Global insurance and financial services specialist Aegon has completed the sale of its two largest U.S. run-off insurance businesses to Wilton Re, the U.S. life reinsurance firm that specialises in the acquisition of in-force portfolios.
In a transaction first announced back in May, Aegon has sold its payout annuity business and Bank Owned / Corporate Owned Life Insurance business (BOLI/COLI), to Wilton Re, in a transaction the insurer says is consistent with its stated strategic objective to reduce the amount of capital allocated to its run-off portfolios.
The agreement saw affiliates of Wilton Re US Holding Inc providing reinsurance for US $14 billion of liabilities from the Aegon businesses.
Aegon said that the transaction and related actions by its management are expected to result in a capital release of approximately US $700 million (EUR 630 million) in 2017.
Aegon said that the capital released by the sale of the run-off business would be upstreamed during the second half of the year to the holding company, which it said will enhance Transamerica’s return on capital by around 60 basis points.
Overall the deal is estimated to improve Aegon’s Group Solvency II ratio by approximately 6%-points.
By reducing the capital expenditure to support run-off or legacy books of life insurance and reinsurance business, European re/insurance companies can improve and optimise their capital and solvency positions.
At the same time, life reinsurance and legacy specialists (such as Wilton Re) are happy to scoop up these books with the aim of making a profit from managing their run-off through to completion.