Global insurance and financial services specialist Aegon is selling its two largest U.S. run-off insurance businesses to Wilton Re, the U.S. life re/insurer that specialises in the acquisition of in-force portfolios.
Aegon is selling 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 businesses.
Wilton Re affiliates will reinsure $14 billion of Aegon’s Transamerica life subsidiaries liabilities, which in addition to related management actions for Aegon is expected to result in a capital release of around $700 million (EUR 630 million) in 2017.
“I am very pleased that we have reached an agreement to divest the majority of our US run-off businesses,” commented Alex Wynaendts, CEO of Aegon. “This transaction is in line with our strategic objective of accelerating the release of capital allocated to these businesses and will further enhance the financial flexibility of the group. We are confident that this agreement is also in the best interests of our customers, as Wilton Re is a highly respected reinsurer in the market.”
Aegon said that as a result of this transaction and related actions the Group Solvency II ratio will show an estimated 6%-points improvement in the second half of 2017, while the capital released will improve Transamerica’s return on capital by around 60 basis points.
The transaction will also reduce annual capital generation from Aegon’s US operations by around $30 million (EUR 27 million).
Aegon anticipates the reinsurance transaction will result in a book loss of approximately $300 million (EUR 270 million) at closing of the deal.
Reducing the capital expenditure to support run-off or legacy books of life insurance business is an increasingly popular way for European companies to enhance their capital and solvency positions, while life reinsurance and legacy specialists are happy to scoop up these books with the aim of making a profit from managing their run-off.