Aegon has announced an agreement to divest the last substantial block of its life reinsurance business to SCOR Global Life, a division of French domiciled reinsurer SCOR.
The latest transaction is consistent with Aegon’s strategic objective to lower the volume of capital allocated to its run-off businesses.
Under the agreement, Aegon’s Transamerica life subsidiaries will reinsure roughly $700 million of liabilities through SCOR Global Life. The transaction covers the last substantial block of life reinsurance business that Transamerica retained after it divested most of its reinsurance business to SCOR Global Life in 2011 and 2017.
According to an announcement on the agreement, it is expected that the transaction will result in a one-time benefit of roughly $50 million on Transamerica’s capital position, as well as a slightly positive impact on recurring capital generation.
Aegon explains that future underlying earnings are not affected by this transaction, driven by the fact earnings of this block of reinsurance business are part of run-off businesses, which it states are not included in underlying earnings before tax.
The transaction is expected to result in a pre-tax IFRS loss of around $105 million, and will be reported in other charges in the second-half 2018 results.
Furthermore, and as a result of the agreement, Aegon is set to substantially reduce the size of its captive insurance firm and the related letter of credit facility that is in place to finance redundant reserves, which is generally referred to as XXX term life insurance reserves.
