Aegon sells US run-off businesses to Wilton Re
Netherland-based insurance group Aegon has agreed to sell its two largest US run-off businesses, the pay-out annuity business and the Bank Owned / Corporate Owned Life Insurance business (BOLI/COLI), to Wilton Re.
The transaction is a part of company's stated strategic objective to reduce the amount of capital allocated to its run-off businesses, according to the statement.
Under the terms of the agreement, Aegon's Transamerica life subsidiaries will reinsure $14 billion of liabilities to affiliates of Wilton Re US Holding. The transaction and related management actions are expected to result in a capital release of approximately $700 million (€630 million) in 2017, the company said.
"I am very pleased that we have reached an agreement to divest the majority of our US run-off businesses," said 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."
The company stated that as a result of the transaction, Aegon's group solvency II ratio is estimated to improve by approximately 6 percent-points in the second half of 2017. After completion of the transaction and the related management actions, the capital released from this transaction is expected to be upstreamed to the holding, which will improve Transamerica's return on capital by approximately 60 basis points.
Aegon expects annual capital generation from its US operations to be reduced by approximately $30 million (€27 million) following the transaction. As the businesses are classified as run-off businesses, their associated earnings are not included in underlying earnings before tax.
Aegon anticipates the reinsurance transaction will result in a book loss of approximately $300 million (€270 million), to be reported in 'Other Charges' at the time of closing. The transaction is subject to regulatory approvals and is expected to close in the summer of 2017.
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