EUROPE - Previously underperforming pension and life insurance giant, Aegon is on the verge of a positive re-rating.

Analysts at investment bank Merrill Lynch said this morning it will upgrade its recommendation to buy, even though Aegon's shares were among the worst performers in the European insurance sector in 2006.

David Nisbet, financials analyst at Merrill Lynch said: "We believe that the operational performance is improving, the valuation is now very attractive and some of the concerns that have affected the shares are no longer valid."

Merrill Lynch has set a twelve-month target of €18.40, 20% above today's share price of €15.14.

The bank believes that, although Aegon shares now stand at the bottom of their trading range against both the sector and the European equity market, the insurer will get close to its target of new business inflows of €1.1bn in 2010, compared to €550m in 2005.

The news broke as Aegon today announced the opening of its public and regulatory affairs representative office in Brussels, headed by the former head of economics at trade body Comité Européen des Assurances, Patricia Plas.

"The new office reflects Aegon's acknowledgement of the growing number of public policy issues that impact the financial services sector in general and the life and pensions business in particular," the insurer said.

Elsewhere, it appeared that buoyant markets are driving up marketing budgets across all asset management classes.

Following a survey by Fin International, 95% of asset managers are planning to increase or maintain their marketing spend in preparation for a fiercely competitive 2007.