ACCOUNTING STANDARDS: AEGON CFO REVIEWS STATE OF

UNCLAS THE HAGUE 001906

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON NL EUN
SUBJECT: ACCOUNTING STANDARDS: AEGON CFO REVIEWS STATE OF
PLAY; CALLS FOR U.S.-EUROPEAN CONVERGENCE


1. Jos Streppel, the Chief Financial Officer of AEGON, a
large Netherlands-based insurance group also active in the
U.S., met with the Ambassador July 28 to review current
efforts to unify European accounting standards and to
achieve greater harmonization between the U.S. and Europe in
this area. Streppel, who serves as chairman of the CFO
Forum of the 20 leading European insurance companies, was
reasonably confident that agreement would be reached on the
EU-wide adoption of International Accounting Standards
(IAS). Somewhat surprisingly, he did not single out French
opposition to the proposed IAS-39 rule on the valuation of
derivatives and other financial instruments as being the
most difficult obstacle standing in the way of agreement; he
thought that the French would bargain hard but eventually
join with the European consensus on this issue. Instead,
Streppel suggested, the quieter but firm opposition of the
Spanish and Italians would be a more difficult problem to be
overcome.


2. Streppel repeated the view expressed by the European
Accounting Forum that the mark-to-market rule in the
proposed IAS-39, which is closer to U.S. accounting
practice, would lead to greater volatility on corporate
balance sheets and thus tend to increase the cost of
capital. He noted that, particularly for insurance
companies, with the long duration of their liabilities,
fixing the value of those liabilities by market prices
prevailing on a single date (e.g., December 31) made little
sense. Nonetheless, he said, the goal for U.S. and European
regulators over the next several years should be to achieve
convergence between the IAS and U.S. GAAP. Phase 2 of the
adoption of the IAS, expected in 3-4 years, would be a good
target date for such convergence. Failing that, Streppel
said, he hoped that the U.S. and Europe could at least agree
on the mutual recognition of IAS and GAAP, eliminating the
need for companies listed on both sides of the Atlantic to
maintain two sets of books.


3. Asked about what particular regulatory issues AEGON faces
in the U.S., where it is the No. 3 life insurance provider
(through ownership of Transamerica and some 20 other
companies),Streppel mentioned (a) the issue of dealing with
50 state regulatory authorities, (b) the longer approval
process for new products and services faced by insurance
companies than by banks (insurance companies require
explicit regulatory approval for each such product, whereas
banks do not),and (c) the potential for different solvency
requirements for insurance companies operating in the U.S.
and Europe when the EU adopts its "Solvency II" rules, akin
to the banks' Basel II, in several years. Streppel again
hoped that harmonization of such solvency rules between the
U.S. and Europe could be achieved.


SOBEL