Aegon to reinsurers: check out our $76bn in variable annuities

Dutch insurance group  Aegon is ready to unload some of its $75.6 billion in variable life annuity accounts in the US, and will proceed to talks with potential reinsurers, officials have indicated.

“We have been preparing ourselves to engage with counterparties to explore our options around reinsurance of part of the [variable annuity] block,” Aegon's chief transformation officer Duncan Russell (pictured) told the company's Q1 earnings call.

“We believe we are now ready to engage.”

The $75.6 billion across four account types currently consumes $1.3 billion in statutory allocated capital but does render operating capital generation at $150-200 million annual over the near-term (and declining with book maturity).

“It is important to recognise there are trade-offs,” Russell said of the comparative value of freeing capital versus losing longer-term capital generation power. “Our shareholders should be prepared for a situation in which we do not take a third-party reinsurance deal.”

Litmus tests for a deal include maximizing financial value (measured chiefly as capital release vs lost capital generation), and security of the rump business plus a command of the knock-on effects to the broader view of Aegon's business.

Russell declined to name initial preferences for deal type or structure or which of the US book types was most disposable.

Aegon rather claims to walk into talks open-minded, ready to learn more on comparative advantages of a variety of options, especially as it affects reserve movements including potential flooring impact, capital sensitivities, ongoing capital generation, and remittance capacity.

Retention of the portfolios remains a possibility as Aegon feels it has “largely completed the big steps” of a plan to manage the existing risk exposure.

“We are comfortable with what we have remaining and will continue to optimize,” Russell said.

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