding debt in September.
AEGON's treasury department also uses cross-currency interest-rate swaps and equity swaps.
Moody's Investors Service rates AEGON Aa3 and Standard & Poor's rates it AA-minus. AEGON is the holding corporation of one of the world´s 10 largest listed life insurance groups ranked by market capitalization and assets.
